Fee schedule updated? It could cost you

Despite HMOs, it does matter

"Managed care has prompted some physicians to think their fee schedules are no longer relevant," says David A. Hess, director of contracting for PMSCO Healthcare Management and Consulting of Harrisburg, PA, a subsidiary of the Pennsylvania Medical Society. However, physician fee schedules remain a very important part of practice management, maintains Hess.

For instance, Medicare and Medicaid health maintenance organization (HMO) contracts and preferred provider organization (PPO) contracts commonly contain a provision to this effect: "Health Plan shall compensate Participating Physician for covered services provided to Members. Participating Physician agrees to accept the lesser of (i) the usual, customary and reasonable charge for the services provided, or (ii) Participating Physician’s usual billed charges, as payment in full for the services provided to Member pursuant to this Agreement."

If you review Medicare’s reimbursement rates between 1997 and 2000 for evaluation and management code 99213 (Outpatient office visit/established patient/expanded focus/15 minutes), for instance, you’ll find the fee for this code has increased nearly 31% during this time period: 1997 - $34.53; 1998 - $37.71; 1999 - $39.95; 2000 - $45.18.

A $5.18 difference

Based on this, practices that billed the 99213 code and charged $40 for this procedure would be reimbursed $40 instead of $45.18. Multiply that by the number of times your practice uses this code, and you come up with a significant amount of undercharging for just one service over the course of a year. What do you do if you discover your fee schedule is underpriced?

Don’t dramatically raise fees overnight. If you discover your fees have been too low, don’t panic and try to immediately get back to market rates. Most experts recommend you gradually raise your affected rates by about 10% every six months.

Know your market. If you know the going rate for a certain procedure is $75 and you’ve been charging $35, don’t reset your fee schedule at $125 to make up the difference in the revenue you’ve lost over the years.

Have all doctors use the same schedule. All physicians in your group, or at least within the same specialty, should charge the same price for the same services. It is all right, however, to charge self-pay patients less. Many practices offer discounts of up to 30% to self-pays who write a check before leaving the office.