Today, let’s talk about fee schedules; not a week goes by where I don’t get some questions about it.
- Should the amount I bill be the same as my contracted rate?
- How do I research fee schedules?
- How do I come up with a fee schedule for my practice?
- Should I charge different fees for insurance vs. cash pay?
Let’s face it, the topic of fee schedules can be as overwhelming as confusing. And to make matters worse, if you don’t get it right, it can get you in a boatload of trouble.
Because just as there are compliance rules about infection control, privacy, and a host of other issues, so are there rules around fees and finances. Be sure to keep that in mind as you set your rates. So, how do you set a fee schedule? Well, there are different ways to go about it and I recommend you look at all three
Time for Market Research
So, one of the things I recommend you do, regardless of whether you’re accepting insurance or private pay, is to do a bit of market research. At a minimum, find answers to these questions:
- What are the services you will be providing?
- Where will you offer them (state and city)?
- What are other providers offering similar services charging?
How do you do that? Just how do you ask these questions? And how do you get that information?
Frankly, it can be challenging. Because it’s not like you can pick up the phone, call the pediatric office down the street and say: “Hello, can you share your fee schedule with me?” No. Chances are they will not tell you anything.
You’ve heard of secret or mystery shoppers? They are often utilized by retail businesses to learn information on their competitors as well as do quality checking. I don’t know if anyone has a business of being a secret patient, but this concept will work when doing market research in your local area. This person could pose as a potential client ask questions on your behalf. If you were to utilize such a service, you’ll want to be specific about the information you want to find out.
Keep in mind as you are doing market research. Geographic location can make all the difference. Not only does it affect the cost of doing business, but it also influences reimbursement determination. Reimbursement in one region of the country will differ based on location.
Doing a bit of boots-on-the-ground market research is one possible route. Another way to gather data is to look around the web. Today, many sites have their services and corresponding fees posted online.
But what if there are no fees posted? Simple. Just call up and say, for example, you need a sports-physical and ask how much it would cost?
Often, rates charged for services are easier to come by when it’s a cash practice. But what if you practice bills third-party payers, well, it gets a bit trickier…
Insurance companies reimburse based on rates negotiated and finalized in the contract signed by the provider. Understand that individual reimbursement rates may vary based on any number of factors.
As you can imagine, insurance companies don’t want providers discussing these details. And if you’ve read through some of your contracts, you know that most insurance companies have a clause referring to fees as proprietary information not to be disclosed or shared with others.
Recently I received a message from someone who had tried to find fee schedules and reimbursement fees from another office. One of the providers in the office informed and warned the individual that it was illegal to do so.
Now, it’s not illegal like you could be going to jail because of it. But it is illegal because it goes against the contract you signed with the insurance company.
Of course, they don’t want their contracted providers to know that provider A is getting 20% more than provider B, who is getting paid more than provider C… all for the same level of work.
Right or wrong, you could lose your insurance contract if you share information about fees if they find out. So, be forewarned!
And here’s another option to create your fee schedule. When I first got started, a biller I knew made the following recommendation: take the Medicare reimbursement rate, at least as a starting point.
Of course, things are more complicated than that because the Medicare contractor you work with depends on your location.
For example, when I was in Washington, Noridian was my Medicare contractor. If you are in Texas, it might be Trailblazer or WPS if you’re in Missouri.
At any rate, go to the Medicare Administrative Contractor (MAC) for your region; all the information listed is public. Once there, look at the posted fee schedules for your area. Be sure to look at the correct location and find the reimbursement rate for whatever code you’re looking for.
In Missouri, for instance, reimbursement rates are the same for St. Louis and Kansas City. However, the rest of the state gets reimbursed at a different level.
The same principle applied to Washington state. Seattle King County was reimbursed at one rate, while locations outside were reimbursed at another level. Regardless, you now have a base number to create your fee schedule.
Let’s look at an example now. To make it easy, we’ll use an even number. Let’s say you bill $100 for a 99214. Now that you have a base schedule, you can work from there. You could take that number and multiply it by .85, 1.50, or even 2.0.
You could double your base number, becoming your billing rate for that particular CPT code. So, if you multiplied your base number by 1.5, your fee for a 99214 would now be $150.
Now, here comes the tricky part. Whatever your rate is, it has to be higher than what your highest payer reimburses.
For several reasons you want to have just ONE fee schedule, and bill out each and every payer the same rate for a particular code. If you have a different fee to Medicaid vs. Blue Cross or Champ VA, you could get yourself into trouble. Not only would you create lots of extra work for yourself, but insurance companies might not look favorably on your unique billing practices.
To make a long story short, you want one fee schedule, and the amount you bill out should be higher than your highest reimbursed rate.
Let’s look at an example. When I was in Washington, my highest reimbursed rate was with Labor and Industries. I would get about $150 for a 99214 visit at the time, which was several years ago now. To get this level of reimbursement, I needed to make sure that everybody I billed for a 99214 was also billed at a higher rate.
You want to do that because if the insurance company should increase your reimbursement rate, you don’t want them to reimburse you the lowest amount you’re billing out.
And you don’t want to underbill. Anytime you’re getting paid the same amount you’re billing out, chances are you’re under billing. Say you bill out at $100, and you’re getting reimbursed $100; you’re under billing. It’s possible that company would reimburse at $118, but they are not going to come back to you and say you made a mistake, here’s more money.
The other thing, and I’m not sure how accurate this is. I’ve heard it said multiple times, among certified billers, practice managers, and other industry people, that insurance companies take a look at what they’re being billed in their area when they readjust their fees every year.
If this is true, if we’re underbilling or billing on the low side, it could lead to lower reimbursement rates over time. For this reason, you always want it to be a little bit higher.
Direct Pay Practices (Membership based or a-la-carte)
If you’re taking insurance as well as cash payments, you need a cash payment policy. Something to the effect that if payment is received at the time of service, your practice will extend a cash discount, sometimes known as a prompt-pay discount.
A common discount is 20% or 30% of the fee for that level of service. Alternatively, you may decide to extend a flat fee discount for your cash patients; one flat fee for new patients, another flat fee for established patients.
Keep in mind that any cash discount will need to be extended to everyone who is paying at the time of service (or whatever your policy will be). The level of cash discount you give is up to you. However, it should be a reasonable amount.
- Do some market research to set up your fee schedule.
- If still unsure, take your Medicare rate adjusted upwards by a percentage for CPT codes and set your fee schedule.
- If you have people paying cash at the time of service, you can give them a discount, either a percentage or a flat fee.
- Look at your highest contracts and reimbursement rates, and make sure you’re billing above that.
- If need be, adjust your fee schedule.
- Keep an eye on your reimbursements, so you don’t underbill.
- And review your schedule on a regular basis.
I know this is a lot of information, and we only scratched the surface. Of course, an important aspect when setting up your fee schedule is going to be your costs. This is something that should be done in the planning phase and adjusted as necessary in order to keep your practice financially sound.
Please share with us:
- Do you have ONE fee schedule?
- How often are you reviewing your schedule?
- Did you determine your fee schedule another way?