Master fee schedule: How it can help your practice

February 13, 2014

In an age where physician fees are primarily determined by the Centers for Medicare & Medicaid Services, insurers who negotiate a percentage of Medicare, or value-based reimbursement programs, it is reasonable to examine the purpose and method of creating and maintaining a master fee schedule, or “charge master.”

Robert A. Dowling, MD

In an age where physician fees are primarily determined by the Centers for Medicare & Medicaid Services, insurers who negotiate a percentage of Medicare, or value-based reimbursement programs, it is reasonable to examine the purpose and method of creating and maintaining a master fee schedule, or “charge master.”

One of the most common uses of the charge master has been for patients who do not have government or commercial insurance coverage, or “self-pay” patients. But almost no one pays “retail” in a urology practice, and usually this is just a starting place for deep and inconsistent discounts. If a practice charges Medicare and commercial insurance payers from their charge master, they create accounting work to adjust each charge and create confusion for patients trying to decipher explanations of benefits.

The alternative-separate fee schedules for each insurance company-may make it simpler for the practice and patient to determine whether payments are appropriate, but comes at a cost of maintaining dozens of separate schedules. Even practices that have multiple fee schedules usually have a master.

So why have and maintain a charge master? I asked one of the leading fee experts in urology-Mark Painter of Physician Reimbursement Systems-to help me answer this question.

“Creating a charge master is not just an instrument for communicating charges to uninsured patients but a tool to benchmark your expected value in the market,” Painter said. Continue to next page for more.

 

Determine costs of services

Determining what to charge for a particular service starts with an understanding of what it costs to deliver that service. How do you determine your costs? Almost all urologists have access to the tools they need to estimate the unit and total cost of everything they do: a spreadsheet program such as Microsoft Excel, the practice expense and malpractice expense relative value unit (RVU) schedule for CPT codes (available from CMS at http://ow.ly/tBolu), a list of CPT codes by frequency (from a practice management reporting system), an expense ledger (from an accounting system), and the Internet. For a tutorial on how to use these tools to determine costs per RVU-and by extension, costs per CPT-see http://ow.ly/tBopD or www.urologytimes.com/calculate-costs.

Once you know how much it “costs” to perform each service, you can determine what to charge for that procedure. There is no law that says your fee schedule has to be equally weighted to RVUs; that is simply a vehicle for indexing costs. Once you understand your cost, you can speak and negotiate intelligently with self-pay patients and even construct a self-pay fee schedule. This also forms the basis for understanding negotiations with payers, creating your annual budget, and tracking your revenue and expenses against a plan.

Another rationale for maintaining a charge master is to be able to benchmark one set of fees against competitors in your state or region-subject to antitrust laws, of course. There are a number of resources for determining benchmarks, including the Medical Group Management Association, American Medical Group Association, state medical societies, and others. A good article on strategies for competitive fee schedules can be found at http://ow.ly/tBoyd. However, keep in mind that the “competition” may have not gone to the trouble of rationally constructing a line-item fee schedule and may instead have simply based their fees on Medicare fees or some other third-party product.

Use charge master to compare reimbursement

Another good reason for creating and maintaining a charge master is that it can serve as an alternate method of indexing reimbursement. One common method used to compare reimbursement for medical services is the conversion factor-the quotient of amounts collected/RVU.

“Although an RVU-based charge master is not required to analyze reimbursement, RVUs are a great way to compare contractual payment and practice profitability across populations treated,” Painter said. This assessment of what you actually get paid helps physicians compare payers: A conversion factor higher than Medicare is good, and lower than Medicare is bad (and may indicate you aren’t charging enough).

One limitation of this analysis, of course, is that it assumes the collection amount is 100% of the contracted fee; a conversion factor may be different because payers underpay or overpay compared to their own fee schedule. The conversion factor can also be used to examine fees/RVU (if the CF wasn’t used to generate the fee schedule in the first place!); this analysis can help you maintain your fee schedule and price certain services differently than the RVU schedule might dictate. This type of analysis can help you negotiate with payers, make decisions about changing your service lines, or conduct marketing activities.

“All of this data, taken in context, will help you maintain your fee schedule and price certain services,” Painter said.

Bottom line: The next time a self-pay patient comes into your practice, be prepared to offer a fair and reasonable fee schedule that is not a legacy charge master from the 1990s but instead a well-thought-out representation of the actual cost of doing business plus a reasonable profit. The profit should be your own determination of the value of the service, what the local market will bear, and what the individual circumstances dictate (emergency, urgent, elective, etc.). Update your charge master at least once per year, and if you use it for all patients, stay on top of your reimbursements and adjustments. The updated charge master is not an obsolete tool, but an indication of a healthy and attentive urology practice.UT

 

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