Revenue Cycle Management Blog | GroupOne Health Source

Fee Schedule Dos and Don'ts

Written by Renzi Russell | March 17, 2016

What if I told you that your practice is missing out on revenue because of an outdated fee schedule? Would you know how to fix it? Unfortunately, many practices are losing revenue because of their fee schedule and they don’t know that updating it would improve their bottom line.

Most physician fee schedules bill for more than their allowables, and for several reasons.

For one, different payers pay different amounts for a given procedure. Billing each insurer and patient based on these different amounts would result in a complex tangle of multiple fee schedules, all of which would need updating regularly. It’s more than you can expect even the most competent billing team and Electronic Health Record (EHR) system to handle.

Not having a set fee schedule also makes comparing charge volumes over time a nightmare. And if you see Medicare patients, your practice isn’t allowed to charge any other entity a lower fee than what Medicare allows. 

Important Goals for Your Fee Schedule 

When setting a fee schedule, consistency is important so you can get a true idea of what your accounts receivables are at any time. If you have a bevy of legacy fees that are different multiples of Medicare allowables, your AR picture becomes hazy. In addition to consistency, another goal should be minimizing money left on the table. Insurers won’t pay more than you bill them, so if they pay $150 for a service, you should bill them the full $150 (or more, since payer allowables can change throughout the year).

This can be a balancing act because you don’t want to set your fee schedules so high that you drive away patients. Self-pay patients and those with high deductibles are likely to call and ask about charges in advance. Excessive charges are likely to send them elsewhere. 

Knowing Your Allowables Is Only Step One 

Know, at minimum, what Medicare allowables are. If you’re charging less than what Medicare allows, you may develop a false sense of prosperity since you’re collecting 100% of what you’re billing commercial payers, many of whose allowables are higher than Medicare’s.

And, of course, if you’re charging a payer less than the allowable, you have no sure way of knowing how much you should have billed out.

You should make revisiting your fee schedule a regular practice to make sure your billed charge is higher than the allowed amount. If your billed charge is equal to the allowed amount, you’ve billed too little and left money on the table.

How often Should You Revisit Your Fee Schedule?

If you can review and revise your fee schedule every three months, that’s probably ideal. You shouldn’t go longer than a year, however. Healthcare market dynamics change, your liability insurance rates change, and patient volumes change frequently, and keeping up with where your fee schedule should be is essential to collecting sufficient revenue to stay in business and invest in the agency’s future. If you’re seeing that your payers are regularly allowing 100% of your charges, it’s time to modify your fee schedule. Check what Medicare and private payers are paying compared to your charges.

How Do Practices Set Fee Schedules? 

Perhaps the simplest way to set fee schedules is to use a percentage of what Medicare allows. For example, family practices may charge 150% to 200% of what Medicare allows, and specialists may charge 300% of what Medicare allows. But the percentage you arrive at should be based on your own payer contracts and what other practices in your area are charging.

Another good starting place for most practices is conducting a cost study, either in-house or with the help of a consultant. Ultimately you want a list of services, each of which is assigned a proportion of overhead and margin as well as the base cost.

Fee Schedule Best Practices 

A few fee schedule best practices include:

  • Avoiding sudden changes in fees. If they’re too low, increase them incrementally until they’re where they need to be.
  • Set fees in consideration of what your market generally charges.
  • Make the fee schedule uniform for all physicians, or at least by specialty.
  • Avoid charging different patients different fees, though you can allow for discounts for self-pay patients, and perhaps a deeper discount if they pay at the time of service.
  • During contract negotiations, focus on codes for which you are paid on the low end of what peers are paid.
  • Always read an insurer’s contract thoroughly before signing it and obtain a copy of your contract. If you do not have a current copy of your contract, I would recommend contacting your insurance carriers to obtain a copy for your records.

Now that you know how to check your fee schedule and update it, make it a habit. You might be surprised at the hidden revenue within your own practice.