Which statement best differentiates a fee schedule from a prevailing charge, and how should a practice set a compliant fee schedule?

Which statement best differentiates a fee schedule from a prevailing charge, and how should a practice set a compliant fee schedule?

• A. Fee schedule lists allowed charges by CPT; prevailing charge is typical local charges; set fees to reflect payer contracts and market standards, while avoiding balance billing where prohibited.
• B. Fee schedule and prevailing charge are the same; set fees equal to the average local charge.
• C. Fees should be higher than all local rates to maximize revenue.
• D. Fees should be determined solely by physician preference.

Answer: (A)

A fee schedule is a formal listing of the amounts a practice will bill for each CPT-coded service, often tied to payer contracts or standard allowances. The prevailing charge is the typical price charged for the same service by other providers in the local market. When setting a compliant fee schedule, you align posted charges with negotiated rates and market standards so the amounts billed match what insurers reimburse and what is commonly charged in the area. This helps ensure you don’t engage in balance billing where prohibited by payer contracts or state law, and it supports fairness and transparency for patients. The other options miss the essential distinction or rely on inappropriate practices: treating the two as the same ignores contract-based allowances; aiming for charges higher than all local rates can create legal and access problems; and basing fees solely on physician preference ignores contracts and market norms.

A fee schedule is a formal listing of the amounts a practice will bill for each CPT-coded service, often tied to payer contracts or standard allowances. The prevailing charge is the typical price charged for the same service by other providers in the local market. When setting a compliant fee schedule, you align posted charges with negotiated rates and market standards so the amounts billed match what insurers reimburse and what is commonly charged in the area. This helps ensure you don’t engage in balance billing where prohibited by payer contracts or state law, and it supports fairness and transparency for patients. The other options miss the essential distinction or rely on inappropriate practices: treating the two as the same ignores contract-based allowances; aiming for charges higher than all local rates can create legal and access problems; and basing fees solely on physician preference ignores contracts and market norms.