What is Physician Reimbursement?

L. Dunne
L. Dunne
Businessman with a briefcase
Businessman with a briefcase

Physician reimbursement is the amount of money a physician is paid by a health insurance company for providing treatment to the insurance company’s policyholders. Depending on the insurance plans accepted at a given physician's office, reimbursements could come from a multitude of insurance companies. If a patient doesn’t have insurance, the reimbursement — or payment for services — is expected to come directly from the patient. Similarly, while a physician may agree to accept a certain amount of reimbursement from an insurance company and be satisfied, he may also expect the patient to pay for any expenses the insurance reimbursement didn't cover.

In the United States, physicians bill to insurance companies using a system of procedure codes and diagnosis codes. Each procedure code is associated with a corresponding amount charged. These codes show the insurance company the reason for a patient's visit and the type of care given by the physician. As of 2010, the coding system has become very complex as a result of growing health concerns and newly developed medical treatments for those health concerns.

The amount a physician is paid for services is usually not the same as the amount charged per code. Certain insurance plans, such as Medicare, always pay a specific percentage of what is charged. Private insurance companies have come to base their own physician reimbursement percentages on Medicare payments. There also are other insurance companies involved in physician reimbursement, including auto insurance companies, which have been known to give physician reimbursement in full if the codes and treatment are accepted. Conversely, if an auto insurance company does not accept the treatment, it will often refuse to pay any physician reimbursement.

Many physicians say that, although some physicians charge outside the acceptable spectrum, the majority of rates are fair. Physician fees include more than just compensation to the physician. Charges also must cover the cost of running the office, including administrative support, medial supplies, and the cost of malpractice insurance. The final payment from insurance companies also depends on the region of practice, because costs vary by region. As the rates for each of these factors rise, so do physician charges.

Many physicians have begun to use a fee schedule analysis guide created by the American Medical Association (AMA) to determine the actual costs of doing business. The physicians then base their charges on this, rather than attempting to predict the amount of physician reimbursement they might receive from insurance companies. Final reimbursement does, however, rest in the hands of the insurance companies and patients.

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