Q&A: Modeling rates for contracts based on a percentage of Medicare payments

Q: What is the recommended method for modeling reimbursement for contracts based on a percentage of Medicare rates?

A: Many contracts are based on a percentage of Medicare rates that define the specific year upon which they will be based. You should already be tracking your performance yearly under Medicare rates. Using this data, identify your best Medicare year and compare it to the year of Medicare being proposed by the payer. In addition, because Medicare rates are low, they should be factored at a percentage that is considerably greater than 100%. Specify a default calculation for anesthesia, J codes, and other procedures to which Medicare does not assign values. In Medicare’s quest to remain budget-neutral, modifiers such as the Budget Neutrality Adjuster and Geographic Price Cost Indexes (GPCI) have often adjusted rates downward in recent years.

For more information see The Essential Guide to Healthcare Payer Contracting.