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Learn How to Calculate Medicare Fee Schedule Rates for Payment & Reimbursements

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When calculating the fee for Medicare costs, the physician or medical facility utilizes the Medicare Physician Fee Schedule (MPFS). This Medicare fee schedule uses a system called the resource-based relative value system (RBRVS) to determine unforeseen costs.

This RBRVS then assigns a value that is relative to an AMA CPT code. The overall factor that determines the value is obtained from a relative value scale. The elements that make up the RBRVS for all medical procedures include the following: professional liability, technical costs, and professional aspects. The entity responsible for determining all code values is the Centers for Medicare and Medicaid Services (CMS). After determining the value, they then multiply it by the annual conversion factor. This is what results in the average national fee. The rates are then adjusted depending on certain geographic locations of providers. Payers in these areas can increase or decrease the conversion factor.

How Providers Calculate Medicare Part B Fees

There are a few factors that providers must take into consideration prior to submitting their fee for services to Medicare Part B. These include:

  • Adjustments for geographical location
  • Limiting charge and non-participating status
  • Non-facility and facility rates
  • The standard 20% Co-pay

Adjustments for Geographical Location

A Medicare fee schedule can be requested based on your location through your Medicare claims representative. The rates can also be accessed through the CMS Physician Fee Schedule website. While urban area payment rates are usually up to 10% higher than the average nationally, the rural areas tend to be a lot lower than the average.

Limiting charge 

Medicare provides two types of participation categories. The first is for providers who wish to participate and providers who do not wish to participate. The difference between these two participants is whether they wish to accept assignments. The provider may also participate but not accept an assignment. Regardless, Medicare enrollment is still required for both categories. Once enrolled in Medicare, it is required that the provider bill per assignment and also the provider accepts Medicare’s allowable fee as full payment.  Although the allowable amount is only 80%, the other 20% will come from the patient upon receiving any services. The 20% can also be billed to supplemental Medicare policy. Whether or not if you are a participating provider, the claim must be filed with Medicare.

Non-Participating Status

If you are a provider, who does not participate, you are allowed to decide whether to accept an assignment or have the patient billed based on unassigned status. If a provider chooses the non-participating fee, then they will receive 5% less than if they did participate. A good example of this is if $100 is the total participating allowable fee, then $95 will be the non-participating provider’s allowable fee. Medicare will them cover 80% of their %95 fee. An assignment will then determine whether the patient will be required to cover the 20% or pay out of pocket.

The provider can easily make more by having a limiting charge of 115%. So, instead of the patient being charged for the allowable fee of $95, the highest allowable amount can only be $109.25. This applies to providers who have a fee of 15% or more than the MPFS fee. If you wish to change your status with Medicare, you must contact the contractor who handles your Medicare participation. Be aware changes can only be made in November to be effective in the following year.

Rates For Non-facility And Facility

The Medicare fee schedule rates for non-facility and facility is included in the MPFS. The fee will be higher if the provider renders service in their office. This is the rate for non-facility because of the provider having to pay the costs for equipment and overhead. The rate will be lower if a facility is used because the costs for equipment and overhead are put on a facility. The most common setting for facility rates is a skilled nursing setting. Services such as therapy are the only type of services allowed at the rate of non-facility settings. This also includes facilities because of the Medicare statute stating that these type of services can obtain the rates of non-facilities no matter where the setting is.

The Required 20% Co-Pay

A 20% co-pay is required for all Medicare Part B beneficiaries. A deduction is not made by the MPFS. That is why the Medicare payment is lessened by 20% than what the fee schedule shows. To collect the remaining 20%, the provider must make the effort to collect it.