In healthcare finance, numbers are – unfortunately – a game. As much as we’d all like to focus on the practice of quality care and little else, the amount we charge for services and the amount we are paid are distinctly different concepts, and therefore must be understood (better yet, managed) as such.
Fee schedules upon which payments for services are (loosely) based, must be higher than the amounts allowed by each payer if a practice is to maximize their revenue. You can rest assured that an insurance company is never going to whisper into your ear, “achem…you know you can charge a bit more for that,” or better yet, “you’re charging less than we’ll pay, so we’ll give you the higher of the two.” This isn’t the way it works, or will ever work. Practices must look out for themselves, and must keep on top of payer contracts on a regular basis to make sure that they are getting paid to the extent allowed.
Now, the difference between the fee schedule and the allowable amount creates a game of sorts (I prefer backgammon myself) when managing practice financials. Because the fee schedule can generally be what you’d like it to be, as long as it’s above the allowable amounts, this can inflate (or deflate) gross revenue (total charges based on the fee schedule) depending on where it sits in relationship to the allowed amounts. Net income will be the same, but there can be wide swings in the amount of revenue “discounted” which can be confusing to the practice owner if not entirely understood.
In this post, Peter Lucash over at the Medical Practice Business Blog makes the point that fee schedules must remain consistent with what services are worth, AND be higher than the allowable amounts per payer contract. By doing so, an accurate representation of the value of services provided as well as the “value” (or lack thereof) of certain contracts can be properly evaluated.
Some disagree with billing at full (private) fee as an exercise in self-deception. But it’s not – it reflects what your services are worth, and what some patients are undoubtedly paying. Financial statements always have to be in context, which is why any footnotes are very important.