Annual Fee Schedule Analysis

First, the review should compare the fee charged by the practice for the top 20 procedures to the insurance company allowable fee.

If fees are reimbursed at 100 percent of the fee charged, it is a good indication that the practice fee is below the amount the carrier determines to be reasonable and customary. Here is an opportunity to increase fees and reimbursement.

Next, make fee comparisons of the top 20 procedures within a geographic area.

A good source for this information is the Physicians’ Fee and Coding Guide published annually by MAG Mutual® Healthcare Solutions, Inc. In the guide, a range of fees (low and high) is provided for each CPT code. Additionally, the guide provides geographic adjustment factors so that fees can be adjusted based on the location of the medical practice.

For example, the fee range for a 99213 (level III established office visit) is $67 (low) to $86 (high) according to the 2006 edition of the Physicians’ Fee and Coding Guide. If the practice is located in Nashville, Tenn., the geographic adjustment factor is .927, resulting in a fee range of $62 to $80.

The goal of the comparisons is to establish fees for the practice that are not below the mid-range.

 In the above example, a practice in Nashville  would want to establish a fee for CPT code 99213 somewhere in the $81 range. A fee that is set too low may result in decreased reimbursement from commercial (non-managed care) payers. This is because a payer may reimburse a 99213 at $90, but if a practice is charging $75, it will only receive $75. While this enables the practice to have a 100 percent collection percentage, it means the practice is not receiving an extra $15 for every level III established office visit.

Physician productivity is a major component of most compensation formulas. If the compensation formula uses gross charges as a means to define production, it is imperative that the appropriate fee schedule be used to establish gross charges. A fee schedule based on relative value units (RVUs) can provide a fair estimate of work performed and also serve as the building block for setting fees.

The RVU for each procedure (CPT code) is multiplied by the practice’s established conversion factor to set the fee. The conversion factor is typically tied to the Medicare conversion factor as a multiple (i.e., 150 percent). For example, the RVU for CPT code 99213 is 1.37. If the practice establishes a conversion factor at 150 percent of the Medicare conversion rate for 2006 ($37.90), the fee would be computed as follows: RVU 1.39 x (37.90 x 150 percent) = $79.

Using the RVU methodology to establish fees also allows the practice to update all fees by revising the conversion factor or the multiple. RVUs and conversion factors are subject to change on an annual basis. The proposed RVUs for 2007 for 99213 is 1.66. The conversion factor is expected to be lower, but as with previous years, that is subject to change. Obviously, efficient utilization of this methodology for setting fees is contingent upon a system capable of converting CPT codes to RVUs.

Fee analysis can help pinpoint low fees for immediate revision. Comparison of a medical practice’s fees to established averages could determine the appropriateness of the fees. In addition, linking the fee schedule to RVUs can result in consistent pricing.

The result of regular fee schedule analysis can be an increase in practice revenue..