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Practice Management Alert

Advanced Biller's Workshop, Part 2:

Does Your Fee Schedule Need Some Fine-Tuning?

Published on Sun Sep 19, 2004

This month: The next 4 steps of our in-depth 12-step solution

A fee assessment may be just what the doctor ordered to ensure that your practice's reimbursement is in tip-top shape.
 Last month we started you down the path to a better Fee Schedule with the first three steps of our expert fee adjustment process. If you've completed steps one through three, you're ready to roll up your sleeves and continue with the next four steps offered by Frank Cohen, CMPA, senior analyst with Medical Information Technology Solutions in Clearwater, Fla. To start from the beginning, see our August 2004 issue.

 4. Determine your conversion factor for each procedure code. Obtain the total RVU for each procedure from the resource-based relative value system (RBRVS). List the RVUs in column five of your spreadsheet, then divide the fee that you charge for each code by the total RVU for that procedure code. The number you get is your practice's own conversion factor (CF) for that code. For example, if a code has a fee of $55 and an RVU of 2.51, the conversion factor is 21.87. List your conversion factors in column six.
 
Important: Sort column six of your spreadsheet in ascending order so your data are listed from lowest to highest conversion factor. This will help you later to quickly identify all conversion factors that are too low.

 5. Identify all procedures below the Medicare Fee Schedule. Medicare's conversion factor for 2004 is 37.3374, meaning that any of your procedures with a lower conversion factor are below Medicare's fee schedule amount. You'll want to raise these fees - but not just yet.
 
Warning: "I can't tell you how many practices I've gone into where I find they're charging fees below Medicare," says Barbara J. Cobuzzi, MBA, CPC, CPC-H, CHBME, president of Cash Flow Solutions Inc. in Brick, N.J. You should check annually to ensure your fees are all above Medicare's conversion factor for that year.

 6. Choose the level of competitiveness for your practice. Determining how competitive your practice is will allow you to choose the appropriate minimum and maximum charge thresholds for your fee schedule, thereby ensuring that you're not adjusting your fees inappropriately for your market. Competitiveness has five levels that break down as follows:

 

  • Level 1 - Very Competitive: An example of this is a primary-care practice in an urban setting. The practice competes with many other providers for primary-care business and wants to keep prices low and competitive.

     

  • Level 2 - Somewhat Competitive: The practice may or may not be in a very competitive market, but it chooses to adjust its fees conservatively to remain competitive.

     

  • Level 3 - Average Competitive: An example of this is a general surgery or internal medicine practice in a suburban market. The practice wants its fees to fall in the average range.

     

  • Level 4 - Not Very Competitive: This level might include specialists in internal medicine or surgery. The practice is not particularly concerned about competitive pricing and will choose to increase more fees and at a slightly higher increase rate than more competitive practices.

     

  • Level 5 - Not Competitive at All: This level is for practices that choose to be non-competitive in their pricing structure. A sub-specialist in an area with no other physicians in the same sub-specialty may choose this level.

     7. Establish a minimum charge threshold. A minimum charge threshold (MCT) means that none of your fees will go below a certain percentage of the Medicare fee for each code. Your minimum charge threshold determines a minimum acceptable conversion factor based on your practice's level of competitiveness. Determining this threshold will allow you to guarantee that none of your fees are below what your practice deserves. Cohen advises you to choose a minimum charge threshold based on the following competitive factors:

    Competitive Factor               MCT           CF Amount
                                                        (Threshold x Medicare's CF)
    Very Competitive              1.1250            42.0046
    Somewhat Competitive     1.3125            49.0053
    Average Competitive        1.5000            56.0061
    Not Very Competitive        1.6875            63.0069
    Not Competitive at All        1.8750            70.0076
     
    For example: Suppose you are an average competitive- level practice and choose a 1.5 percent minimum charge threshold. You would then take the Medicare conversion factor (37.3374) and multiply it by 1.5, arriving at a minimum acceptable conversion factor of 56.0061. Any of your fees with a conversion factor below 56.0061 fall under your minimum charge threshold.
     
    Identify your fees that fall below your minimum charge threshold, because you will need to adjust them - but not just yet.
      
    Next month:     We'll conclude this workshop by showing you how to establish a maximum charge threshold and, finally, how to make your fee schedule adjustments. Stay tuned!

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