←Module 5
Lesson · 22 min

Payer Rules and Fee Schedules

Understand how payers decide what to pay, and why the same service produces different payments from different plans.

By the end of this lesson you can

  • Explain what a fee schedule is and how allowed amounts are set
  • Describe how Medicare's RBRVS system works at a practical level
  • Explain timely filing limits and why they are absolute
  • Read a payer contract for the terms that affect billing
📘 Reading Lesson

Lesson Notes

Read through the key concepts before you try the challenge.

The contract sets the price

On the job

You reconcile payments at Lakeside Medical Associates.

The same office visit code produces $186 from one payer, $142 from another, and $109 from Medicaid. Nothing about the encounters differed. Three contracts set three prices, and the practice agreed to all three.

Your task: Understand where allowed amounts come from, so you can tell an underpayment from a contracted rate.

A fee schedule is the list of allowed amounts a payer will pay for each code. In-network providers agree to accept it as payment in full and write off the difference from their charge. This is why the billed amount is largely a starting figure — the contract, not the charge, determines the money.

Medicare sets its fee schedule using the Resource-Based Relative Value Scale. Each code carries relative value units reflecting physician work, practice expense, and malpractice risk. Those are adjusted geographically and multiplied by a national conversion factor to produce a dollar amount. Many commercial payers set their rates as a percentage of Medicare, which is why Medicare's annual changes ripple across the whole payer mix.

Timely filing limits are absolute and unforgiving. A payer may allow 90 days from the date of service, or 180, or a year — but past that deadline the claim is denied and generally cannot be appealed on any grounds, because the failure was the practice's. A clean claim worth $1,200 that sits unworked for four months is worth nothing. This is why aged accounts receivable matters so much: old claims are not just harder to collect, some become uncollectible by rule.
TermWhy it matters
Fee scheduleThe allowed amount for every code you bill
Timely filing limitThe deadline past which a claim cannot be paid
Appeal window and levelsHow long you have to dispute, and how many attempts
Authorization requirementsWhich services need approval in advance
Clean claim definitionWhat the payer must receive before its payment clock starts
Payment turnaroundWhen you can reasonably begin following up
Contract terms that affect daily billing
Check your understanding

A clean, correctly coded claim for $1,200 is discovered unworked four months after the date of service. The payer's timely filing limit is 90 days. What is the realistic outcome?

Challenge

Apply what you've learned in this lesson.

Work with real numbers and real contract terms.

  1. Find the current Medicare Physician Fee Schedule lookup tool on the CMS website. Look up the allowed amount for a common office visit code in your locality.
  2. Explain in three sentences how RVUs and the conversion factor produce that dollar amount.
  3. Research typical timely filing limits for three payer types. Note the range and where you found each.
  4. Design a simple weekly report a biller could run to catch claims approaching a filing deadline, and say what it would need to show.

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