What Is a Fee Schedule?

What a Fee Schedule Means

A fee schedule is a comprehensive list of procedure codes paired with the maximum reimbursement amount a payer will pay for each service. Medicare publishes the Physician Fee Schedule nationally, assigning relative value units to every CPT code based on work, practice expense, and malpractice components. Commercial payers maintain their own fee schedules, often derived from Medicare rates with contractual adjustments. When a claim is adjudicated, the payer looks up the billed CPT code on the applicable fee schedule and uses that amount — not your chargemaster rate — as the basis for payment calculation.

Why Fee Schedules Matter

Your chargemaster may list $500 for a procedure, but if the contracted fee schedule allows $180, that is the maximum you will collect from the payer. Understanding fee schedule rates is essential for contract negotiation, service line profitability analysis, and setting realistic revenue expectations. Medicare's 2024 conversion factor was approximately $33.29 per relative value unit, and even small annual changes to this factor ripple across every code in the schedule. Providers who do not track fee schedule updates often discover payment shortfalls only when month-end reports reveal unexpected variances.

How Fee Schedules Affect Your Claim

When the payer processes your claim, the allowed amount on your remittance advice comes directly from the fee schedule applied to your contract. If you are out-of-network, the payer may use a different schedule — often a percentage of Medicare rates or usual and customary charges. Multiple procedure reductions, bilateral surgery rules, and global surgery packages all modify the base fee schedule amount during adjudication. A denial for exceeding the fee schedule is rare because payers simply pay the scheduled amount, but underpayments occur when the wrong fee schedule version or contract tier is applied to your claim.

What to Do About Fee Schedule Discrepancies

When payment falls below your contracted rate, pull the fee schedule from your payer contract and compare it line by line against the 835 remittance advice. Verify that your provider is enrolled under the correct contract tier and that the service date falls within the contract effective period. File a reconsideration request with the payer when the allowed amount does not match the contracted schedule. For denials unrelated to fee schedule amounts — such as medical necessity or authorization failures — upload your EOB to Denial Appeal Pro for an instant appeal strategy.

Frequently Asked Questions

What is the Medicare Physician Fee Schedule?

The Medicare Physician Fee Schedule is CMS's national payment schedule for physician services. It assigns relative value units to each CPT code, which are converted to dollar amounts using a conversion factor updated annually.

Can providers charge more than the fee schedule amount?

Providers can bill any amount, but contracted in-network providers accept the fee schedule rate as payment in full minus patient cost-sharing. Out-of-network providers may balance bill patients for amounts above the allowed rate.

How often do fee schedules change?

Medicare updates its fee schedule annually, typically effective January 1. Commercial payer fee schedules change at contract renewal, which may occur at any point during the year depending on the agreement.

Why does my payment differ from the fee schedule?

Payment may be reduced by sequestration, multiple procedure reductions, bilateral procedure rules, or patient deductibles and coinsurance applied after the allowed amount is calculated.