Charges and allowed amounts are different numbers Copy link
Your charge is what you bill. Each payer’s allowed amount is what its fee schedule or your contract with it recognizes. Medicare’s payment rules pay on the lower of the two: the bilateral and multiple-procedure rules and the 85% rule for NPs and PAs all start from the actual charge when it is below the computed amount. Check each commercial contract for the same lower-of language. Where it applies, a charge below the allowed amount caps what you collect.
Pricing as a multiple of Medicare Copy link
Take the local Medicare amount for each code, for the setting where you perform it, and multiply by one figure. A single multiple is simple to maintain and simple to explain. It also carries Medicare’s relative values straight into your charges, so a service Medicare values low stays low in your charge list. Some practices use different multiples by service category for that reason.
The floor check Copy link
For each code, find the highest allowed amount across Medicare and your contracts. A contract paying 125% of Medicare allows 1.25 times the Medicare amount for the same code, locality and setting. Any charge below the highest of those figures is worth raising. The charge check runs this for a whole charge list at once.
Review it every January Copy link
Medicare’s RVUs, GPCIs and conversion factor change with each year’s final rule, and contracts tied to the current Medicare schedule move with them. A charge list set last year can fall below this year’s allowed amounts without anyone changing it.
What this guide does not decide Copy link
It shows the arithmetic and the floor check. It does not recommend a multiple: that depends on your payer mix, your contracts and your market, which no fee schedule can tell you.
Charge floor check Copy link
Enter the local Medicare amount for a code, your contracts as a percentage of Medicare, and your charge. With a $99.63 Medicare amount (CPT 99213, office, Chicago, IL) and a 125% contract, the floor is $124.54; a charge below that is worth raising. To check a whole charge list at once, use the charge check.
- Highest allowed (floor)
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- Charge vs floor
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A charge below the floor matters for payers that pay the lower of your charge and their allowed amount; check each contract.
Frequently asked Copy link
Does Medicare pay more if my charge is higher than the fee schedule amount?
No. Medicare pays from its fee schedule amount. A higher charge does not raise it, but a charge below the fee schedule amount can lower what Medicare pays, because its payment rules start from the lower of the two.
How do I set charges as a percentage of Medicare?
Multiply the local Medicare amount for each code, in the setting where you perform it, by your chosen percentage. Then check that each result is at or above the highest amount any of your payers allows for that code.
Is a practice charge the same as a payer contract rate?
No. The charge is what the practice bills. The contract rate is what the payer agrees to allow, often written as a percentage of Medicare.
Sources Copy link
- CMS Medicare Claims Processing Manual (Pub. 100-04)
- CMS Medicare Physician Fee Schedule Relative Value Files
- CMS Physician Fee Schedule overview (cms.gov)
Written from primary CMS sources—see how we source, compute, and verify everything on this site.
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