Navigating Fee Schedules and Reimbursement Rates

At the highest level, there are two layers you need to hybridize:

1. Your baseline fee schedule – the master list of services/supplies offered along with their assigned fees. This is basically your “menu” of clinical offerings and sticker prices.
2. The reimbursement rates dictated by your contracted payer sources (Medicare, Medicaid, commercial insurance plans, etc.). These are the allowed amounts you’ll actually get paid for each service after contractual adjustments.
   

• Get intimately acquainted with each payer’s reimbursement policies
  I’m talking down-in-the-weeds familiarity – memorizing coverage guidelines, medical necessity criteria, code editing rules, bundling logic, and more. Burn through technical manuals and load up on payer-provided training resources.
  The more you understand the discrete policies and reimbursement determination processes for each payer you’re contracted with, the better equipped you’ll be to:
  • ensure services are coded/billed compliantly
  • maximize allowable reimbursements
  • identify underpayments and appeal them persuasively
• Audit routinely, QA maniacally
  A big part of the fee schedule/reimbursement game is staving off underpayments through meticulous quality assurance. Put processes in place to meticulously audit all remittance data down to the claim/line level.
  Flag and appeal any outlier payments that don’t reconcile with the contracted reimbursement rates. Identify root coding issues or process breakdowns that enabled improper denials or bundled payments that shortchanged you. An ounce of proactive auditing is worth pounds of revenue recovered through tedious back-end appeals.
• Track and model rate changes
  It would be nice if contractual reimbursement rates were just a static, predictable constant you could set and forget. But of course, that’s rarely how reality works. Payer fee schedules update annually (if not more frequently) based on new clinical coding rules, market dynamics, and regulatory changes.
  You need to not only stay abreast of these modifications but model out their revenue impacts across your historical claims data. Use those projections to then optimize things like fee schedules, budgets, revenue forecasts, and where to allocate resources in denial management.
  While this exercise requires some heavy lifting, the ROI is huge in terms of predictable income and forestalling any nasty revenue surprises down the line.
• Be shrewd with contract negotiations
  Your approach to managed care contract negotiations is another key lever for controlling reimbursement rates. Don’t just blindly renew agreements without scrutinizing the proposed fee schedules and rate structures. Get adept at spotting subtle payer tactics within contract language to degrade rates year-over-year. Things like bundling services that were previously unbundled, reimbursing at a lower percentage of your charges, switching from charges to flat fees, and more. If you’re not vigilant, those gradual degradations of reimbursement can choke off your margins.
  No payer negotiation team wants you to earn fair, sustainable rates. They’re incentivized to nickel-and-dime you as much as legally permissible. So push back fiercely with data-driven counteroffers and maximize those contract economics in your favor.
• Mine for revenue integrity wins
  In your quest to optimize reimbursement rates, don’t neglect straightforward revenue integrity tactics that can unlock millions straight away.
  Comb through historical underpayments and identify systematic root causes for things like improper code edits, bundling oversights, payment calculation errors, and medical necessity denials that can be appealed and overturned.

Let’s explore key tactics for doing so:

• Benchmark intelligently
  You can’t just set fees in a vacuum or based on gut instinct if you want to be strategic and maximize net income. To optimize your pricing model, you need robust data comparing your fees to regional/national market rates across different sites of service. What are your peers charging for the same procedures and supplies? At what percentile are your fees priced relative to norms? Are your markups on supplies defensible under regulatory scrutiny? Benchmarking analyses give you a rigorous empirical foundation for making pricing decisions.
• Stay update on regulatory changes
  As you know all too well, the healthcare industry is rife with ever-shifting regulations around fee schedules, pricing transparency, documentation requirements, and so on. You have to maintain a constant pulse on updates to things like:
  • Annual CMS fee schedule updates and IPPS/OPPS rules
  • State-level pricing regulations and oversight
  • New coding guidelines or billing rules issued by NCCI, AMA, etc.
  • Evolving price transparency and consumer-friendly requirements

It only takes one naïve misstep to inadvertently run afoul of regulations. Closely monitor and swiftly implement modifications to fee schedules as needed to maintain compliance. When you operate in a heavily regulated industry, this is a non-negotiable.

• Account for service line nuances
  One glaring mistake many healthcare orgs make is taking a one-size-fits-all pricing approach across all service lines, care settings, and specialties. In reality, your pricing models should account for discrete cost structures, reimbursement model dynamics, and market conditions for each clinical service line.
  For example, your fees for surgery and imaging services will need to factor in expensive equipment, specialized staffing, supply costs, and facility/overhead allocations. Whereas evaluation & management services are more labor/time driven. Prescription pricing needs to align with acquisition costs plus dispensing fees.
  Get granular in mapping out the unique variables and economic drivers for each major service realm you offer. That level of specificity prevents your fees from being misaligned with the underlying cost/revenue profiles.
• Manage fee schedule hygiene
  Having a comprehensive, accurately-coded fee schedule is noble in theory. But if you lack rigorous processes to maintain it over time, things can descend into chaos pretty quickly. Establish strict protocols like:
  • Formal processes for vetting, approving and loading new fees into the system
  • Routine audits to identify and remediate coding/pricing errors
  • Version control and audit trails for any fee schedule modifications
  • Staff training on proper charge capture and documenting rationale

These “fee schedule hygiene” best practices ensure pricing integrity, reduce compliance risks, and provide auditability if you get whistleblower complaints or face external audits.

• Leverage technology and automation
  The management of healthcare fee schedules has become mind-bendingly complex. Between evolving codes, frated fee schedules, fee schedule modeling, and regulatory changes – it’s virtually impossible to maintain tight control through manual processes alone.
  This is where purpose-built fee schedule tools and IT solutions can be game-changing. Solutions that automate code mapping, handle regulatory crosswalks, model reimbursement impacts, and ensure your EMR/PM systems are publishing the right fees. When properly implemented, these enable smoother operations and tighter fiscal control.
• Don’t neglect patient-pay optimization
  For all the attention paid to optimizing fees for institutional payers, many healthcare organizations drop the ball on optimizing pricing for patient pay obligations (e.g. co-pays, co-insurance, deductibles). This “wall of shame” area causes rampant revenue leakage.