They Owe You One

April 1, 2003

You need to make sure you are billing for your full value and getting back what you are owed.


Have you ever stood in a check-out line, item in hand, only to have the cashier realize there is no price on the product? The cashier might ask you if you know the price, or worse, go look for it herself while you deal with the withering looks of the customers in line behind you. Sometimes, a cashier will even negotiate with customers, suggesting a price off the top of her head.

If this seems a likely scenario at the local grocery store, but not in your office, spend a day observing your own billing operation. Sadly enough, there are a lot of guessing games going on there. Why? Insurance companies often refuse to tell you what price they have assigned to each service you render. Billers often just don't know what the payer owes - or what they should bill. They end up as befuddled as that grocery-store cashier.

The second annual Fee Schedule Survey helps you negotiate with payers. But what happens later on, when a claim goes out or a payment comes in? You need to make sure you are billing for your full value and getting back what you are rightly owed.

Evaluate fee schedules annually

With all the hullabaloo in the press about physicians' fees being so high, and a general sense that fee schedules don't matter anymore since payers never reimburse the full amount, physicians too often neglect to update their fee schedules.

Don't let that happen. Evaluate your fee schedule every year. It's much too easy to end up charging an insurance company less than they would be willing to pay. When it comes to choosing between their fee and what you charge, an insurance company will always pay you whichever is lower.

For example, one orthopedic surgeon I know kept his fee schedule up-to-date when it came to surgeries and evaluation and management (E&M) codes, but he somehow never got around to analyzing his in-office imaging codes. The consequence? He was routinely charging workers' compensation (and probably other payers) less than they were willing to pay.

To illustrate, the doctor was charging $63 for a 73030. He could have charged workers' compensation - and been reimbursed - $94, the allowable for that service that year in his state. That means he lost $31 every time he billed the code. Since he billed the code 182 times that year, he lost $5,642 in one year on that code alone.

On his 10 most-frequent CPT codes - and just to workers' compensation - this physician lost over $39,000. You can easily be losing just as much. The mistake is widespread.

You'll know you have a problem if your services are routinely being paid at 100 percent of your fee schedule. It almost always means that you're leaving money on the table.

Have your billing staff copy the evaluation of benefits (EOBs) and circle any CPT codes paid in full. Then evaluate the code to determine if your fee is too low. Had my orthopedist friend done this, he wouldn't have been nearly $40,000 in the red last year.

That said, be careful about suddenly making significant increases to your current fee schedule - you don't want to shock patients with brand-new, much higher fees. Consider phasing in the new schedule or offer a discount to patients who pay in cash. You'll need to balance good public relations against the need for better revenues.

Know what you're owed

Obtain the allowance schedules from the carriers with whom you contract. Otherwise, you'll never know if you are being paid correctly.  Federal and state insurance companies, like Medicare, Medicaid, and workers' compensation are published, often on the Internet. Each year, these carriers distribute their fee schedules to all participating providers on paper or electronically.

However, commercial and managed-care companies usually don't hand over their allowance schedules so easily, so you need to be prepared. First, know what codes you need. Most practices, on a specialty basis, can define the majority of their business in 25 codes. Set up a spreadsheet and fax it to the insurance company, asking them to fill in their fees. You'll have better luck obtaining the information when you negotiate and then renew the contract, so time your requests with this.


But hasn't the insurance company given you information about its allowances by indicating the payment formula in your contract with them? Don't be so confident. Many insurance companies will "define" their allowances in the contract by stating, for example, "Fees based on 110 percent of RBRVS."

Although it appears that all you would need to do is multiply your Medicare allowance per code by 1.1 to obtain the prices, the insurance company may have failed to tell you, for instance, that they use the 1994 RBRVS schedule to calculate their rates. The devil is in the details. The bottom line is that you should know the dollar amounts you are owed; if not, make sure that you verify the payment formula.

If you're still frustrated by the lack of information, consider contacting your state medical society. Many states, like Georgia, have introduced legislation that forces insurance companies, buy law, to inform physicians of their allowances.

Watch for underpayment

Underpayments from payers are such a pervasive problem, a recent research study by Texas-based contract management software vendor, MPV, revealed that one out of every five payments received by physicians was underpaid. (Visit www.mpv.com/pr2002.07.01.html for a copy of the survey.)

Their tactics include:

  • Downcoding - when you turn in a code and the carrier changes it. For example, a 99214 gets switched to a 99213, and is paid at the latter, lower rate.

  • Bundling - when you submit more than one service and the carrier changes it to just one service. For example, say you bill a 99213 for treating migraines and a colonoscopy, but the payer switches it to the colonoscopy only and pays only for that service.

  • Plain and simple underpayment - when you have a contract for a certain allowance and the payment is less than that.

It's not hard to conclude that physicians can lose a lot of money, very quickly, because of these issues.

When you discover one of these problems with a claim, treat it like a denial. Evaluate the claim to make sure that you can support the level, volume, and nature of the services billed. (Of course, some underpayments are legitimate if you've coded the services incorrectly, so be sure to review them before you begin the appeals process.) Talk to the carrier first by phone to discuss whether they'll reconsider. If that is unsuccessful, move to the appeals process. Resubmit the claim with supporting documentation, as well as a letter of explanation.

Since this process can be costly in terms of billing staff, keep a log of issues and problems, categorized by payer. If you discover, for example, that more than 50 percent of a certain payer's claims must be appealed for payment, this is good information for you to bring up during the contract renewal process. Keep in mind, however, there may be insurance companies that aren't worth the time and effort to contract with, even if they publish high allowances. It's a business decision you need to make based on your practice's circumstances.

Elizabeth Woodcock is director of knowledge management for Physicians Practice. She can be reached at ewoodcock@physicianspractice.com.

This article originally appeared in the April 2003 issue of Physicians Practice.