What You Need to Know About Usual, Customary, and Reasonable Charges

Usual, customary, and reasonable charges are often used interchangeably, but they have distinct meanings in the context of medical billing and insurance claims.

UCR is based on the average charge for a specific service or procedure in a particular geographic area, which can vary depending on the location.

Customary charges, on the other hand, refer to the typical amount a provider charges for a specific service or procedure, often based on their own rates and experience.

Reasonable charges are determined by the insurance company and may take into account factors such as the provider's usual charge, the customary charge for the service, and the provider's actual costs.

Broaden your view: Reasonable Contact

Usual, customary and reasonable charges are a key concept in medical billing and insurance reimbursement. They refer to the typical amount a medical provider will bill for a certain service within a geographical region.

The UCR methodology is a strategy to establish the value of medical care, and it's used in cases such as personal injury, malpractice, and billing fraud. UCR charges analysis may help establish the value of care for an injured plaintiff.

You might like: Reasonable Charges for Tenant Damages

The charged amount is the dollar amount a provider sets for services rendered before negotiating any discounts. This can be different from the amount paid, and it's not the same as what Medicare pays.

The Healthcare Financial Management Association defines the charged amount as the amount a provider sets for services rendered before negotiating any discounts. This is not the same as the allowed amount, which is the amount a health plan determines the provider should be paid for a service.

Providers set UCR charges, and they may not always apply those charges uniformly. In fact, in personal injury and medical malpractice cases, the collateral source rule may prohibit the introduction of any evidence of insurance.

The allowed amount is often used to calculate patient responsibility, and it's not necessarily the total amount a health plan determines the provider should be paid for a service.

A fresh viewpoint: Which Step Is Usually Not Performed When Finding a Pulse?

A fee is different from a charge. Fees are not out-of-pocket fees that a health insurance policyholder must pay for services. Insurance companies set a base UCR rate for a region, but providers can charge higher or lower than that rate.

If this caught your attention, see: Affordable Care Act Health Insurance Rate Review Program

UCR fees are based on the services provided to the policyholders, as well as the area of the country where the services are being provided. Insurance companies use their own data to determine what local doctors are charging for procedures.

A fee is considered usual if it is consistent with what the medical provider has charged in the past. Insurance companies must tell you how they came up with a rate if you ask.

On a similar theme: Prior Authorization Services

In jurisdictions like Texas, affidavits from Usual Customary Reasonable Expert Witnesses are required, and these experts have specialized knowledge and data to present UCR charges in the marketplace where a patient resides.

UCR charges in the community are determined by analyzing individual bills, payment policies, and the entire payment process. This includes evaluating line-item charges and applying the appropriate charge model, such as the Inpatient Prospective Payment Rule or OPPS for hospital-owned facilities.

A Usual Customary Reasonable Charges expert witness can analyze UCR charges for various services, including hospital inpatient stays, ambulatory surgical center charges, pass-through payments, and physician charges.

Take a look at this: What Is Payment Posting in Medical Billing

In Texas, affidavits from Usual Customary Reasonable Expert Witnesses are required.

UCR charges can be presented in the marketplace where a patient resides by an expert witness with specialized knowledge and data.

Jurisdictions like Texas need expert opinions on UCR charges for litigation, which our team provides.

We offer expert opinions on UCR charges for hospital inpatient stays, evaluating line-item charges and applying the appropriate charge model.

The Inpatient Prospective Payment Rule or IPPS and DRGs are used when applicable for hospital inpatient stays.

Ambulatory Surgical Center charges are also evaluated by our team.

Pass through payments and physician charges are analyzed when relevant.

Diagnostic imaging charges such as MRI, PET Scan, x-ray, and CT Scans are evaluated by our team.

Surgical procedures in orthopedics, cardiology, neurosurgery, cosmetic surgery, wound care surgery, and bariatric surgery are also evaluated.

Our team includes physicians, registered nurses, certified coders, economists, regulatory compliance, analytics, and healthcare administrators.

This diverse team can analyze individual bills, payment policies, and the entire payment process.

Usual, Customary and Reasonable Charges (UCR) are based on the services provided to policyholders, as well as the area of the country where the services are being provided.

A UCR expert witness has specialized knowledge and data that is useful in presenting UCR charges in the marketplace where a patient resides.

Our team of physicians, registered nurses, certified coders, economists, regulatory compliance, analytics, and healthcare administrators can analyze individual bills, payment policies, and the entire payment process.

UCR charges are determined by evaluating line-item charges and applying the appropriate charge model, including Inpatient Prospective Payment Rule or IPPS and DRGs, when applicable.

We also analyze Ambulatory Surgical Center (ASC) charges, pass-through payments, and physician charges.

UCR charges can be higher or lower than the base rate set by the insurance company, depending on the provider and what they typically charge.

If you are charged under the UCR rate, your insurance company will reimburse you the amount charged, but if the provider charges above the UCR rate, you will be on the hook to pay for any amount over what the UCR rate is.

Contact the insurance company issuing the policy you are considering purchasing for more information on UCR charges and how they affect you.

A unique perspective: What Is a Exclusive Provider Organization

UCR fees are not based on what's medically necessary, but rather on what other doctors in the area charge for similar services.

The actual bill from your provider may be higher or lower than the UCR rate, depending on their typical charges. Insurance companies set a base UCR rate for a region, but it doesn't take into account outliers.

A fee is considered usual, customary and reasonable if it falls within a price range that other doctors in the area charge. However, this explanation doesn't account for what hospitals, laboratories, diagnostic imaging, surgical centers and others may charge.

If your provider charges above the UCR rate, you'll be responsible for paying the difference. For example, a doctor's visit in Miami, Florida is typically $375, but if the doctor you go to charges $500, you'll still owe $125.

Insurance companies set the rules for what they will pay or reimburse, so it's up to patients to figure out how much they'll actually have to pay once insurance has kicked in.

Additional reading: How Much Do Companies Pay for Health Insurance

Insurance companies determine a maximum amount they'll reimburse for a specific medical service in a specific region based on data from third-party data analysts.

This helps them process claims, determine the amount they'll reimburse for claims on specific services, and even deny reimbursement for any amount over what's determined by the UCR rate.

Insurance companies can tell you what the UCR rate is for a specific region, but only the doctor you see can tell you what they charge at their office.

Just because an insurance company sets a base UCR rate for a region, it doesn't mean the provider you see will charge that amount. The actual bill by your provider could be higher or lower than the UCR rate.

If you're charged under the UCR rate, your insurance company will reimburse you the amount charged, but if the provider charges above the UCR rate, you'll be on the hook to pay for any amount over what the UCR rate is.

For example, a doctor's visit for a cold in Miami, Florida is typically $375 according to what's usual, customary, and reasonable. However, if the doctor you go to charges $500 for that visit, your insurance provider will reimburse you $375, but you'll still owe $125 to your doctor.

On a similar theme: Anthem Medical Data Breach

Insurance companies set their UCR charges at the 80th percentile, meaning 80% of medical providers in a given area charged equal to or less than the insurance company's UCR rate.

For instance, if your insurance company's UCR charge for a procedure is $5,000, and you're billed $6,000, they'll cover 80% of your bill up to $5,000, leaving you to pay the $1,000 above their UCR rate.

In many cases, insurance companies don't count the money you pay above a UCR rate toward your deductible or out-of-pocket maximum, which means you could wind up paying a hefty amount in medical bills.

Staying in-network can help you avoid UCR fees, but if you regularly use out-of-network doctors, you could face paying a UCR fee, plus your deductible and coinsurance.

Intriguing read: 5 Essential Reasons Why Your Business Needs Insurance

Insurance companies use data to determine a maximum amount they'll reimburse for a specific medical service in a region, known as the UCR rate. This helps them process claims and decide how much to pay.

They can tell you the UCR rate for a specific region, but only your doctor can tell you what they charge at their office. You'll need to check with your doctor to see what their prices are.

If your provider charges less than the UCR rate, your insurance company will reimburse you the amount charged. But if they charge more, you'll be responsible for paying the difference.

For example, a doctor's visit in Miami, Florida might be $375 according to the UCR rate, but if your doctor charges $500, you'll still owe $125.