Posts Tagged ‘fee schedules’

Multiple Fee Schedules – Good or Bad?

In Uncategorized on August 23, 2013 at 6:37 pm

A client recently asked M.E.D.I.C., Inc. about the legality and viability of implementing multiple fee schedules – each tailored to a specific carrier allowable, so as to reduce the appearance uncollectible AR in reports.  I thought that perhaps other clients and non-client providers may have considered this as well, and would thus be interested in this information.  For the reasons outlined below, I believe that it is preferable for a medical practice to maintain only one fee schedule.

As an initial matter, it is fairly common knowledge that a practice cannot bill Medicare a fee that is more than the fee billed to other carriers.  Medicare’s guidance on this is not crystal clear, however the rules do say are that a providers’ fee may not be “substantially in excess” of their “regular fee” (or “usual and customary” fee) for the same service(s).  Translation: if a providers’ fees to Medicare exceed their fee for the same service more than some unstated amount, or more often than ‘occasionally’, then that practice would be violating Medicare’s rule.  The premise is that if a provider charges less to other carriers, then that provider’s regular or usual and customary fee is in fact that lower fee.

So, if Medicare is your best payer, then it is moot to even entertain the idea of tailoring fee schedules to the carrier allowables, for you will run afoul of this regular/usual and customary fee rule.

Conversely, if Medicare is the lowest fee schedule, and you are wanting to charge other carriers higher fees because they may allow (and thus, pay) more, you will be safe with regard to Medicare’s rules.  BUT, while not running afoul of Medicare rules, this practice may be in violation of your participation agreements with those other carriers.  Those participation agreements may contain “most favored rate” or “most favored nation” clauses which provide that that carrier receives the best (i.e., lowest) fee schedule rate that you have.  In a case in which Medicare is the lowest fee schedule, then any carrier possessing such a “most favored rate/nation” clause must only be charged the Medicare (i.e., lowest) fee, and again the discussion of tailoring fee schedules is moot.

The key question to ask is why a practice may want to use multiple fee schedules – each tailored to the specifics of the various carriers with which the practice participates.  Often, the rationale is to avoid posting contractual adjustments…  if the fee that a provider charges is equivalent to the carrier allowable, then there will be no contractual adjustment.  However, the time saved by not posting contractual adjustments will be lost in the constant management and updating of that fee schedule to accommodate the constantly changing allowable.   And, if those fees are not constantly managed and updated, then the provider will undoubtedly leave some money on the table.  Also, keep in mind that this is a code-by-code analysis, not a schedule-by-schedule one…  for example, Medicare may pay more for some CPTs but not others – so now you have to worry about not only capturing all moneys to which you are entitled on an ever-changing code-by-code analysis, but you also have to remember not to violate Medicare’s regular and customary fee rule on a code-by-code basis!  This is undeniably an administrative nightmare!

Another rationale that is often asserted is that using one “overinflated” fee schedule will result in overstated AR, while tailoring the fee schedule to the carrier allowable will result in an accurate depiction of the truly owed and collectible AR.  That may be true, however, there are several elements that must be factored into this equation:

  • The contractual adjustments that are logged (and thus, which can be reported on) when using a single fee-schedule provide practices with a complete depiction of the amount of income that that practice has foregone by virtue of its participation agreements – i.e., the amount contractually written-off versus collected as the full fee.  This is important to a practice’s ability to analyze the value of participation with a particular carrier.  For example, when deciding whether to continue participating with ABC Insurance Company, a practice with a single fee schedule can take its most frequently billed procedure codes and analyze the collection rate across various carriers – they are all being charged the same fee, so the amount paid vs. write-off is patently obvious, and comparable.  This analysis is impossible with multiple fee schedules.
  • Absent a constant review and analysis of fee schedules and carrier allowables, a practice employing multiple fee schedules is bound to lose some money by underbilling for charges whose allowables have changed, or using the lower fee based on the allowable of one carrier when filing to another carrier that would have allowed and paid more.
  • Finally, there is the problematic conundrum of billing for patients with multiple coverage.  A practice cannot charge two different fees for one service on the same claim form.  So, although a practice may have established multiple fee schedules for each carrier, how does determine which fee to use for a claim for a patient having secondary (and perhaps tertiary) insurance coverage?  One fee must be selected, and in doing so, that practice is clearly going to either lose some amount of income (if the fee is less than one of the carriers’ allowable), or it is going to have a contractual write-off (the thing that it was trying to avoid in the first place).

All things considered, while the single-fee schedule approach may indeed lead to inflated AR figures, the benefits of that system appear to far outweigh the negatives, and in the long-run is much more efficient than the multi-fee-schedule approach.

As always, please do not hesitate to contact M.E.D.I.C., Inc. at any time to discuss these – or any matters – further.