If you have contracts tied to the Medicare Part B fee schedule, there are some important considerations to keep in mind when managing these relationships.
The first is to develop a detailed understanding of reimbursement for the services your practice provides. This information is usually found on the rate page in a payer contract, which can be one of the most difficult pages to understand. Here are a few examples of reimbursement for services we spot routinely in current major payer contracts:
- Payer market fee schedule
- Payer resource-based relative value scale (RBRVS)
- Percent current-year Medicare physician fee schedule (MPFS)
- Fixed-year (i.e., 2012) Medicare Part B fee schedule
- Fixed-year RBRVS from the Centers for Medicare & Medicaid (CMS), varying by category (i.e., E&M CPT codes are at 115% while labs are at 50%)
- Service category with a hierarchy of methodologies for rates (i.e., 100% of Medicare or 100% for Ingenix/Optum or 105% of invoice cost)
- Usual and customary rates (UCR)
Don’t bother attempting to back into these calculations. It’s best to obtain CPT code rate details directly from the payer, or alternatively, they can be abstracted from the Explanation of Benefits.
Keep in mind that CMS updates the MPFS each year, which could affect practice fee schedules. For example, rates for E&M codes in 2008 are lower than in 2017, which means that 105% of 2017 MPFS could be a richer fee schedule than 110% of 2008 MPFS. Also, if your fee schedule “rolls,” meaning that each year the base rates for the next MPFS update automatically, your reimbursement for that payer will be affected by annual updates.
In a fee-for-service arrangement, there is a foundational exercise to use to truly understand reimbursement for the services the practice provides; conducting a rate comparison for top CPT codes. Here are the steps to take:
- For top contracted payers, create a list of CPT codes that drive 80 percent or more revenue.
- Take this list and create a table that includes for each identified CPT code:
- Current- year MPFS
- Allowables for top five contracts.
This information can be used to compare how different payers reimburse the practice at the CPT code level. It is a starting point to assess payer contract performance. Tying contract reimbursement to the Medicare Part B fee schedule is not necessarily a bad thing. Developing a detailed understanding of current arrangements and monitoring fee schedules for changes is a critical workflow in effectively managing your revenue cycle.
Need a little more guidance around payer contracting? Transitioning to Alternative Payment Models A Guide to Next Generation Managed Care Contracting offers medical practice leaders practical steps aimed to help practices succeed in negotiations amid the shift from volume-based to value-based manage care contractual relationships.
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Need professional assistance understanding your options for contracting? MGMA Consulting can help identify actionable solutions tailored for your organization.
Doral Jacobsen, MBA, FACMPE
MGMA Consulting
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