Question

Identify an appropriate Medicare rate that you would use when setting your in-office fees and describe the reason why you would choose that rate?

Answer 1

******** Identify an appropriate Medicare rate that you would use when setting your in-office fees and describe the reason why you would choose that rate?

The main goals or principles to consider when setting a fee schedule are:

1. Be consistent: One key element of a fee schedule is not allowing inconsistencies in how the fees were set to make it hard to understand the true value of your AR at any point in time. If some codes are set at 300 percent of Medicare and others are set at 150 percent of Medicare and still others are legacy fees that are a random multiple of Medicare then it becomes difficult to look at your AR and quickly understand how much it should yield in terms of your collections. On the other hand, if a fee schedule is set in a consistent manner then some simple calculations will provide you with a yield which can be easily applied to you AR to provide you with a quick estimate of what you should collect. In a future article I will outline how to calculate your practice's yield.
2. Don't leave money uncollected: One of the key ideas to keep in mind is that no matter what an insurance plan is willing to pay for a claim, they will never pay more than you bill them. So, if BCBS is willing to pay $150 for a level 3 office visit but you bill them $125, they will only pay you $125. In addition, some plans pay a percentage of billed charges. Not many do this and typically they represent a small percentage of the practice's charges, but there is no reason to leave any money uncollected. Finally, payer allowables can change throughout the year. If you are charging BCBS $150 (from our previous example) and at some point the allowable goes up to $165, you will only receive $150 unless you increase your fees. So, you need to set you fee schedule high enough that you never bill a contracted payer less than they are willing to pay and high enough that you can reasonable take full advantage of plans that pay a percentage of billed charges. Finally, you want to set fees high enough that you have "wiggle" room and are not caught off guard by unexpected shifts in your allowables (like the BCBS example I provided earlier).
3. Don't scare away patients: So, given the two principles above why not simply charge 10 times Medicare and be done with it? Well, there are two ideas to keep in mind here. First, many self-pay patients (or those with high deductible insurance plans) will call a doctor's office and ask what about the charge for an office visit or procedure. If the patient hears that your office visit cost $1,500 they will likely move on to the next practice. The second idea that you need to keep in mind is that patients will see on their Explanation of Benefits (EOBs) that you charged $1,500 for your office visit. Even though the EOB shows you may only have been paid $150, the idea that you charged so much can easily lead patients to view the practice as greedy and unreasonable.

So, given the ideas above you want to set the fee schedule consistently high enough not to leave legitimate money uncollected but not so high that you risk alienating patients when they receive an EOB or are told the charges for the day.

An easy way to achieve this balance is to set the fees at a reasonable percentage of Medicare. Often family practices will use 150 to 200 percent of Medicare and specialist will use 300 percent of Medicare. The percentage you select should be informed by practices in your area and your own payer contracts, but you will typically be quite safe with 200 to 300 percent of Medicare. Before finalizing your fee schedule you should always make sure that none of your payer contracts have carve outs or allowables that exceed (or even come within 25 percent) of your fees. One safety net you should always have in place is a report that identifies any claims that paid at 100 percent of billed charges. If you see this, then your charges for the codes on that claim are too low and you need to revisit your fee schedule.

Too many practices pay too little attention to their fee schedules. It's easy to think that a physician's stated charges don't matter; hardly any payers reimburse at that level anyway.

In speaking with medical practices all over the country, I often hear (and have been known to say), "Who cares what you charge?" Insurance companies are going to pay a certain amount (often called an "allowable") for the procedure code, and that's the bottom line. If Payer A has set an allowance at $50, it will pay $50, whether physicians charge $50 or $500.

But practices ignore their fee schedules at the peril of their own financial success. I recently visited two practices that were both making costly mistakes involving fee schedules. Do you recognize your practice in either of these scenarios?

The first, a primary-care practice, was routinely billing its office visits at fees lower than the Medicare allowable. They were charging less than they could because they were not paying attention to how their fees compared to Medicare.

While revenues seemed low, the practice was very pleased with its reimbursement because they were collecting 100 percent of what they billed commercial payers. Of course, payers typically reimburse according to their allowable (which usually is at least slightly higher than Medicare) -- or the physician's fee schedule, whichever is lower.

A surprising number of practices actually charge less than the allowable. And if you charge the payer only $45 -- when $50 is the allowable -- don't expect to receive any gracious phone call or kind letter letting you know you are charging too little.

The second practice saw lots of cash-paying patients and allowed each physician to establish his or her own fees. Because the physicians were providing a number of new services, patients would often get to the checkout desk with an encounter form listing a procedure code that was not on the existing fee schedule. So, after waiting outside of exam rooms to ask physicians what they wanted to charge for the codes, the checkout clerks realized they would be more efficient by just guessing on the fees -- which were inconsistent and random, and tended toward the high end.

This practice was putting itself at risk by charging patients different amounts for the same service. Worse, it was probably losing patients who were made to wait around while staff decided what to charge them.

Physician fee schedules do matter. Every practice needs to make revenue enhancement a priority. Your goal should be to get paid fairly for the services you provide. At the very least, your fees should be higher than the allowances set by payers; keep these additional points in mind as you set your fees.

• Avoid changing your fees suddenly or dramatically. If you discover your fees have been too low, don't increase them by more than 10 percent increments every six months. Even though your fees are relatively meaningless to patients who are covered, they'll still see them on their receipts and copies of the explanation of benefits. A sudden increase can be a public relations nightmare for you.
• Be sensitive to your market. Don't set a fee for a 99213 at $200 if the only other primary-care physician in town is charging $65. That said, avoid setting fees at all with physicians outside of your group. This is called collusion, something the authorities don't look kindly on.
• Establish your fees based on the resource-based relative value scale (RBRVS), also known as a "percent of Medicare." (Download a sample fee schedule calculator from the "Tools" area of thi site.) A consistent approach to establishing your fees will be helpful for management, reporting, and tracking payer compliance based on allowance. Simply multiply the total relative value unit (RVU) of the CPT codes you use by the conversion factor chosen by the practice. You can establish multiple conversion factors for office visits versus procedures or surgeries, but most fee schedules fall in at 250 percent of Medicare (or a conversion factor of
• Have a uniform fee schedule for all physicians, if possible, and at least by specialty. Avoid charging different fees to different patients; you can, however, allow a reduction in the payment for self-pay patients. I often see groups offering a 30 percent discount to patients who do not use an insurance company and make their payments at the time of service (thereby encouraging prompt payment instead of a lengthy collections battle).

You work hard. By setting a profitable, but reasonable, fee schedule, you can be sure you are getting paid what you deserve.