Every practice has a fee schedule, which is simply a list of the fees to be charged for each service provided, and it is widely used in the billing process.
Most fee schedules are (or should be) based on a percentage of the Medicare Physician Fee Schedule (MPFS), which is public information. Your contract with a plan may call for you to be paid 80% of the MPFS, in which case, you’ll be paid 80% of whatever Medicare pays for that Current Procedure Terminology (CPT) code as listed in the schedule.
All billing programs require you to enter your practice fee schedule. This will be the default charge that will be listed on each claim. The fees are associated to the CPT codes billed by your practice so that when your claim is populated with a visit code and EKG, for example, your billing system will add your practice’s fees associated with those CPT codes. Some rare plans pay you based on billed charges; in those cases, it behooves you to have an accurate fee in your system so you will be paid correctly. Other payors reimburse based on their fee schedule or your billed charge, whichever is less. In those cases, you should certainly know the MPFS so that you don’t undercharge for a service.
Some issues we’ve found in working with providers include:
- Old fee schedules. It’s not unusual for a clinician to set a fee schedule when he or she first establishes the practice, and never or rarely revisit those figures. If enough time has gone by, and the MPFS has increased, you could be shortchanging yourself.
The same holds true if your billing system graciously enters the MPFS in your system. If you don’t create your own fee schedule which marks up the Medicare fee, the default will be exactly what Medicare pays. If fees change before your system has been updated for the new calendar year, you could be underpaid. This can affect any Commercial insurance payments if your contracted rate is higher than the MPFS.
- Exorbitant fees. We always recommend applying a set percentage increase to the MPFS when setting your fees. If you pick 100% of (or double the) MPFS, use this same multiplier for all the CPT codes in your practice. For example, if the MPFS lists $78.77 for a Level 3 E/M code, set your fee schedule at $157.54, 100% of the MPFS. This will also allow you to mentally calculate a truer accounts receivable because you will know to discount the A/R by roughly, half.
Fee schedules are also used to provide information to self-pay patients, who may inquire about paying privately for services. Since you already know the MPFS for each service, you can create a discount from your “doubled fee” in order to charge your self-funded patients.
The MPFS can change every year so it’s important to review your fee schedule each calendar year to make sure it remains in line with current practice.