It is highly recommended that practices establish a regular schedule for charge master review. Failure to follow standard business principles is what often times keeps a medical practice from achieving financial success. It is best to use weighted averages to maximize your reimbursements.Ī primary goal of the medical practice is to be profitable. Rather, it is wrong for you to base your negotiation (or charge) on the average because the average does not account for the revenue impact of each code. It is not that the payer is wrong for telling you that the average rate of reimbursement is 147 percent. Further, the payer may be averaging across all CPT® codes in our fee schedule, not just the top revenue producing codes. If this were an actual contract negotiation, we should be negotiating up from this 119 percent, not 147 percent. The only problem is your real average reimbursement, or the weighted average, is actually 119 percent. This is what the payer will tell you and this is accurate. In this example, the average percentage of Medicare for the two codes combined is 147 percent. The example above illustrates the importance of using weighted averages. Each CPT® code has an RVU assigned to it, which when calculated with the GPCI (geographic adjustment) and conversion factor results in the compensation to the provider for a specific service. Each service in the fee schedule is scored based on the RBRVS to determine payment.
Relative value units (RVUs) are a part of the resource-based relative value scale (RBRVS) and are used in the Medicare reimbursement formula for physician services. No doubt the most popular method for practice’s to create a fee schedule is to multiply Medicare by an arbitrary percentage. We have seen a variety of fee schedules over the years, some make sense, some do not.
With the fee schedule as important as it is, and it is, it is unfortunate that so many practice’s create their fee schedule without a clear understanding of the methodologies involved. Your fees should be set with consideration for basic business principles, including expenses, profit, return on investment, competition, marketing, etc. As with any other business, the fees charged reflect the value of services delivered. Although your standard fees are not necessarily the amount you’ll receive from third-party payers, they are the amounts you should list in the charge field for claims you file, with few exceptions. The fee schedule, sometimes referred to as the charge master, is arguably the single most important financial tool within the medical practice.
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