24 Feb Updating Your Practice Fee Schedule
Many pediatric practices are so busy trying to see patients, manage administrative reporting burdens and trying to make sure their claims get processed that they forget to pause and remember the financial health of your practice starts with having an appropriate fee schedule. While contractually the payers determine how much they are going to pay you for each service you provide, it starts with how much you charge.
Scheduled Process and Procedure
At the very least, every January your practice should have a scheduled process and procedure for updating your fee schedule so you can be sure you are not leaving money on the table (and in the insurance company’s pocket.) The AAP has resources for pediatricians regarding coding, payment and RVUs.
Each January, CMS sets their conversion factor for how much physicians will be paid per RVU for Medicare. Most other insurance companies use some reference to the CMS conversion factor. Sometimes your contract is tied to a specific year of CMS fee schedule, sometimes it considers this yearly adjustment. For some new CPT codes, new services or a payer trying to break into your market, they will often pay at some percentage of charges. So if your contract says that’s 50% of charges, make sure your fee schedule reflects that!
Don’t Assume Anything
Find your contract language so you know how you should be paid. Don’t assume someone else has updated your fee schedule. Trust you have a great team, but verify not only how frequently it’s done but what is the basis for the fees you set.
Most financially successful practices base their charges on some percentage of the Medicare Fee Schedule for their geography. Should it be 150% or 300%? There are practical implications to what you choose (including AR, how much you write off and what happens to self-pay patients.) Regardless, it is good advice to start with Medicare rates and pick a percentage above that rate. There will be some CPT services you provide that don’t have a Medicare rate, but using RVUs as a proxy for those codes is good practice. At the very least, you want to make sure you cover your practice’s expenses to provide a service.
Ongoing Policies and Procedures
Once you have completed your yearly review – you are not done. You need to make sure that there is a policy in your practice with what to do when any payer pays you at 100% of your charges. Your billing team should alert you and you should have a policy of what to do with that information. But that’s not enough!
You should be running reports at least quarterly to find any CPTs that are paid at 100% by any payer that didn’t get caught by your billing team. There may be items that you don’t want to increase.
For example, form fees or ear piercing which are always patient responsibility, you should expect are paid at 100% of your charges. If postpartum depression screening often falls to patient responsibility, and you have only one payer covering your charges at 100%, you may want to leave that alone so families don’t refuse needed services due to high out of pocket responsibility (as long as your costs are covered.)
Vaccines Are a Subject of Their own
Pharmaceutical companies increase the costs of vaccines at various times during the year. You want to proactively order ahead and increase your charges so the payers will cover your costs with profitability. Remember, the AAP Business Case for Vaccines reports that practices need to get 17-28% above acquisition costs in order to break even!
No Margin, No Mission
Every child and adolescent deserves to have access to high-quality pediatric care. Every pediatrician deserves fair and adequate payment to provide those services. As the mantra of the AAP Section on Administration and Practice Management (SOAPM) states: “No Margin, No Mission.” You deserve to have your services valued and paid appropriately. It all starts with what you charge for your services.
So get started with a fee schedule analysis today! And if you just did it? Make sure you have ongoing policies and procedures in your office to continue this important work.
For more information on this topic, check out the recording of my educational webinar Updating Your Practice Fee Schedule.