What is the fee schedule in Medical Billing?

The fee schedule defined by the Centers for Medicare and Medicaid Services (CMS) is a complete  list of charges for health care services on a fee-for-service basis. Fee schedules play a critical role in  reimbursing practitioners for clinical laboratory services, durable medical equipment, ambulance  services, prosthetics, orthotics, and other supplies. 

Understanding  the breaking  point between discount and making a profit, setting a defensible fee schedule helps in overcoming many problems. Updating the fee schedule every 3 to 12 months is  mandatory so that you are not missing out on revenue. The updated fee schedule will keep up with market dynamics, such as your liability insurance rates and patient volume, by cross-checking with private and public payers to avoid any glitches.

How to decide the fee schedule? 

First and foremost, a self cost study or hiring a consultant to account for every cost is essential. It is so much so that you have a reasonable margin to reinvest in your clinic. Perhaps the simplest way is to  break down your cost and margin into hourly units of work. It is essential that your service  includes a list of all overhead charges, margins, and the actual charges. For instance, the fee for a flu shot should contain nursing staff’s pay, a fraction of the rent, insurance premium, electricity bill, your take home pay, and a fraction of the cost of an upcoming x-ray machine.  

It is important that your fee schedule ensures that you stay in business using the Centers for Medicaid and Medicare services on the resource-based relative value scale (RVUs) plus your expense. RVUs are relative values, so every code is multiplied by the conversion factor to get a fee schedule. Once the total cost is calculated, list every CPT code to your practice bills, excluding the ones w/o an RVU. Figure out the RVU for every code, practice expense & liability, and practitioner’s work RVU. Next, with  the total cost and total RVUs billed each year, allocate a dollar value to each RVU. Finally, multiply each RVU cost factor with the RVU per code to have a fee schedule. If you choose to create a fee schedule on the hourly rate, calculate how much time each service takes. After the calculation, you get an idea of what others are charging without breaking antitrust laws. 

Levels of the fee schedule

Medicare: The Medicare fee schedule administers the maximum amount reimbursed by Medicare  for a particular service. It is on the basis of the 7,000 unique codes. It is worth noting that not every  code defines a reimbursement amount. CMS classifies services as primary and secondary. Primary  get reimbursed by the Medicare fee schedule whereas secondary services are dependent. Medicare  fee schedule for a practitioner is adjusted basis RVUs applicable to the conversion factor. The  adjustment includes the area code of the practitioner, facility, and non-facility service. 

Medicaid: The fee schedule runs at a state level and, therefore, the lowest fee schedule is favorable to the Medicaid payor’s reimbursement rates. The beneficiary receives less reimbursement. Therefore,  some practitioners view it as a subsidized fee schedule and do not accept patients with Medicaid  coverage. 

Commercial: It is a negotiated fee schedule between the practitioner and the insurer. Here the  practitioner can bill any amount deemed reasonable. Additionally, insurers prefer in-network  practitioners for commercial fee schedules. It benefits the practitioners as they get a high payment  rate for the services rendered. The negotiation depends upon the payor, provider, state, and region,  which is likely profitable for the payor. When deciding upon a negotiation, the payor puts a higher  commercial fee schedule if the practitioner accepts the payors Medicaid population.

Given the current market dynamics, the pressure of lowering fee schedules will increase to make  healthcare more affordable and simultaneously profitable for practitioners. Perhaps, hiring a  medical billing service company can alleviate your troubles with compliance rates and accurate  billing.