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September 2012 Radiation Oncology Coding Tip (View More Coding Tips and News Alerts)

Managing Payor Fee Schedules Effectively
By Bridget Krueger, MBA, RT(T)

Healthcare is an evolving industry and it is paramount to stay current in a number of areas.  One of the most important areas is analyzing and maintaining your billed charges and payor fee schedules.  Appropriately billed charge amounts used in conjunction with payor fee schedules are the vital link to revenue improvement opportunities, accurate billing and compliance with third party payors.

Medicare fee schedules will change annually and some change on a quarterly basis.  Do you know where to find the updates and how they relate to your geographical area?  A good baseline to assist you in building your fee schedule is to know your current local Medicare allowables and/or the Relative Value Unit (RVU) files.  From these Medicare allowable billed charges, you can determine a factor at which to set your charge master/fee schedule, while being in compliance with payors and being reasonable. 

We recommend that you analyze all of your payor fee schedules annually.  To start the review, gather all your payor fee schedules, per line item, of all the codes you bill.  Compare each of these codes (at very minimum, your top 20 utilized procedures) to your current local Medicare allowables.  Ensure that all your billed charges are higher than your contracted payor fee schedule.  For example, if any payor fees are reimbursing at 100% of a billed charge, you most likely need to increase your billed charge amount.  Be sure to review how your payor contracts read; some contracts could include language regarding limits on increase amounts on your billed charges.  Some entities, such as Physician Health Organizations (PHO) or Independent Physician Associations (IPA), have the ability to negotiate much higher payor fee schedules; therefore, the need to analyze your charge master/fee schedule against your payor fees is vital under these circumstances to ensure no lost revenue.  Another part of fee schedule analyses is determining the trends of your contracts.  For example, if you have a payor that is continually decreasing their fee schedule annually, you want to attempt to re-negotiate your contract with that payor.  Post payment review is another advantageous step to review what you are actually being reimbursed and to ensure that reimbursement matches your payor contracts.

Here is an example of a fee schedule analysis for a professional-only, facility-based provider.  In this example, we reviewed the 2012 calendar year.  For a more in-depth analysis, we would look back at previous years for trends and the potential need for negotiations with payors.  Please note that this is just an example and the numbers are arbitrary.

Not only is annual review of your charge master/fee schedule and payor fee schedules important, reviewing code descriptors and determining services currently offered by your practice are also important in assisting financial accuracy.  When these updates are performed, it helps to ensure that you are capturing the appropriate codes for services and are being compliant with Medicare and your payors.  This may also assist in maximizing your revenue.

Revenue Cycle Inc. can assist in many aspects of fee schedule analyses, payor contracting, updating the location-specific Medicare allowable billed charges on a quarterly basis, ensuring code descriptors are accurate, current relative value units under the Medicare Physician Fee Schedule, historical payment information and guidance in determining your billed charge amounts per line item.  For more information, please contact info@revenuecycleinc.com.