Revenue cycle

How to write an underpayment appeal letter (with a template)

A payer that pays less than your contract says will usually fix it when you show the math: what the line should have paid, what it did pay, and the contract term that makes the difference. This guide covers what to check before you write, which route each payer type uses, and a letter you can adapt.

Before you write: three checks

1. Is the allowed amount actually wrong? Compare allowed (not paid) with what the contract or fee schedule requires for the code, modifiers, units and place of service as billed. Patient responsibility reduces what the payer sends you but not what it allowed.
2. Which route does this payer use? Send the letter to the address your contract or provider manual names for payment disputes. A general correspondence address can sit unread until the deadline passes.
3. How much time is left? Count from the remittance date. For traditional Medicare, the remittance is presumed received 5 days after its date, and the redetermination is due 120 days after that (42 CFR 405.942).

What the letter needs

• Identifiers: claim number, patient and member ID, date of service, remittance date and check or EFT number.
• The line in question: CPT or HCPCS code, modifiers and units, with billed, allowed and expected amounts side by side.
• Your calculation: the contract section or fee schedule, the year and locality, and the arithmetic. A reviewer who can redo your math in a minute is more likely to agree with it.
• The adjustment code the payer used, such as CO-45 or CO-59, so the reviewer can find the decision you're contesting.
• A specific request: the dollar amount to be paid, plus interest where your contract or state law provides it.

Template

Replace everything in brackets. Keep it to one page plus attachments.

[Your organization]
[Address] · [Phone] · [Tax ID] · [NPI]

[Date]

[Payer name]
[Provider disputes / appeals address from the payer's provider manual]

Re: Request for reconsideration of underpaid claim
Patient: [Name] · Member ID: [ID]
Claim number: [Number] · Date of service: [Date]
Remittance date: [Date] · Check/EFT number: [Number]

We are requesting reconsideration of the payment on the claim above, which was allowed at less than our agreement requires.

Line [#], CPT [code][, modifier]
  Billed:             $[amount]
  Allowed:            $[amount]
  Expected allowed:   $[amount]
  Difference:         $[amount]
  Adjustment on 835:  [group code]-[reason code]

How we calculated the expected amount:
[e.g. "Section [X] of our agreement dated [date] pays [percent]% of the [year] Medicare Physician Fee Schedule for locality [number]. The [year] non-facility amount for CPT [code] is $[amount]; [percent]% is $[amount]."]

[If a reduction was misapplied: "The multiple-procedure reduction was applied to line [#], the highest-valued procedure. Under [contract section / payment policy], the reduction applies to the second and later procedures."]

We ask that you reprocess the claim and pay the difference of $[total][, plus interest under [contract section or state prompt-pay statute] if applicable].

Enclosed: remittance advice, claim, [contract excerpt / fee schedule page].

[Name], [Title]
[Email] · [Phone]

Variations by payer

Traditional Medicare

Medicare doesn't take letters as the first step. File a redetermination with your Medicare Administrative Contractor on Form CMS-20027 or through the MAC's portal, and attach your calculation as the reason you disagree. The 120-day limit runs from receipt of the remittance (42 CFR 405.942).

Medicare Advantage, out of network

If you don't have a contract with the plan, it must pay you what you could collect under original Medicare (42 CFR 422.214). Say so in the letter, and show the original Medicare amount for the code, locality and date of service. If the plan doesn't decide within 30 days, or you disagree with its decision, you can ask CMS's Payment Dispute Resolution Contractor for an independent decision (CMS memo, Jan. 4, 2010). This route covers amounts paid and down-coding. A claim paid at zero goes through the plan's appeals process instead.

Medicare Advantage in network, and commercial plans

Your contract governs: the dispute process, the deadline and the payment timeline. Medicare Advantage contracts must include prompt-payment terms (42 CFR 422.520(b)). Quote the section number in the letter.

When the same error repeats

If one payer underpays the same code by the same amount across many claims, the cause is usually a rate loaded wrong in its system. Ask your provider representative whether you can file one dispute with a list of affected claims. Fixing the rate at the source also stops the next round of short payments.

After you send it

Log the date sent, the method, and the response date your contract or the payer's manual promises. If the payer upholds the underpayment, the decision letter should name the next level of review. File there before the new deadline runs out.

Questions

What should an underpayment appeal letter include?

The claim and line details, the amount allowed, the amount your contract or fee schedule requires, how you calculated it, the contract section or rule you rely on, and the exact amount you're asking the payer to pay.

Do I use a letter for Medicare?

For traditional Medicare, file a redetermination with your Medicare Administrative Contractor using Form CMS-20027 or the MAC's portal, within 120 days of receiving the remittance. You can attach the same calculation the letter would contain.

Can I appeal many claims in one letter?

If the same error affects many claims, such as one wrong rate, ask your payer whether it accepts a single dispute with a list of claims; it keeps the argument in one place.

What if the payer doesn't respond?

Track the response time your contract or the payer's manual promises, and escalate when it passes. For non-contracted Medicare Advantage disputes, if the plan hasn't decided within 30 days you can go to CMS's Payment Dispute Resolution Contractor.

Last reviewed October 19, 2026. This guide is general information about payer payment rules, not legal advice. Your payer contract and provider manual control the details; check them before you file.