The UCR Shell Game

Dec. 1, 2003
Trying to understand UCR is a lot like trying to find the pea in the old shell game. Here's how it works ... and how you can win!

by Del Webb, DDS

We've all heard it, haven't we? "Dr., my insurance company said you charge too much!" The typical dentist's response to this ranges from the almost socio-pathological, to the fetal-position fearful, to the nonprintable comic zingers. At a minimum, this statement causes a huge jump in your blood pressure and mine! However, the good news is that correctly applied knowledge is power. The information in this article will empower you to turn this situation into a successful one for your office.

ADA President Dr. T. Howard Jones attended a New Dentists' "Eat and Learn" session during the Texas Dental Association Meeting this year. I was the speaker, and the subject was UCR and reimbursement. Dr. Jones has been very involved with the reimbursement phase of dentistry and has done much to help dentists in our struggle with the giant insurance industry. (See examples of his efforts in the sidebar on the ADA-Aetna settlement on the next page.) While this settlement represents a huge step in the right direction, there are several facts that you must know to deal effectively with the "UCR," "fee schedule," and "external database" information that is promised by one company out of many.

How do insurance companies create the UCR? Someone collects all of the submitted charges and breaks the data down by zip area and percentile ranking. The insurance companies then record the fees doctors submit on dental claims. They "sell" these numbers to a company, such as the Health Insurance Association of America (HIAA). Since the HIAA is not an insurance company, it can compare and analyze fees without worrying about restriction of trade litigation.

HIAA then sells the data back to the insurance companies. This gives them an entire range of fees from which each can compose its very own UCR. Most companies use the numbers as they come back from HIAA, and sell policies based on several percentiles (not percentages) represented. I'll explain more on that in a minute.

What does this mean? It means there is no such thing as a "usual, customary, or reasonable" fee. It is a huge hoax perpetrated by the insurance industry upon the dental profession! There is no single number per code that is the "UCR"; there is a range of fees based upon percentiles. A list with a single set of numbers is not a legitimate UCR table. The table must reflect different percentile levels to be authentic. Remember, percentile range and zip codes are the critical factors in determining how much an insurance company will reimburse for a particular plan.

What is percentile?

In simple terms, it means, "How many out of 100 did you beat?" For example, the 80th percentile is that number, such as a fee, in which 80 percent of all fees fall below it and 20 percent are above it.

The word "percentile" must now be understood. Remember the SAT exam? Suppose 8,935 people took the exam on May 1, 2003. Let's assume also that there were 731 questions on the exam and each was worth one point. Suppose my daughter scored a raw score of 698. Although we could calculate the percentage, the percentage would be meaningless. The people at SAT convert raw scores into percentiles. A 93rd percentile tells you that out of every 100 who took the test, your child scored higher than 93 of them.

The insurance industry sells policies with premiums based upon the scope of coverage purchased, including the percentile ranking of fees charged. The most commonly sold percentile rankings are the 70th, 75th and 80th. Different employers buy different percentile levels.

An example might help here. During the initial boom years, a fictitious computer company that we will call CW Internet bought the 90th percentile of coverage. Translated, that means that the company's employees could go to 9 out of 10 dentists in town and have their teeth cleaned without the fee exceeding the UCR. Thus, the cleaning was paid at 100 percent and the patient got his or her teeth cleaned for free.

The next year, in order to save money, CW Internet buys the 70th percentile of coverage. Note: the employee's insurance booklet still says that Code 01110 is covered at 100 percent of UCR, but now UCR is set at the 70th percentile. This means that employees can go to seven out of 10 dentists and the fee will not exceed UCR. However, at three offices out of 10, the dentist's fee for a cleaning will exceed the UCR.

The terms of the contract

It is cheaper to cover a group of people at the 80th percentile than it is to cover the group at the 90th percentile. The 80th percentile fee would be the fee at which 20 percent of the dentists in an area are charging more and 80 percent of the dentists are charging that amount or less. A dental insurance company, such as Aetna, sells policies at several UCR levels or percentiles. The UCR reflects not only the average, mean, median, or mode fee, but also the percentile of the policy coverage. This is why the words, "pursuant to the terms of your contract," are so critical for you to understand.

Here it is again: In any Explanation of Benefits (EOB) form sent to an individual who is covered by a plan offered or administered by Aetna with a UCR determination, Aetna will include the following statement: "Your plan provides benefits for covered services at the prevailing charge level, as determined by Aetna pursuant to the terms of your contract. Aetna's determination of the prevailing charge does not suggest that your provider's fee is not reasonable or proper." What you need in your office is a copy of the table showing the dollar amounts for every code — for your zip code area — at the most commonly sold percentiles. Remember, the 80th percentile is among the most commonly sold.

Why would you charge less than the insurance industry is willing to pay? Someone is making up the lower percentiles. That's fine ... if you know exactly why your fees are too low! If they are too low out of fear or lack of information, you can now overcome that drain on your profit margin. You are not a bad person — nor will you lose all of your patients — if you exceed UCR. You will lose money if you don't charge — at a minimum — what the insurance companies will pay as reimbursement for a particular service.

The way for you to take advantage of this information is to recognize that if you exceed UCR, you are not charging more than other doctors in your area; you are only charging more than one insurance company's percentile levels. It could be that the policy represented by your patient's letter — the one that implies that you charge too much — is a policy sold at the 50th percentile. You've got to have a fee higher than the 50th percentile or you'll go out of business!

Fee schedules

Aetna will provide a fee schedule, upon a written request, to a dentist who has a valid contract with Aetna. If you have a "valid contract with Aetna," then you have chosen to participate in some form of managed care. Managed care is a euphemistic term created to cover the huge drop in dental fees that would be reimbursed to dentists if they participated in these programs. It is — and was always meant to mean — "managed costs." The only benefit to the participating dentist is that he or she will be placed on a "preferred provider" list. The major detriment is that, typically, there is a substantial reduction in the reimbursement level for dental services. A company such as Aetna may have many managed-care plans, each with a different reimbursement schedule.

As a result of the ADA-Aetna settlement, you may now obtain a copy of those schedules if you comply with their requirements. Just remember: the dollar amounts allowed and/or paid under nearly all "fee schedule" plans is significantly less than those paid under a typical "indemnity" plan. You pay dearly for the privilege of being on that list!

I see a frightening misperception out there. Too many dentists think that their contract with the fee-schedule-based plan requires them to charge all of their patients the same reduced fee. This is not true!

It's time to recall Dr. L.D. Pankey's definition of a fair fee. "A fair fee is that fee which the patient is willing to pay and the doctor is willing to receive (with gratitude)." If you know what your overhead is, your cost of production, your quality of service, and your own temperament, then you can set a "fair fee." That fee is likely to be much higher than the insurance company's "fee schedule" allowance. That fee schedule does not represent the UCR at any percentile, so don't base your fees for non-managed care patients on those numbers! Obtaining a copy of an insurance company's fee schedule is helpful. You can measure how much profit you are likely to lose on each and every procedure you do on your managed-care patients.

Dr. Jones and the ADA, representing us against the giant insurance industry, have made great gains for all dentists in the area of third-party reimbursement. Take full advantage of these inroads. Know what your overhead and profit needs are; then, set your fees accordingly. Obtain copies of the actual UCR numbers for your zip-code area and copies of the fee schedules from the plans in which you are a preferred provider. With this information in hand, you will be fearless in the face of the allegations by some patients that you "charge too much!"

Replace the fear with facts. You and your staff then can base your fee discussions with your patients on dependable, reliable information. Your patients come to you because they like you and they like your office. They do have a choice. Since they already have chosen you, why not add one more level of quality service by becoming informed on the facts of UCR, fee schedules, and the terms of contract for these third-party reimbursement mechanisms.

Editor's Note: Udell Webb, DDS, is the director of the Udell Webb Leadership Institute. The information in this article is for general informational purposes only. It represents the assessments and opinions of the Udell Webb Leadership Institute — not Dental Economics — based upon the experience, research, evaluation, and assumptions of the institute. The Udell Webb Leadership Institute is not responsible for any decisions made or actions taken as a result of reliance on this information, and does not warrant that this information is error-free or accepted or approved by others.

ADA-Aetna settlement

An example of 2003 ADA President Dr. Howard Jones' success with the reimbursement phase of dental insurance is evident in an email sent to ADA members in October:
Subject: Aetna Update

From: Peter M. Sfikas, chief legal counsel, and Brent D. Hanfling, senior staff attorney

The ADA is extremely pleased about the settlement it reached with Aetna, two years after filing suit against the insurer for engaging in abusive billing and reimbursement practices against dentists. Under the terms of the settlement agreement, Aetna has agreed to remedy these practices in a manner unparalleled in the insurance industry. Just a few of the changes Aetna has agreed to undertake include:

• Aetna will provide a fee schedule, on written request, to a dentist who has a valid contract with Aetna.

• Upon receiving a written appeal by a dentist of a reduction in requested payment based on Aetna's determination that the requested payment exceeds UCR, Aetna will undertake a case-by-case review of the appealed case. This review will consider, among other things, the complexity of the applicable procedure and the provider's geographic location. In conjunction with the appeal, Aetna will identify any external database used in making the UCR determination and will provide the dentist a summary of factors known by Aetna to have been used to develop that database.

• In any EOB sent to an individual who is enrolled in or covered by a plan offered or administered by Aetna that includes a UCR determination, Aetna will provide the following statement: "Your plan provides benefits for covered services at the prevailing charge level, as determined by Aetna pursuant to the terms of your contract. Aetna's determination of the prevailing charge does not suggest that your provider's fee is not reasonable or proper."

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