Reimbursement Based On % Of Medicare
Reimbursement based on % of medicare is an approach where payment rates are determined by paying a percentage above or below Medicare's standardized fee schedule for a service.
What is Reimbursement Based On % Of Medicare?
Reimbursement based on % of Medicare is a payment methodology where the amount a healthcare provider receives for services is calculated as a percentage of the fee schedule set by Medicare for those same services. This approach is commonly used by commercial health insurance plans, state Medicaid programs, and other payers to establish a baseline for their payment rates. It simplifies the negotiation process and provides a widely recognized benchmark for service valuation, ensuring a degree of standardization in healthcare pricing across different payers.
This reimbursement model often results in varying payment amounts depending on the specific percentage applied by each payer. For example, one commercial insurer might pay 120% of Medicare rates, while another might pay 90%. Providers must understand these percentages for each of their contracted payers to accurately estimate their revenue and manage their financial operations. It is a critical component of healthcare revenue cycle management, directly impacting a provider's profitability and ability to cover operational costs.
What is the difference between Reimbursement Based On % Of Medicare and Fee-for-Service?
Reimbursement based on a percentage of Medicare uses the Medicare fee schedule as a baseline for payment, often used by commercial insurers and Medicaid. Fee-for-Service is a payment method where providers are paid for each individual service performed, and it is the dominant physician payment method in the US.
Reimbursement based on % of Medicare calculates payment as a percentage of the established Medicare fee schedule, providing a standardized benchmark.
Fee-for-Service pays healthcare providers for each specific service (e.g., tests, office visits) that is performed.
Reimbursement based on % of Medicare results in varying payment amounts depending on the specific percentage applied by the payer (e.g., 90% vs 120% of Medicare rates).
What are examples of Reimbursement Based On % Of Medicare?
A commercial insurer pays a provider 120% of the Medicare rate for a specific service, meaning if Medicare pays $100, the insurer pays $120.
Another commercial insurer pays 90% of the Medicare rate for the same service, so if Medicare pays $100, this insurer pays $90.
A healthcare provider estimates their revenue by understanding that a state Medicaid program pays 80% of Medicare rates for certain procedures, allowing them to project income for those services.
Let's review your payer contracts side-by-side with the market.
Bring your top billing codes and we'll show you how you compare to your peers in 15 minutes or less.