When reviewing claims in the practice management system, you notice many claims have been paid at 100 percent of the practice’s fee schedule. Further review shows the practice’s fee schedule has not been updated in the past few years, and the current fee schedule is less than the Medicare allowables. Your research also shows the practice has been losing revenue for the past few years because it has been undercharging for its services.
Now is the time to go to work and get the fee schedule updated. How do you plan to establish your fee schedule? Will it be based on a percentage of the Medicare allowable, or the cost of doing business, for each CPT code?
A simple method is to develop your fee schedule based on a fair percentage of the Medicare allowable. Develop a spreadsheet that:
- lists your top 25 to 50 CPT codes
- includes columns for the Medicare allowable, current fee and each payer
- calculates various percentages of the Medicare allowable in 25 to 50 percent increments to determine the “new” fee schedule
As an example, primary care practices may set their fee schedule at 150 to 250 percent of the Medicare allowable, while specialty practices may set their fee schedule at 250 to 400 percent of the Medicare allowable.
Another option is to determine the cost of providing services for each CPT code. The cost should include every expense from facility to personnel and supply costs. Be sure to include an amount for profit. Using the relative value unit (RVU) calculation as a guide should be helpful. This method will better prepare you when negotiating payment with the insurance company contracting department. If the insurance company offers you an amount that is less than your cost, you will have your cost analysis available to discuss a higher payment.
Just a word of caution:
- Keep in mind that your patients will eventually see your fees when they receive their Explanation of Benefits (EOB). The patients will most likely focus on the amount charged instead of the amount you were actually paid. Some patients may complain that your fees are too high.
- A high fee schedule may discourage the private pay patient from scheduling an appointment when he calls the office to ask how much you charge for a certain type of office visit or procedure.
- Be consistent in setting your fees. As an example, do not set E&M CPT codes at one rate, and then the surgical CPT codes at another rate. Consistency will make your financial analysis easier to compare one year to another.
Once your physician leadership has approved the new fee schedule, instruct the billing staff to load the following in your practice management system:
- new fee schedule
- current year Medicare allowable fee schedule
- various insurance company contract rates
A billing staff “best practice” should be comparing the payment received to the agreed upon contract rate for each insurance company. The billing staff must regularly report any underpayments to the practice manager immediately.
Setting the fee schedule can be a daunting task for a new practice manager. Call Concordis Practice Management LLC at 210-704-1014 or visit concordispm.com today for more information or assistance as you develop your fee schedule.