When was the last time your practice reviewed its fee schedule? We found that most practices set fee schedules and rarely conduct annual reviews. Fee schedules are outdated, and so is coding. Every year, payers update their fee schedules for current and new CPT codes, so providers should do the same. Your fee structure should be revised periodically; a bi-annual or annual schedule is recommended. The impact of two small (1-10%) semi-annual changes will be amplified whereas a single annual adjustment will not. Large, infrequent changes can attract unwanted attention from patients, insurers, and competitors.
No Review = Lost Revenue
As payers update their fee schedules, it is recommended that you perform an analysis of your fee schedules to ensure revenue optimization. Outdated fee schedules can result in significant reimbursement losses. For example, if the office fee schedule states that an in-office procedure costs $100, then that is the amount each insurance company will charge. If the same procedure is listed on the insurance company’s fee schedule for $120, the insurance company will only pay $100 because that’s how the entire charge is done. Each execution of the procedure results in a financial loss of $20. If the procedure is performed 100 times a year, the clinic loses $2,000 on just one procedure.
How Does a Practice Complete a Fee Schedule Review?
1. Organize the current fee schedule for the practice.
2. Identify the top insurance company payers.
3. Obtain the most current fee schedules for all payers.
4. Begin the analysis by reviewing what the practice is currently charging versus what the payers are reimbursing based on the obtained fee schedule in step 3. Your clinic’s fee schedule should never be less than what the payers will reimburse for a service.
5. Many payors pay a default rate (% of Gross Charge) for some services. Your Gross charge must be set so that the payor is paying equal to or better than all others.
6. Once the updated fees for each procedure have been determined, practices will want to ensure that the fee schedule is updated in their practice management system. This will bill the insurance company for the updated amount the next time the program is billed.
Fee Schedule Review
Simply put, the fee schedule is the most important financial tool in the doctor’s office. Contrary to general consensus, practice fees have a dynamic impact on future allowance calculations. Physician offices are no different from other industries in this regard.
As in other industries, fee schedules should reflect the value of clinic services. Ignoring fee schedules, or worse, allowing payers to dictate the value of these services, can impact viability.
By applying sound econometric models for analysis such as true cost, market dynamics, competitive factors, and value-based pricing, healthcare organizations will optimize their revenue potential.
While these concepts may sound foreign to some, they are actually within reach with Complete Healthcare Business Consulting (CHCBC). By applying basic business techniques and working with our team, any practice can develop and maintain a fee schedule that meets or exceeds its financial needs. In combination with a Master Fee Schedule analysis, your practice identifies poor payers, creates leverage in contract negotiations, gives patient clear financial expectations, reduce accounts receivable and increase revenue. Call (801) 274-2677 to speak to a certified healthcare business consultant today.