Know your Contract Allowables
All practices have contracts with the insurance companies thru IPA’s (Independent Physician Associations) or directly with the insurance carrier. In both cases, there is a negotiated reimbursement rate for each CPT code that could be submitted. The problem I encounter with most offices is that the office does not know what the reimbursement is for each code and each insurance payer.
It is common for me to encounter physicians and Staff that have never heard the term contract allowable or negotiated allowable, so I will try to explain that first.
Let’s say you bill $150 for a certain CPT and that your UHC contract allowable for this CPT is $100 and your patient has an insurance plan with a 20% co-insurance. Your insurance company EOB (explanation of benefits) will look like this:
§ Charges: $150
§ Allowed: $100
§ Contractual Adjustments: $50 (difference between your fee schedule and your UHC contracted rate)
§ Patient portion: $20 ($100 contract allowable times 20% patient co-insurance)
§ Payment from UHC: $80
So, the $150 charge leads to an $80 payment from the insurance payer and a $20 balance transferred to the patient. In most cases, the amount you charge for this CPT has absolutely no impact on the $80 payment. If you charged $300 instead of $150, all that would happen is that the EOB would show a Contractual Adjustment of $200 (Your $300 charge minus the $100 contractual allowable) instead of $50. This is a critical point. Many new physicians think that a higher fee schedule will generate more income – this is not the case from most payers with whom you have a contract. In addition, many new physicians do not understand why they see these contractual adjustments each month. As you can see the combination of your fee schedule and payer contracts lead to these contractual adjustments. There is one exception to the above calculation method. Some Insurance carriers will pay you a percentage of your billed charge for specific procedures that are carved out in your contract. For example, the insurance carrier may have your “inner office surgery” code set to pay at 50% of the billed charge. If this is the case and you billed the insurance company $300, then the insurance would send you payment for $150. Many doctors ask, “why can’t I bill $3000 in that case?”. Each carrier will have a limiting amount that they will reimburse for that procedure. You will have to enquire to know what that limit is. This is situation is a rare occurrence and further illustrates the importance of knowing what your contracts state.
A final point here, payers make mistakes. Just because they say the contract allows a certain fee for a CPT does not mean they are correct. This is why it is critical to know your contract allowables.
How does this knowledge help improve collections?
All office personnel should know what the patient is being seen for before the patient shows up to the office.
Know your patient! Failure to do so could cost you!
You should know the patient complaint and have a precise idea of what they will be seen for and the procedures that will be billed before the patient ever arrives. (if you are unsure, work with your physician to find out what they typically do for this type of patient)
1. Leverage EHR software that can pull the patients eligibility status and provide benefit information like co-pay, how much deductible is remaining and what services are subject to co-insurance.
2. Create a mock charge and pull the contract allowables for each CPT code. If you have software like Aprima EHR, the allowables can be preloaded into the system or they can populate as payments are posted to the system allowing for you to collect accurately before the patient ever sees the physician.
Failure to collect properly can lead to disgruntled patients and can reduce practice annual income by up to 20%. Imaging having an additional 20% for your business by just follow some simple steps.
