Setting your practice’s internal fee schedule (also known as your specific billed prices, CPT input codes, or chargemaster) is one of the biggest challenges in being a profitable physician practice. No matter what you do, there’s always an incredible amount of maintenance in setting charge prices for your healthcare services.
Maintaining accurate chargemaster and pricing solutions is a key component of revenue integrity.
Healthcare organizations must consistently update chargemaster and pricing solutions to keep up with revenue codes, HCPCS codes, health plan changes, and other variations. When chargemaster data is outdated, it can create downstream revenue issues that hurt your bottom line and threaten business continuity.
Many health systems view chargemaster maintenance as part of revenue cycle management. Accurate pricing results in cleaner claims, fewer denials, and better visibility into how you perform in inpatient and outpatient settings.
In this post, you’ll learn about two common chargemaster rate approaches, the pros and cons of these approaches, and tips for creating a profitable chargemaster.
There are two main approaches when implementing or fine-tuning chargemaster and pricing solutions: percent-above-Medicare and cost-based pricing.
It’s common to use a flat rate percentage above Medicare (CMS) to set a practice’s Charge Description Master (CDM). The percent-above-Medicare pricing structure is simple, considering CMS prices are easy to find.
CMS.gov is Medicare’s website where practices can get fee schedules to their resource-based relative value scale (RBRVS) for ASP drug schedules, durable medical equipment (DME), lab schedules, etc. CMS even produces ambulatory surgical center (ASC) fee schedules.
The percent-above method is used in inpatient and outpatient services. It’s particularly popular for standard procedures like imaging, lab testing, and routine surgical services. By anchoring prices to Medicare rates, you can maintain a consistent baseline that scales across service lines while still allowing adjustments for commercial contracts and specialty care.
Medicare rates are usually some of the lowest when it comes to reimbursement. If you use them as your floor, it can negatively impact your entire pricing strategy. The result is a charge structure that’s inflated and far off from what payers actually reimburse you for common services.
Use the percent-above-Medicare pricing strategy as a starting point when other options are unavailable, or no fee schedule is relevant to set your prices. As a general rule, you shouldn’t use your lowest rates with a high markup to set charge prices.
Cost-based pricing, also known as cost accounting, refers to aggregating all costs of running and maintaining a healthcare practice (e.g., physician compensation, facility overhead, and supplies) and allocating charge prices above that.
Cost-based pricing can help you better understand how negotiated rates compare to actual service costs. When you align your pricing with payer-reimbursement structures, it can reveal gaps between operational costs and reimbursement performance.
In some cases, a cost-based approach can influence patient financial responsibility. You must accurately allocate costs, especially when applying deductibles and coinsurance based on billed charges.
Cost-based pricing can also create misalignment with payer-reimbursement methodologies, especially when there’s a large gap between what you bill and contracted reimbursement rates.
Lesser-of clause issues occur when you charge, say, $80 for a service, but the insurance company you billed would’ve contractually allowed up to $100 for that service.
Under a lesser-of clause in your contract, the insurance company will pay you the billed amount instead of the contracted amount because they are only obligated to pay the lesser of the two (in this case, $20).
By using the cost-based pricing structure, it’s not likely you’ll have the time or the manpower to adequately avoid underpayment.
Lesser-of clause exposure becomes more complex when revenue codes and HCPCS codes aren’t consistently aligned across chargemaster entries. This disparity can lead to inconsistencies in how claims are adjudicated. Maintaining consistency is essential to avoiding revenue leakage and protecting your bottom line.
Cost-based charges can be used in a very small practice where a practice administrator can determine a more definitive itemized list based on actual costs, though you may feel overwhelmed with the amount of work it’ll take to keep everything up to date.
Approaches such as cost-based charges and percent above Medicare offer more cons than pros, but changing the way you set your prices can be difficult and uncomfortable. The journey isn’t easy, but the destination is well worth the effort.
Cost-based pricing can also vary depending on the care setting. Costs are generally easier to track in outpatient services because procedures and resource use are more standardized. In inpatient care, cost allocation is more complex due to variable lengths of stay, shared resources, and differences in patient acuity.
Establish a baseline.
First and foremost, you should start with your fee schedules. Once you’ve collected your pricing information, you’ll be able to comprehensively understand your contracted rates and begin making an impact on your revenue.
The accuracy of your chargemaster and pricing solutions will largely depend on the quality of your data and governance structure. Integrating your charge capture into existing workflows can reduce manual rework and promote consistency in documentation.
Knowing where you stand will make it easier to see growth.
The more fee schedules you have, the more robust your pricing strategy will be to actually go about getting better rates.
Fee schedules also serve as a point of reference for benchmarking your internal pricing strategies. When analyzed collectively, they can help you identify outliers and underperforming service lines. Analyzing fee schedules can also support alignment with price-transparency initiatives by improving how organizations estimate patient responsibility.
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Start with your payers.
There are certain payer portals, provider websites, and payer representatives that can help you begin collecting your fee schedules. Availity.com is a great internet resource that helps you access fee schedules for multiple private payers such as Blue Cross, Humana, Aetna, and others. Use cignaforhcp.com to request the PPO and POS fee schedules for Cigna. Cigna typically responds within 48 business hours.
Payer representatives can be difficult to track down since their central email is often named “provider relations” or “PSU inquiry,” but you can still identify the right payer representative you need to contact or what the central phone number you should be contacting is for your fee schedules.
When reaching out to providers, you should remember that your contracts probably have a built-in clause that will help you obtain the documents you need. There’s usually a clause with a service-level agreement (SLA) that states a certain amount of time health insurance providers have to send you copies of fee schedules.
Regularly review your fee schedules across all major health plans, including commercial payers, Medicare, and Medicaid. When payers make updates throughout the year or contract cycle, it can impact your reimbursement expectations. Establishing a structured review cadence keeps pricing aligned with current reimbursement data.
Don’t be afraid to use contractual language to get a hold of your fee schedules!
You've collected your fee schedules. What's next?
Essentially, you’ll want to take your highest contracted rate, add a modest buffer, and validate that it covers hard costs. Here are the steps you could take to create a profitable practice or hospital chargemaster.
Find your highest contracted rate by looking through all contracted rates. These steps will help you promote transparency for patients while protecting the health of your revenue cycle.
Creating effective chargemaster and pricing solutions requires ongoing effort. Here’s what to focus on.
Variability between inpatient and outpatient billing structures is a revenue killer. Adopt a standard process for updating your chargemasters to ensure consistency and remove guesswork. Otherwise, you’ll constantly be playing catch-up when it comes to implementing changes.
Maintain a clear audit trail of chargemaster updates to facilitate compliance and financial reporting. Proper documentation will help your team understand why pricing changes were made and how they impact revenue cycle performance. The sooner you can identify negative changes, the easier it will be to stop the revenue leakage.
Think about all of the redundant billing-related tasks your team completes in a given day. Now, imagine if you were able to automate all of that.
Pick a few high-friction tasks and scale up from there. Trying to automate too much at once can create unnecessary headaches and change resistance.
Reducing manual rework should be one of your top revenue cycle priorities. Errors in charge capture can lead to downstream issues that delay reimbursement. In contrast, improving alignment between clinical documentation and billing workflows will cut down on rework.
Sign up for an upcoming live webinar or view an on-demand webinar to learn more about improving your revenue cycle.
Time to try Rivet.
Rivet is a claims analytics software that gives you the big picture of what’s going on in your practice with payer contracts, fee schedules, denials, and underpayments. You can also check eligibility and provide accurate upfront patient cost estimates with Rivet. The Rivet team will help you aggregate your fee schedules and input your claims data to enable you to take control of your revenue cycle and decrease AR days.
For more information about the tools Rivet provides, schedule a Rivet demo.
A chargemaster is a comprehensive list of billable items, procedures, services, and supplies used by a health system, along with how much each resource costs.
Chargemaster and pricing solutions are the foundation for generating claims and determining patient billing amounts. Without an accurate chargemaster, reimbursement becomes a tedious, error-filled process.
Percent above Medicare uses Medicare reimbursement rates as a baseline and applies a markup. Cost-based pricing calculates charges based on the actual cost of delivering care plus a margin.
A lesser-of clause is a contractual provision that requires payers to reimburse the lesser of the provider’s billed charge or the contracted allowed amount. If billed charges are lower than the contracted rate, reimbursement is limited to the lower amount.
You can collect fee schedules through a custom portal or website. Collaborate with each payer to identify the best method so you can protect your cash flow.
Start by comparing fee schedules from each payer. Analyze reimbursement patterns by service line to identify trends and find ways to boost revenue.
