Sign up to save your podcasts
Or
Share Allowed Amount vs Billed Amount: What Insurance Really Pays Providers
Share to email
Share to Facebook
Share to X
Share to email
Share to Facebook
Share to X
Or
Allowed Amount vs Billed Amount: What Insurance Really Pays Providers
EPISODE SUMMARY
In this episode, Jeremy breaks down the critical distinction between your Billed Amount (your "sticker price") and the Allowed Amount (the "club member price" you negotiated in your contract). Using the story of "Sarah," a clinician frustrated by receiving $112.50 for a $180 session, Jeremy explains the "Lesser of Two" rule. You’ll learn why setting your fees too low prevents you from capturing automatic raises when insurance companies update their rates, and why your fee schedule needs to be a "bucket" big enough to catch every drop of revenue available.
KEYWORDS
Revenue Cycle Management, Allowed Amount, Billed Amount, Contractual Adjustment, Lesser of Two Rule, Balance Billing, Fee Schedule
TAKEAWAYS
The "Lesser of Two" Rule: Insurance computers are programmed to pay the lower of two numbers: their internal fee schedule or your billed amount. If you lower your price to match them, you'll miss out on future rate increases.
The "Bucket" Analogy: Think of your billed amount as a bucket. If the insurance company wants to pour $115 into a $112 bucket, that extra $3 spills over the side and is lost forever.
Strategic Fee Setting: We generally recommend setting your fee schedule at 150% to 200% of the Medicare rate in your area to ensure you aren't undercutting yourself on better-paying commercial contracts.
Stop Balance Billing: The difference between your billed rate and the allowed amount is a "contractual adjustment." You are legally obligated to write this off—trying to collect it from the patient is a fast track to getting kicked out of the network.
Know Your Data: You can find your allowed amounts through portal hunts, direct calls to provider relations, or by reviewing your last five paid claims.
CHAPTERS
00:00 Introduction: Zooming In on Billing Domain Strategies
02:46 Understanding Allowed Amounts and Fee Schedules
12:27 How to Look Up Insurance Allowed Amounts
16:30 Payment Posting and Claim Tracking Essentials
18:31 Conclusion: One Simple Check to Maximize Revenue
RESOURCES
Today Sponsors: Jane | One Month Grace Period Promo Code: PRACTICESOLUTIONS1MO
Learn More About The Claim Game: Visit practicesol.com/podcast
The Hourglass Learning Hub: Dive deeper into RCM best practices and downloadable tools mentioned in this episode, like the various checklists and templates, by visiting The Hourglass Learning Hub.
Our Blog: Explore years of educational articles on billing and practice management at Practice Solutions Blog.
Book: For a comprehensive guide on navigating insurance, grab your copy of Insurance Billing Basics: Steps for Therapists to Successfully Take Insurance.
Images: Claim Management Spreadsheet, Payment Posting Guide
Get full access to The Claim Game at jeremyzug.substack.com/subscribe
View all episodes
By Jeremy and Kathryn ZugEPISODE SUMMARY
In this episode, Jeremy breaks down the critical distinction between your Billed Amount (your "sticker price") and the Allowed Amount (the "club member price" you negotiated in your contract). Using the story of "Sarah," a clinician frustrated by receiving $112.50 for a $180 session, Jeremy explains the "Lesser of Two" rule. You’ll learn why setting your fees too low prevents you from capturing automatic raises when insurance companies update their rates, and why your fee schedule needs to be a "bucket" big enough to catch every drop of revenue available.
KEYWORDS
Revenue Cycle Management, Allowed Amount, Billed Amount, Contractual Adjustment, Lesser of Two Rule, Balance Billing, Fee Schedule
TAKEAWAYS
The "Lesser of Two" Rule: Insurance computers are programmed to pay the lower of two numbers: their internal fee schedule or your billed amount. If you lower your price to match them, you'll miss out on future rate increases.
The "Bucket" Analogy: Think of your billed amount as a bucket. If the insurance company wants to pour $115 into a $112 bucket, that extra $3 spills over the side and is lost forever.
Strategic Fee Setting: We generally recommend setting your fee schedule at 150% to 200% of the Medicare rate in your area to ensure you aren't undercutting yourself on better-paying commercial contracts.
Stop Balance Billing: The difference between your billed rate and the allowed amount is a "contractual adjustment." You are legally obligated to write this off—trying to collect it from the patient is a fast track to getting kicked out of the network.
Know Your Data: You can find your allowed amounts through portal hunts, direct calls to provider relations, or by reviewing your last five paid claims.
CHAPTERS
00:00 Introduction: Zooming In on Billing Domain Strategies
02:46 Understanding Allowed Amounts and Fee Schedules
12:27 How to Look Up Insurance Allowed Amounts
16:30 Payment Posting and Claim Tracking Essentials
18:31 Conclusion: One Simple Check to Maximize Revenue
RESOURCES
Today Sponsors: Jane | One Month Grace Period Promo Code: PRACTICESOLUTIONS1MO
Learn More About The Claim Game: Visit practicesol.com/podcast
The Hourglass Learning Hub: Dive deeper into RCM best practices and downloadable tools mentioned in this episode, like the various checklists and templates, by visiting The Hourglass Learning Hub.
Our Blog: Explore years of educational articles on billing and practice management at Practice Solutions Blog.
Book: For a comprehensive guide on navigating insurance, grab your copy of Insurance Billing Basics: Steps for Therapists to Successfully Take Insurance.
Images: Claim Management Spreadsheet, Payment Posting Guide
Get full access to The Claim Game at jeremyzug.substack.com/subscribe