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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

  1. Non-pars are reimbursed 5% less than the Medicare Physician Fee Schedule (MPFS) amount.
  2. 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.
  3. The formula for calculating the limiting charge is :

[MPFS – (MPFS x 5%)] x 115% = limiting charge

  1. Medicare will reimburse the non-par 80% of the reduced amount
  2. 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

  1. 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 ________

  1. 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.

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