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Establishing Your Baseline

Before agreeing to transition from fee-for-service to a new payment system, physician practices must determine whether they will be able to stay in business if they are paid pursuant to the new methodology.

The first step to making this evaluation is determining the practice’s underlying costs of doing business. While practice consultants use different methodologies to determine the cost of providing services, the AMA has developed tools that let you use the Centers for Medicare & Medicaid Services (CMS) Resource-Based Relative Value Scale (RBRVS) and its underlying Relative Value Units (RVUs). Following 12 simple steps, you can calculate your practice’s cost per RVU, and then, based on the RVU value of each service, calculate your costs. To use this method, the physician practice should have the necessary reference sources, including current copies of the AMA Current Procedural Terminology (CPT®) book , Healthcare Common Procedure Coding Systems (HCPCS), Medicare RBRVS, RBRVS Data Manager and Medicare’s National Correct Coding Initiative (NCCI) or similar resources.

While these tools were specifically developed to assist physician practices in developing a fee schedule which reflects the physician practice’s underlying costs, you can also use these tools to create a document showing your costs for each service you provide.

Chapter one: How to establish your baseline costs

The two tools available for this purpose include:

  • Fee schedule analysis: Using your complete practice cost as a guide
  • Interactive fee schedule tool physician portal quickly generates fee analysis reports that let you:
    • Develop a practice-specific fee schedule that accurately reflects business costs and the value of your medical services
    • Compare your practices’ fee schedule against the Medicare Physician Fee Schedule by locality and against national average billed charge amounts
    • Answer your patients’ questions about your fees with confidence
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