RCM Tip #6: Review and Adjust Your Fee Schedule
Is your orthopedic practice missing out on revenue due to an outdated fee schedule?
When is the last time your practice reviewed and adjusted your fee schedule? If it’s been a while, now might be a good time to do so.
Each month, I will provide a revenue cycle management tip to help you stay on track for financial growth and success. This month’s tip will focus on the importance of keeping your orthopedic practice’s fee schedules up to date.
Without realizing it, many orthopedic practices may be missing out on revenue because of outdated fee schedules. Every year, the Centers for Medicare and Medicaid Services (CMS) and other payers update their fee schedules for current and new CPT codes, so you should do the same for your orthopedic practice to stay up to date. Ideally you should review your fee schedule every quarter, but at a minimum, once a year to ensure you are charging payers appropriately maximizing your reimbursement revenue.
How do payers set their reimbursement fee schedules?
To determine how much you should be charging, you should first understand the basics of how charges are paid, or reimbursed.
Payers—usually private healthcare insurance companies or Medicare—reimburse providers for medical services and procedures based on their allowed amount. An allowed amount is the maximum dollar amount a payer will pay for a covered medical service or procedure.
Allowed amounts are established by each payer based on what they consider “reasonable, usual and customary” for your geographic region. Payers have pretty broad flexibility for their methods of determining this amount, which can result in different allowed amounts for the same service or procedure for each payer. This amount is usually agreed upon by the payer and an associated network of providers. Sometimes this is also called an eligible expense or negotiated rate.
Before you start adjusting your own fee schedule, you should obtain the most current fee schedules from Medicare and your top payers. Most payer fee schedules can be found by visiting the payer’s website or making a quick phone call.
How do payer allowable amounts impact your practice’s fee schedule?
Most orthopedic practices set one fee schedule that charges more than the highest allowed amount set by their top payers. Because each payer can pay a different amount for the same procedure, trying to keep up with what every payer allows for each procedure could result in numerous fee schedules that can quickly become unmanageable for your staff and billing software.
Additionally, if you see Medicare patients in your practice, there could be regulations mandating that you cannot charge another payer a lower amount than what Medicare allows.
Setting your fee schedule above your highest allowed amount helps you to collect the maximum amount of reimbursement for the procedure or service provided. If you were to charge less than the allowed amount, the payer will only reimburse the amount charged, and not the maximum allowed, which means you could be leaving your hard-earned money on the table.
For example, If your practice fee schedule indicates an in-office knee x-ray is priced at $100, that is the amount that will be billed to each insurance company. If that same procedure is on an insurance company fee schedule priced at $150, the insurance will only pay $100, since that is all your practice billed. Multiply that $50 loss of revenue by the number of times you perform that procedure, and it can quickly add up.
So, how much should you charge?
Once you understand the allowed amounts from your top payers, you can better evaluate and adjust the charges set in your fee schedule. A commonly used method is to simply charge a percentage of what Medicare allows. For example, you could set your fee schedule at 150-300% of what Medicare allows, which is generally higher than what other payers allow. As long as you keep an eye on what your other top payer allowed amounts are, this could be a successful reimbursement strategy for your practice.
Another, albeit more complex, method is to establish a fee schedule that reflects your orthopedic practice’s true time and costs associated with offering each service or procedure. This method requires you to perform an in-depth analysis of your practice’s financial and operational metrics, such as procedure volumes, practice expenses, liability insurance costs, provider salaries, etc. The American Medical Association provides some guidance on using the Medicare resource-based relative value scale (RBRVS) as a tool to help evaluate provider effort and costs when determining your fee schedule.
How does your fee schedule impact your patients?
An important factor to consider when adjusting your fee schedule is to balance charging at or above your maximum allowed, while not charging so high that you drive your patients away. In today’s healthcare environment, patients are shouldering a larger portion of the costs with high deductibles, copays and coinsurance. Higher fee schedules that result in a bigger financial burden on the patient could prompt them to consider other providers.
Also, when updating your fee schedule, don’t make drastic changes. A good rule of thumb is to keep the amount changed within 10 percent of the previous amount. While patients usually do not pay the full charged fee, they can see the charges on their bills and EOBs. Minimizing changes can help prevent sticker shock to patients who may not understand how fee schedules work.
Should you consider professional orthopedic billing services?
Keeping up with fee schedules on top of all of your clinical, administrative and billing processes can seem like an arduous task. To help offload some of your billing processes and free up staff resources, one option is to enlist the help of a professional orthopedic billing service.
Modernizing Medicine’s Revenue Cycle Management (RCM) provides orthopedic billing services to help manage the various steps of your revenue cycle, including claims processing, denial appeals, patient collection calls and A/R management.
Orthopedic billing specialists not only manage the daily billing tasks, but also stay on top of your financial metrics and trends to help you increase your revenue. One of the metrics the RCM team monitors is your payments as a percent of your charges. This can help you identify opportunities to adjust your fee schedules and help collect more of what you are owed.
With a team of orthopedic billing experts keeping an eye on your practice financial operations and metrics, you can get back to what you love—taking care of your patients!
Here’s what a client has to say about our RCM services:
“The RCM team has been instrumental in helping improve our practice workflow and collections. Their attention to detail and dedication has helped our practice obtain optimum efficiency, and we cannot imagine running our practice without their services.” – Roger Kao, MD
Interested in learning how RCM can help improve your bottom line?
About Veronica Diaz, MD
MEDICAL DIRECTOR OF ORTHOPEDICS
Dr. Diaz is a board-certified, fellowship-trained orthopedic surgeon specializing in upper extremity surgery. She founded Palm Beach Hand to Shoulder, where she focuses on the management of degenerative, traumatic, and sports-related conditions of the shoulder, elbow, wrist, and hand, and oversees all operational aspects of the practice. Dr. Diaz is also the Director of Orthopedics at Modernizing Medicine, Inc.