What Is a Physician Fee Schedule? How Do Different Types of Fee Schedules Affect Medical Reimbursements?

It’s not always necessary to be charged a coinsurance amount or copay when you visit your physician for healthcare service. There are times when you visit the medical facility and take the treatment and come back to work after visiting. This is because you are aware of the coverage you have from the secondary or primary insurance payers.

When providers are paid according to the collective service from the payer, it comes through the physician fee schedule. What is a physician fee schedule and how do insurers decide to pay the respective doctor?

What is a physician fee schedule?

A complete list where the provider has mentioned the whole list of treatments provided with the resources used is called a physician fee schedule. This is one of the essential steps in medical billing where providers are paid based on the physician fee schedule. This fee schedule translates into the cost of services a provider is entitled to be received.

Generally, there are three types of physician fee schedules i.e., Medicaid, Medicare, and Commercial. These types of fee schedules determine the payment rates that vary according to the services provided and the involved entities. A brief explanation is made in the next part of the article about the types of physician fee schedules.

Medicare Physician fee scheduling

What is a physician fee schedule

Centers of Medicare and Medicaid Services – CMS which is regulated by the federal government that has defined the fee schedules. CMS works within the United States Department of Health and Sciences which is responsible to administer healthcare programs under Medicare. The US Department of Health and Sciences also connects with the state government to monitor Medicaid programs. The healthcare programs under Medicare define the amount through which providers will be reimbursed after providing their services.

Medicare fee schedule is part of Medicare Healthcare programs and uses over 7000 unique billing codes to reimburse providers for their services. However, not all of these unique codes are used for reimbursements. They have their specified medical meaning associated with the treatment and the process. According to CMS, they categorize healthcare services as primary and secondary services. Here providers are reimbursed depending on the type of services. Primary care services are the ones that are covered through the Medicare fee schedule but the secondary care services depend on the primary services to be performed so they can be reimbursed. In other words, secondary services are considered a subcategory of primary services when it comes to reimbursements.

The value of the Medicare fee schedule is accredited to be paid through RVUs (relative value units) that are relatively applied to conversion factors. These RVUs are adjusted to specify the place of the service like the zip code of the healthcare provider and the place such as in the facility or for out-patients.

These rules are regulated to be fair and competitive by Medicaid for both payers and payees. However, many healthcare providers believe that they are not fair and they should be raised. Although, Medicare puts all its faith in accurate and efficient RUVs adjusting and believes that Medicare fee scheduling would be sufficiently beneficial for a provider if the process is done smoothly.

Medicaid Physician fee scheduling

Medicaid healthcare programs are also managed by the United States Department of Health and Sciences but they basically run at the state level. Although Medicaid still needs guidance in many obligations from CMS. This is being said that Medicaid functions at the state level, the fee schedule is determined individually by every state and therefore is different across the country.

Similar to Medicare fee schedules, Medicaid fee schedules also have primary and secondary reimbursement service options for providers and healthcare facilities. It also needs to mention here that the Medicaid fee schedule is the lowest of all the three types of fee schedules determined by the US Health department.

Medicaid fee schedules are more favorable to insurance payers as they provide the lowest reimbursement rates for providers’ services. The reason for less reimbursement is the Medicaid carriers receive fewer reimbursements for the population under Medicaid compared to what two other types of fee scheduling Medicare and Commercial population receive. Since Medicaid physician fee scheduling is lower, many physicians deny accepting appointments for the patients covered through Medicaid programs.

On the other hand, it is also commonly accepted by the providers that Medicaid fee schedules are typically the lowest fee schedules, they are being subsidized by the commercial fee scheduling. This is because providers have the opportunity to balance out the lower reimbursement of Medicaid fee schedule with the higher reimbursement of Commercial fee scheduling for identical services.

Medicaid fee schedules are generally approachable over several state websites.

Commercial Physician Fee scheduling

Commercial fee schedules are the ones that are negotiable. These fee schedules are typically mutually decided between payers, which include insurance providers and healthcare physicians. Insurance companies discuss the fee schedules with their group of preferred networks and choose the selected doctors as members to use for the commercial fee scheduling.

Medicaid Physician fee scheduling

In commercial fee scheduling, providers are allowed to quote their own bills according to the services. However, this will enable the insurance providers to provide less reimbursement than the claimed amount. While the providers can still be able to charge their price according to their reasonable consciousness. Healthcare providers often agree to the reimbursed amount through commercial fee scheduling in order to prevent the patient from getting default if they can’t pay the high billed amount and on, the member shared amount remains after the insurance has paid what they find payable.

In addition to that, providers also agree to the commercial fee that the group of doctors under the insurance payer decides. As these members will decide to have the sheer providers to be added to their network to reimburse under commercial fee scheduling.

Not only the commercial fee scheduling, but at the negotiation table, payers and providers also discuss the services which will be reimbursed as secondary. In commercial fee scheduling, secondary services have an elevated reimbursement rate compared to Medicare and Medicaid and they are connected with more secondary healthcare services.

Besides, commercial scheduling fee is more about negotiating and reaching a mutual point, they vary in state, provider, payor, and services. Within the commercial fee schedules, it is also possible that a provider will accept commercial fee schedules from different payers for services provided to different patients.

A comparison between Medicare, Medicaid, and Commercial reimbursement cost actually determines the relative difference between their scheduling fee.

To be precise, fee schedules that are below or nearly match the fee scheduling rate of Medicare fee scheduling favor and are beneficial to payors, on the other hand, a fee schedule that is significantly greater than the Medicare fee schedule is considered in favor of providers. In both cases, payers and providers are lenient when it comes to agreeing on the scheduling terms. Possibly payor negotiates to get a higher commercial fee schedule with the provider for the service if the provider agrees on Medicaid fee scheduling terms in return.

With negotiating on own terms, the fee scheduling population increases, and all of the involved parties work according to their preferred terms under commercial fee scheduling. Besides, commercial fee scheduling is non-transparent. This means they never publicly post their scheduling fee and lose an edge that is more competitive than the other two types of physician scheduling fees i.e., Medicare and Medicaid.

Comparison of the types of the fee schedules for services

With the comparison between the fee schedule services for reimbursements will indicate the competitiveness among schedules that have been regulated. As you learned from the above example, the Medicare schedule fee is regulated keeping the intention to be fair and enough for all the involved parties. As for the commercial fee schedule, it is developed keeping a large margin which is viewed as the Medicare and Medicaid subsidy for services by providers.

The table below explains how each payor will receive through every fee schedule type for the same service rendered. The table delivers the idea of how Medicaid, Medicare, and Commercial fee schedules will reimburse providers for a single office standard visit.

As you can see the commercial being the competitive payor will reimburse the highest amount of $87.50 for a visit which is around 111% higher than the Medicare reimbursement. The population for Medicaid reimburses $55.00 per visit which is 69.8% less than Medicare reimbursement. With this example, you must have got an idea of why many providers do not show interest in accepting Medicare and Medicaid patients. Because they have an option to receive higher reimbursement from the commercial fee schedule.

fee table


With the passing time, it is likely possible that there would be more restrictions on providers as patients are continuously pressurizing the government to decrease the fee schedules to make healthcare available and attainable for all.