Allowed amount is the only number that matters
Your chargemaster should sit comfortably above every payer’s allowed amount, because you generally cannot be paid more than you billed. Beyond that, raising charges does not raise revenue from contracted payers — it only inflates the write-off column.
How fee schedules are built
Nearly all commercial fee schedules are expressed as a percentage of Medicare, which makes the Medicare Physician Fee Schedule the reference frame for the whole market. Medicare’s RBRVS. Each CPT code carries relative value units in three components — work, practice expense, and malpractice — each adjusted by a geographic practice cost index, summed, and multiplied by an annual conversion factor to produce a dollar amount.1- Facility vs non-facility rates differ because the practice expense RVU differs depending on where the service is delivered. This is why place of service codes affect payment.
- The conversion factor changes annually, so “110% of Medicare” is a moving number. A contract that seemed adequate can degrade without anyone renegotiating.
🦷 Dental, dental fee schedules are not Medicare-based. They are typically the payer’s own schedule by CDT code, often expressed as a percentile of regional charges.
🦴 PT/Chiro, Medicare therapy services carry their own rules including the multiple procedure payment reduction, which reduces payment for additional units in the same session.
Detecting underpayment
Nothing tells you. You have to look.1
Load your contracted fee schedules into your PM system
Per payer, per code. This is called contract loading or expected reimbursement setup. Most PM systems support it and most practices never configure it, which is exactly why underpayment persists.
2
Compare allowed amount to expected on every 835
The system flags variances automatically once loaded.
3
Review the variance report weekly
Distinguish real underpayments from legitimate reductions — multiple procedure reductions, bundling, and modifier-driven adjustments are contractual, not errors.
4
Aggregate before you dispute
One 12 shortfall across a code is a systematic configuration error on the payer’s side, and it is worth a formal dispute.
5
Dispute in writing, citing the contract
Reference the specific fee schedule provision and provide the claim list. Payers correct systematic loading errors when shown the pattern.
Contract terms that quietly cost you
Read these before signing. Every one of them has cost real practices real money.Silent PPOs and rental networks
A rental network aggregates provider contracts and rents access to payers who have no direct relationship with you. A silent PPO is the term for what it feels like from your side: a discount taken by a payer you have never contracted with. The mechanism is a network access or assignment clause in a contract you signed, sometimes years ago. When an unfamiliar payer takes a contracted discount, trace it back through your agreements rather than assuming it is an error, and negotiate those clauses in future contracts.Renegotiation
Most practices never renegotiate. Payers count on that. When you have leverage: you’re the only provider of your specialty in the area; a payer’s network adequacy depends on you; you deliver measurable quality or cost outcomes; you have scale; your current rate is demonstrably below market. What to bring: your actual volume for that payer, your case mix, your top codes by volume, comparable rates where you can substantiate them, and a specific ask by code rather than a general request for “better rates.” When to ask: at renewal, when adding locations or clinicians, when the payer needs network adequacy, or after any material change in your scope. MSO-PC note: contracting support is squarely an MSO function, analysis, preparation, negotiation. But the PC signs the contract, because the PC is the contracting party. Keep that boundary clean. See What an MSO can and can’t do.Multi-entity complications
A group with several PCs holds several separate contracts with the same payer, often at different rates negotiated at different times. Practical implications:- Rate variance across your own entities is normal and worth measuring — the same service can pay differently in two states for reasons that have nothing to do with cost.
- Renegotiating one entity’s contract doesn’t move the others.
- Payers may offer group-level contracting once you reach scale, which is worth asking about.
- Your fee schedule loading is per entity, so contract-loading discipline multiplies with entity count.
Sources
- CMS, Physician Fee Schedule and PFS Federal Regulation Notices for the annual conversion factor.