AH 120 Calculating Reimbursement Methodologies
Using the Medicare Physician Fee Schedule, there are different methods to calculate the reimbursement for participating providers and non-participating providers.
Under Medicare, participating providers are reimbursed at 80% of the fee schedule amount. To calculate the reimbursement, use the following formula:
MPFS amount x 80% = This is the allowed charge.
The patient is responsible 20% of the MPFS amount, and a participating provider will accept the MPFS amount as payment in full, regardless of what he charged. The difference between the MPFS amount and the physicians charge is called a write off.
Reimbursement for non-participating providers (non-pars) is more complex.
Below are the steps for calculating the non-par reimbursement
- Non-pars are reimbursed 5% less than the Medicare Physician Fee Schedule (MPFS) amount.
- The non-pars may not charge the patient more than what is called the limiting charge. The limiting charge is 115% of the reduced MPFS amount.
- The formula for calculating the limiting charge is :
[MPFS – (MPFS x 5%)] x 115% = limiting charge
- Medicare will reimburse the non-par 80% of the reduced amount
- Non-pars do not accept the MPFS amount as payment in full and may charge the patient for the difference between the limiting charge and the MPFS amount
Example: The MPFS amount is $80.
[$80 – ($80 x 5%)]) x 115% =
[$80 – $4] x 115% =
$76 x 115% = $87.40
Medicare will reimburse the non-par based on the $76.
$76 x 80% = $60.80 This is the allowed charge.
and the patient is responsible for the difference between the amount reimbursed by Medicare and the limiting charge. In this case: $87.40 – $60.80 = $26.60
- Calculate the following amounts for a participating provider who bills Medicare
Submitted charge $75
Medicare physician fee schedule $60
Coinsurance amount $12
Medicare payment (80%) ________
Medicare write-off ________
- Calculate the following amounts for a nonPAR who bills Medicare
Submitted charge $650
NonPAR Medicare physician fee schedule allowed amount $450
Limiting charge (115% of MPFS allowed amount) ________
Medicare payment (80% of the MPFS allowed amount) ________
Beneficiary is billed 20% plus the balance of the limiting charge $157.50
Medicare write (NOT to be paid by Medicare or beneficiary) ________
3. Calculate the non-par limiting charge for a MPFS allowed charge of $75
4. Calculate the non-par allowed charge for a MPFS amount of $75.
Expert Solution Preview
Introduction: In this content, the Medicare reimbursement methods for participating providers and non-participating providers are discussed. The calculation formula for reimbursement is provided, along with an example. Two calculation problems are also given, one for a participating provider and the other for a non-participating provider.
1. For a participating provider who bills Medicare:
– Medicare payment (80%) = $48 ($60 x 80%)
– Medicare write-off = $27 ($75 – $48)
2. For a nonPAR who bills Medicare:
– Limiting charge = $517.5 ([$450 – ($450×5%)] x 115%)
– Medicare payment (80% of MPFS allowed amount) = $360 ($450 x 80%)
– Medicare write (NOT to be paid by Medicare or beneficiary) = $0
– Beneficiary is billed 20% plus the balance of the limiting charge = $157.5 ($517.5 – $360)
3. The non-par limiting charge for a MPFS allowed charge of $75 can be calculated as follows:
– Reduced MPFS amount = $71.25 ($75 – $3.75 [$75 x 5%])
– Limiting charge = $82.01 ([$71.25 x 115%])
4. The non-par allowed charge for a MPFS amount of $75 can be calculated as follows:
– Reduced MPFS amount = $71.25 ($75 – $3.75 [$75 x 5%])
– Medicare payment (80% of MPFS allowed amount) = $57 ($71.25 x 80%)
