Not all medical services are associated with financial charges. Some procedures are bundled into an overarching service. For instance, the simple closer of an incision made by a healthcare provider is considered an integral part of the incision procedure, while the simple closer of a laceration due to trauma, is considered a surgical procedure in its own right. Professional medical billers understand when to apply the procedural code for a simple closure, either with sutures or a butterfly dressing, or whether another procedure code includes the closure. They know when charges are applicable in a particular case, and when they are not.

Charges for medical services are determined by third party payers, such as commercial healthcare insurance or government healthcare plans, using the Resource-Based Relative Value Scale (RVRBS). The RVRBS is a mathematical formula that weights the average expense healthcare providers incur when they provide specific medical services as defined by Healthcare Common Procedural Coding System (HCPCS). Third party payers determine the fee that they are willing to pay for services based on the physician work involved, the practice expense involved, and the malpractice expense involved in providing the service described by every HCPCS code. Based on the result of this formula, payers determine what is the reasonable and customary fee for each procedure performed in a pre-defined geographical area.

These fees are published in regularly updated fee schedules that are made available to healthcare providers. Medical billers review fee schedules regularly to determine how the prices charged by their institution compare to the published medical fee schedules. Medical practice administrators also review these fees to determine if providing these services to patients covered by a healthcare plan will be profitable.

While healthcare providers are free to set their fees at whatever level they feel is reasonable, they are obligated to accept no more than the agreed-upon fee schedule when they contract to provide services to the covered beneficiaries of third-party payers. The terms of the contract obligate the payer to reimburse the healthcare provider for either the actual fee charged or for the contracted fee, whichever is less.

For this reason, medical billers monitor payments. Medical fees are generally set higher than the contracted rates in order for providers to receive maximum contracted reimbursement. Any excess between the actual fee charged and the contractual rate is adjusted off the patient’s account, and the patient is not responsible for the excess in accordance with the terms of his or her insurance benefits. When medical billers notice that their fees are routinely paid in full by third-party payers, they contact practice administrators to to evaluate the possible need to raise the rates charged.

There is nothing underhanded in this, healthcare providers contract with third-party payers to receive mutually-agreed-upon rates of payment for specific services, and they are entitled to the contractual rate. Charging less shortchanges the providing institution from receiving potential income to continue being able to offer medically necessary procedures.

When medical billers and practice administrators set healthcare rates, they generally rely on the fee schedules determined by the RBRVS. Though medical billers do not perform these calculations themselves, they use the third parties’ rates as a baseline to set their practice’s fee schedule as reasonable and customary for their community. This results in fees that are above what third-party payers will reimburse for contractually covered services

Patients covered by commercial and government healthcare insurance are not affected by the rates set by individual medical practices. Their financial obligation is pre-determined by the terms of their policies. The patients who pay one hundred percent of a medical practice’s fees are patients who are not covered by third-party insurance.

Healthcare providers who contract with third-party payers do so in order to capture that payer’s beneficiaries. Due to economies of scale, they are willing to reduce their charges to a reduced rate compared to what they have determined is a reasonable charge for their practice. When a patient is not covered by insurance, he or she must negotiate the rate individually, from a weaker bargaining position than a large third-party insurer that can offer thousands of individual healthcare encounters at a pre-determined discount.

Because a legally binding contract is not involved with the reimbursement of services provided to uninsured patients, healthcare providers are free to make individual arrangements. Because of the RBRVS, which assumes a discount, most providers feel their actual charges are fair on a case-by-case basis for patients who are not covered by insurance.

Professional medical billers are responsible for preparing bills to be submitted to insurance, and for posting payments according to contractual obligations. They also serve as financial counsellors to uninsured patients, defining the financial relationship with the provider. Because of their training, they are able to make uninsured patients aware of the fees involved, and to counsel them on payment arrangements. Due to financial hardship on the patient’s part, medical billers can recommend discounts for medically necessary services, arrange payment plans, or offer discounts for services that are paid in full in advance.

While providers are not under any obligation to discount services provided to uninsured patients, they rely on professional medical billers to manage patient accounts and receive reasonable reimbursement for their services. Professionally trained medical billers can apply standard industry policies, and professional practice guidelines, to ensure that healthcare remains affordable for the patient, while remaining profitable for their employers.