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Physician Fee Schedule Survey - 2008


The results of our annual fee schedule survey tell you how much to expect from payers. The news isn’t good, but we have plenty of advice for making the most of difficult times.

The state of physician reimbursement is pretty depressing. That’s hardly a surprise, we know - but our exclusive research is shedding new light on just how bad it is out there. For starters, commercial insurers’ payment rates, which have been declining for years, are now almost as bad as government pay - on average nationally, a mere 10 percent or less over Medicare for E&M codes. Our annual Physician Fee Schedule Survey reveals that average reimbursement for a 99213 - a midlevel established office visit - is just $71.67, a tad better than Medicare’s $59.80 national rate.

The going rate for a 99211: $35.51.

The going rate for a haircut: $45, according to the Professional Beauty Association.

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Does that mean you’d have been better off going to beauty school than medical school? Well, no. To be clear, our payer fee data reflect only that - money from payers. Physicians can expect more in total when patient payments are included. Patient fiduciary responsibilities are growing.

Still, payer fees remain the largest source of income for most practices, and payments for office visits are in sharp decline regardless of practice location or specialty. Physicians providing E&M services in the Mountain region earn $114.72 on average, the best in the nation, while physicians in South Central states are at the bottom of the heap at $101.93. That gap is fairly narrow.

Medical specialty, surgical, and primary-care practices get basically the same reimbursement, with a dollar difference here or there. Of course, specialists might be able to earn more at the end of the day than their primary peers, but that extra cash comes from reimbursement for procedures, not the basic office visit codes that Physicians Practice examines for comparative purposes. (E&M codes are the ones everyone uses.)

Very generally, payment for routine visits nudged up slightly in 2008, relative to the growth of some specialty or procedural codes. Medicare boosted the relative value units granted to primary-care codes and slashed RVUs for codes used in some specialties. And since most commercial payers now reimburse based on a percentage of Medicare, their payments followed suit. “Cardiology and GI are getting massacred,” says Todd Welter, a Denver-based management consultant who specializes in payer contracting. “We call it Robin-Hooding - robbing from the rich to give to the poor.”

We also asked what physicians across the country are charging patients - their stated fee schedule without discounts. On average, physicians charge 75 percent over Medicare, harsh economic climate be damned.

There is a ton of data detail, but here’s what we take away from the minutiae:

  • Reimbursement is low.

  • There is no region of the country where things are terrific - no happy place. An unhappy, broke physician can’t just up and move somewhere else to hit the jackpot.

  • Your best bet is to set reasonable goals, based on the facts, and negotiate for what you can get.

That’s exactly why we do this survey every year. To arm you with the weapons you need when it comes time to talk turkey with payers. Welter recalls the old adage from the “Art of War”: If you know yourself as well as you know your enemy, you have no fear in battle. “Know your practice, what your costs are, and what you need,” says Welter. “Do some homework.”

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Using the data

The research matters. Payers already have data like you see on these pages when you go to them to ask for better pay. They know what the market rate is. And that’s the key to negotiation.

Payers “just want you to be in market,” says Welter. “They don’t want to pay anymore than anyone else. As long as Cigna is buying podiatry at the same rate United is buying podiatry, they are OK with it. It’s a commodity game, like pork bellies or barrels of oil.”

Cheryl Randolph, a spokeswoman for UnitedHealthcare, agrees with Welter’s basic point. “If a physician comes to us and says, ‘We want a 30 percent increase,’ we look at what other physicians are getting and if [30 percent] is a lot more, we’ll ask why” the physician deserves more. “I don’t know anyone who would just say, ‘OK,’ if the rest of the market isn’t charging that. We think it’s important for us to provide wide, quality access, but also to make sure we are paying fair, appropriate rates. We want to make sure we aren’t being over-charged and that physicians aren’t being underpaid.”

Since United contracts with more than 560,000 physicians, it has a pretty good sense of what the going rate is, she adds.

Aetna, too, says it pays a standard market rate unless you can prove you deserve more. “Physicians who believe they deserve higher reimbursement rates than the Aetna Market Fee Schedule must demonstrate that they deliver more effective and efficient care than their peers,” says Don Liss, MD, regional medical director for Aetna Mid-Atlantic Region. “They should be prepared to review factors such as adherence to evidence-based medical care, superior results on patient satisfaction measures, and established processes to deliver cost-effective care.”

Of course, the payers aren’t willing to share with you their data on market rates. Without the data on these pages, you’d just have to trust them. Our numbers are a starting point. If your allowables from payers are well below these norms, you know you have a problem and may have a good case in a contract negotiation.

You’ll also want to compare what various insurers are paying your practice. Is one payer way out of line with the others? How does each compare to Medicare?

“Where you can begin to leverage the payers to some extent is when you do this analysis for two or three or four plans and you can identify who is the lowest payer. Then go to that lowest payer and say, ‘It may not be profitable to me to accept your patients anymore,’” explains William Reiser, vice president of information services and decision support for Halley Consulting Group.

Neat trick

Unfortunately, some practices aren’t sure what they themselves are getting from some payers, much less what a given insurer is paying generally. “It baffles me frankly, but those payers will get you to sign a contract, but they won’t give you the data about what they are reimbursing,” Reiser points out. He suggests approaching the problem with a spirit of fun and doing a bit of “reverse engineering.”

Ask payers for allowables for your top 10 codes - or study your EOBs to see what they pay. Take their rate for each code and divide it by the RVUs Medicare gives the code in its fee schedule. The result essentially gives you the payer’s conversion factor - the number it multiplies RVUs by to come up with a payment. “If you do it for all the codes you have, you’ll see the conversion factor they are applying is pretty close across all codes,” promises Reiser. There will be some variation, but a median will become clear. Apply that conversion factor across every code and you’ll have a full fee schedule by payer.

Look at costs too

Want to take this analysis a step further? Start by knowing your own bottom line in the negotiation process. You can’t do business if your pay is less than your costs, so know what a given service costs. See if your allowables cover you.

One easy way? Do it by RVU. You’ll need the total RVUs Medicare assigns each code, a count of how often you bill each code in a given period - a year or a month (we’re talking comparison here, so it doesn’t really matter), and your total practice costs in that same period.

Multiply the number of times you do a service by the total RVUs, then allocate a cost to it. Look at your total cost for the clinic. If 20 percent of your practice is 99213s, allocate 20 percent of your total costs to 99213. Then divide back to an allocated cost per unit. “If it’s below what the payer is reimbursing, you’ve got a red flag,” Reiser says. Confused? Download Medicare’s fee schedule.

Why do all this math? If you take results to payers, “you’ll get a reputation for being someone with a plan and will be respected for it, so your future negotiations will be even that much better,” promises Welter. “Contracting is a process and it’s a process that goes on forever. Don’t stop. No doesn’t mean no; you have to be professionally persistent.”

Play nice

Negotiations also improve when you have a positive relationship with payers, rather than cantankerous one.

“You are in a stronger position if you do have a relationship with your carriers,” Carolyn Pickles, a practice management consultant from Longmeadow, Mass., advises. “One way to start that is simply to invite them into your practice. Set the stage and get to know one another for half an hour. Take them around the practice and show what goes on in your day-to-day world. Focus on billing but also the overall practice. And vice versa: Learn what their day-to-day work is and what their challenges are.”

Invite one payer this quarter, another the next, and soon you’ll have friends all over the place.

That is, if you keep it nice. “You can’t invite them out and then yell at them,” Pickles points out. “They won’t come back, and it will put a damper on what you are trying to accomplish. You have to be welcoming, ready, and willing to discuss situations, not get heated and aggravated about them.”

Welter likes the nice guy approach, too, at least at a certain level. “The troglodytes at the insurance companies, you can yell at them all you want, but if you get to a dealmaker, be good, be nice, be professional. It’s a business relationship. I have bought a lot of beer for contractors and gotten a lot of good contracts out of it.”

How do you get to a dealmaker? Pay attention, Welter says. Take note, for example, of who signs letters about policy changes. Call that person.

“Most people work from the bottom rung up. What they should do is work from the top rung down. The schmoe who answers the phone is not in a position to make decisions. The person who signs the letters won’t want to talk to you but their lieutenant will.” In the end, “your Rolodex has great value.”

Dropping payers

Golden Rolodex or not, of course, sometimes you just can’t get anywhere in negotiations, and it’s time to drop a payer.

Welter suggests a straightforward approach to deciding whom to dump: Create a graph where the X-axis is volume and the Y-axis is rates. Then plot all your payers. Get rid of those with low volume and low rates.

“You are trading discount for volume, period,” Welter explains. “If you don’t get volume why would you give a discount? And if you get volume, you’d give a bigger discount.”

Most practices are essentially at capacity already, he points out: “If I’m an internist in Houston, I’m going to be full as long as I’m not a brand-new physician.”

Having enough patients isn’t really the issue; having the right patients is. “You want the better-paying patients coming to your practice. You don’t have a downside if you have good information.”

Pickles is a little less hard-core: Dropping a payer “is a very difficult decision for a practice. Practices need to look at the big picture, the compilation of plans they participate with - what would be the impact? And it’s not just financial; there are issues with established patients. There are issues, in the instance of a specialist, with referring physicians, how those patients will be cared for, and how those physicians will be perceived in the community. I don’t think it’s ever an easy decision.”

Still, hard decisions sometimes need to be made.

Here’s hoping these numbers give you insights to make negotiation and contracting decisions more clear.

(For the big picture, download the complete 2008 Physician Fee Schedule Survey charts.)

Pamela Moore is director of content and strategy for Physicians Practice. She can be reached at pam.moore@cmpmedica.com.

This article originally appeared in the February 2009 issue of Physicians Practice.


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