Hospital underbilling: how to identify invisible losses

When a health plan refuses to pay for a procedure, the hospital receives a denial code, records the occurrence, files an appeal and tries to reverse the loss. The process is laborious, but the loss is visible. Hospital underbilling works differently: the hospital performs a procedure, administers a medicine, uses a material and simply does not charge for it. No code is generated, no appeal is filed, no report records the occurrence. The revenue disappears without a trace.

While the accepted denial rate reached 1.96% of gross payer revenue at the hospitals monitored by the Anahp Observatory 2025 (National Association of Private Hospitals), underbilling has no equivalent metric in the industry, precisely because the loss is never recorded. A hospital that measures only denials is monitoring only part of the problem.

Understanding what causes underbilling, why it is hard to measure and how to identify it in operations is the starting point for recovering revenue that is being left behind today without anyone noticing.

What hospital underbilling is

Hospital underbilling is the loss of revenue from items that were delivered but not charged, or charged below the amount the hospital was contractually entitled to. Unlike a denial, which is a refusal by the health plan after the claim is submitted, underbilling happens earlier: the item is never billed, or is billed incompletely.

This distinction matters. A denial assumes that the hospital charged for something and the health plan disagreed. Underbilling occurs when the hospital fails to charge, because of a recording failure, a coding error or a lack of knowledge of what could be billed in that clinical situation. There is a loss in both cases, but only the denial leaves a trace in the systems.

Why underbilling is hard to measure

A denial has a characteristic that makes it easier to control: it generates evidence. When a health plan refuses an item, it issues a justification code, records the occurrence on the payment statement and opens a window for appeal. This whole chain of events is traceable and can be monitored through indicators such as the initial denial rate and the reversal rate.

Underbilling generates none of this. A material that was used and not entered into the system simply does not exist as far as billing is concerned. A procedure coded at a lower tier than the one performed generates a smaller payment, but no alert. A fee that was not applied produces no notice of loss. The health plan pays what was charged, the hospital receives less than it could have and the process moves on without anyone identifying the discrepancy.

This means underbilling can only be identified by actively comparing two sources of information: what was done, recorded in the clinical record, and what was charged, recorded on the hospital claim. There is no standard report, industry indicator or available benchmark that allows a manager to measure the institution’s underbilling without doing this cross‑check internally.

The main causes of hospital underbilling

Underbilling originates at different points in the clinical and administrative process. Some are in the clinical record, others in coding, others at the interface between the two.

Materials and medicines not entered

Every item used during care must be recorded in the system at the time of use. In practice, shift changes, clinical complications and team overload mean that materials are used and not entered. The item leaves inventory, is administered to the patient and does not appear on the claim. Failing to charge for materials and medicines is therefore one of the most recurrent causes of revenue loss in hospital billing.

Procedures performed without being recorded in the medical record

A procedure performed at the bedside, a clinical complication resolved during a shift or an intervention carried out outside the original surgical schedule may not be recorded in the medical record in time for the claim to be closed. Without a record, there is no documentary basis for the charge, and the item is left off the claim.

Coding at a lower tier than the procedure performed

The TUSS Table and the CBHPM classify procedures by complexity, and the tier determines the amount charged. When the billing team uses a code at a lower tier than the procedure actually performed, whether out of lack of knowledge or excessive caution to avoid a denial, the hospital receives less than it was contractually entitled to.

Items used in larger quantities than charged

Continuous-use medicines, medical gases and materials used daily in the ICU are charged by quantity administered. Discrepancies between the volume administered and the volume entered on the claim result in systematic underbilling over prolonged hospital stays.

Fees and daily rates not applied correctly

Each care setting has associated fees: operating room, post-anesthesia recovery, ICU and special procedures. Failing to apply a fee provided for in the contract, or charging a daily rate at a lower classification than the setting actually used, reduces the value of the claim without the health plan needing to refuse anything.

Missing the contractual deadline for submitting the claim

Each health plan sets a window for the hospital to submit the invoice. Claims submitted outside this window lose the right to be charged, regardless of what was done. The result is a total loss of revenue for that hospital stay: the service was delivered, but the right to charge for it was lost. To understand how to control these deadlines, read the article Denial appeal deadline: what the rules say.

Incomplete surgical team fees

In surgeries with multiple professionals, failing to record any team member — assistant, scrub technician or second surgeon — results in fees that are never charged. This omission is common when filling in the surgical team depends on manual recording after the procedure.

How to identify underbilling in the hospital

The only reliable method for identifying underbilling is a systematic cross-check between the clinical record and the hospital claim. The medical record shows what was done; the claim shows what was charged. The difference between the two indicates where the loss occurs.

Cross-checking by item category

This cross-check can be done by category. For materials and medicines, comparing the nursing administration record with the entries on the claim identifies items used and not billed.

For procedures, comparing the surgical description or the physician’s progress notes against the codes charged reveals omissions and undercoding. For daily rates and fees, checking the care setting recorded in the medical record against the type of daily rate charged points out classification discrepancies.

The role of concurrent and prospective audits

Concurrent audit and prospective audit are the processes that capture underbilling most effectively. Concurrent audit, performed during the hospital stay, identifies items not entered while the patient is still in the hospital and correction is still possible. Prospective audit, performed when the claim is closed before submission, does the final review and captures what slipped through the previous stage.

Prioritizing by complexity

The depth of the cross-check should be proportional to the risk. High-cost hospital stays, involving OPME (implants and special materials), chemotherapy or a prolonged ICU stay, require systematic verification of every billable item. Lower-complexity medical stays allow for sample-based review, focused on the categories with the highest historical incidence of omission.

Underbilling and denials: two sides of the same loss

Denials and underbilling are the two drivers of lost payer revenue. A denial occurs when the hospital charges and the health plan refuses. Underbilling occurs when the hospital fails to charge. Both reduce the revenue received, but through opposite mechanisms and with completely different levels of visibility.

A hospital that controls denials but not underbilling is recovering revenue on one side and losing it on the other, without knowing it.

In both cases, however, control should be preventive: cross-check the medical record against the claim before submission, identify omissions and correct them before the loss becomes permanent.

Revenue that was never charged cannot be recovered

Underbilling has a characteristic that makes it more serious than a denial in one specific respect: it cannot be recovered. A denial can be appealed and reversed within the contractual deadline. An item that was not billed has no recovery mechanism once the claim has been submitted and the payment processed. The health plan paid what was charged, and the hospital lost the right to the rest.

Rivio automatically cross-checks medical record data against the hospital claim before submission, identifying items delivered and not charged, undercoding and omitted fees. This cross-check is done on 100% of claims, with oversight from billing specialists, eliminating reliance on manual review in a process where the loss, once consolidated, cannot be undone.

Frequently asked questions about hospital underbilling

What is hospital underbilling?

Hospital underbilling is the loss of revenue from items that were delivered but not charged, or charged below the contractually due amount. Unlike a denial, which is a refusal by the health plan after the claim is submitted, underbilling happens earlier: the item is never billed or is billed incompletely.

What is the difference between underbilling and a denial?

A denial occurs when the hospital charges for an item and the health plan refuses to pay. Underbilling occurs when the hospital fails to charge for an item that could have been billed. Both reduce the revenue received, but through opposite mechanisms: a denial is visible and traceable; underbilling is silent and can only be identified by actively cross-checking the medical record against the claim.

Why is underbilling hard to measure?

Because the loss is never recorded. An item that was not billed generates no refusal code, does not appear on the health plan’s statement and is not included in any standard billing report. The hospital simply receives less than it could have, without any system flagging the discrepancy.

What are the main causes of hospital underbilling?

The most common causes are materials and medicines used and not entered into the system, procedures performed without being recorded in the medical record, procedures coded at a lower tier than the one performed, items charged in smaller quantities than administered, fees and daily rates not applied correctly, missed contractual deadlines for submitting the claim and incomplete surgical team fees.

How can underbilling be identified in hospital billing?

The most reliable method is a systematic cross-check between the clinical record and the hospital claim, done by item category: materials and medicines, procedures, daily rates and fees, and professional fees. Concurrent audit and prospective audit are the processes that capture underbilling before the claim is submitted, when correction is still possible.