Is Your Fee Schedule Causing Lost Revenues?

Many practitioners are under the misconception that updating their fee schedules is a futile effort because most payers reimburse at predetermined, discounted fee-for-service rates. Therefore, regardless of what your fee is, the payment is already fixed. This is simply not true.

In recent comprehensive fee-schedule reviews, we have found tens of thousands of dollars of revenue falling through the cracks. At a time when practitioners are working like dogs to maximize their charge volume it is a pathetic reality that they are increasing their lost revenues caused by outdated fee schedules.

Practitioners often don’t read payer contracts and overlook a common clause that states that the payer will reimburse at “the lower of their discounted fee or the provider’s usual fee.” Practitioners will argue that with declining reimbursements, fee schedules that were reviewed two years ago or longer should still be higher than discounted fee-for-service rates. What they don’t understand is that fees haven’t declined consistently across the board.

Indeed, while some have declined, others have risen. Even Medicare reimbursements have risen for procedures in which the relative value units have increased. As a result, payers who base their rates on a multiple of Medicare also have increased their fee schedules for certain procedures. Also, don’t forget commercial payers who, however few, generally pay higher than HMOs. Overall, we have found that there is still a wide variance in reimbursements among different payers.

Another misconception is that increasing fee schedules to reflect fair market pricing does not affect future rate setting. Although fees are no longer directly set by profiling regional, usual, customary, and reasonable (UCR) fees, payers and CMS do track the trend in fees charged to determine what the market will bear. Practitioners who underprice their services negatively impact future rates for everyone.

Practitioners should review their fee schedules annually. It is a time-consuming process that many office managers and administrators find difficult to undertake with in their busy schedules. Outsourcing to experienced consultants is the most common approach, though there are data-based software products available for the office manager/administrator. You can also set up your own spreadsheet. Suggested columns are shown in the illustration above.

Tips for Fee-schedule Analysis

Check to see if your billing software has a module to import your CPT codes and fee schedule. This is a big time saver.
Use the latest Medicare fee schedule as published in the Federal Register (Dec. 31, 2002) and utilize the non-facility RVUs.
If you bill global procedures, be sure you are comparing with payer global fees.
Enter payer reimbursements based on analyzing actual and current explanation of benefits (EOB) forms. Utilizing payer fee schedules is not recommended. These may be outdated. Also, we have found variances between what payers actually pay and what their published schedules purport.
Highlight payer reimbursements that are equal to your fee schedule in one color and those that are greater than your fee schedule in another color. If payers‘ reimbursements are equal to your fee, it is very probable that they are paying the lower of your fee rather than their allowable. If they are paying you more, it may be inadvertent and short-lived unless your fee is adjusted upwards.
You can begin by adjusting your fees (or conversion factor) to 125{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} to 150{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of the Medicare fee schedule, but don’t simply adjust your fees across the board at some multiple of Medicare. Next, recheck each new fee against the payer reimbursements to be sure all new fees are higher. Review all fees for those that are unusually high and consider adjusting these down on an individual basis.
Avoid using published fee schedules for setting your fees. You may, however, find these useful as a reference for specific outliers.
For those payer reimbursements that were equal to or greater than your original fees, recheck subsequent payments on new charges to be sure your fees are greater. If not, readjust.
Other Considerations

This analysis can also assist you in evaluating your contracted payers. If a payer’s reimbursements are significantly below others, this is cause for a more detailed review. First. dollarize the impact of the disparity on your overall revenues. Next, perform a procedural cost analysis to determine if you are losing money with this payer. This, together with poor receivables turnover, excessive claims denials, pre-certification hassles and unfavorable plan withhold experience can build a case for negotiating high reimbursement or withdrawing from participation with this payer.

This analysis can also identify payers that are not reimbursing in accordance with contracted allowables, enabling you to recoup monies owed.

Before implementing the new fee schedule, communicate the increases with all providers and patient contact support staff, explaining the need for such increases and how to reply to patient inquiries.

James B. Calnan, CPA, is partner-in-charge of the Health Care Services Division of Meyers Brothers, P.C., Certified Public Accountants and Business Consultants in Longmeadow; (413) 567-6101.