Physicians’ retail rates (billed charge) and UCR charges
Before managed care contracting became common, physicians routinely charged patients and third-party payers their retail, non-discounted rates. To protect against the potential that an unscrupulous physician or other health care provider would engage in fee-gouging, the concept of usual, customary and reasonable (UCR) rates was developed.
The AMA defines Usual, Customary and Reasonable (UCR) as:
"Usual": the fee an individual physician usually charges his or her private patient for a given service (i.e., his or her own usual fee);
"Customary": a fee that is within the range of usual fees physicians of similar training and experience currently charge for the same service within the same specific and limited geographical area; and
"Reasonable": a fee that meets the above two criteria and is justifiable, considering the special circumstances of the particular case in question without regard to payments that governmental or private plans have discounted.
Over time, health insurers that offered policies covering "out-of-network" services calculated their out-of-network benefits based on a percentage of UCR rates. Out-of-network services are those provided by physicians or other health care providers that have not entered into a contract with the health insurer to accept discounted rates. Typically, the subscriber contract states that the payer will pay a rate for out-of-network providers based on the UCR charges or "market" rates for physician services prevailing in the area.
Unfortunately, some payers started reducing the payments for out-of-network services below what their beneficiaries reasonably expected. The most troubling for both patients and physicians was a systematic underpayment based on flawed methodology for determining UCR, which left the patients’ portion of out-of-network charges considerably higher than it should be.
Such health insurer underpayment leaves subscribers responsible for paying not only their required portion (typically 20-50 percent) of the amount due the out-of-network physician, but also any remaining amount unpaid by the health insurer that is owed to the physician. Leaving subscribers liable for amounts owed to the out-of-network physician because of health insurer underpayment defrauds subscribers. It denies them the benefit of the higher premiums they paid in order to affordably access out-of-network physicians.
The AMA challenged the flawed UCR methodology health insurers used to calculate payments due to out-of-network physicians. These challenges were mounted in the courts and before state and federal legislators and regulators.
This advocacy has paid off. Not only did AMA negotiate a successful settlement of its lawsuit, where a fund of $350 million was established to pay insured patients and physicians to compensate for their underpaid out-of-network services. In a related matter, then-Attorney General Andrew Cuomo entered into a settlement pursuant to which the major health insurers agreed to the creation of an independent database, which they will use to develop their UCR schedules.
FAIR Health Inc.
Pursuant to AG Cuomo’s settlement, FAIR Health Inc. launched the FH Medical Cost Lookup, powered by the independent database, on its free consumer website on August 1, 2011. FAIR Health also operates a website for healthcare professionals at www.feeestimator.org. Through these websites, FAIR Health has enabled patients and their physicians to look up the billed charges for specific medical services in their area. Patients can access this database alongside educational videos,articles and frequently asked questions that help them better understand the reimbursement process and their out-of-network benefits.
The AMA played a leading role in advising FAIR Health during the database’s initial development phase, and the AMA continues to closely monitor the database and press for continued improvements.
Physicians can explore how the database reports the services they routinely perform and are encouraged to email the Practice Management Center with any concerns. The AMA will discuss these concerns with FAIR Health and its Physician Advisory Committee as appropriate.
Watch the webinar "What the FAIR Health database means for practices" for a comprehensive overview of this new and important resource for physicians and patients.