You’ve undoubtedly heard of Medicare if you’ve spent even just a little bit of time working in the healthcare industry. For anyone unsure, Medicare is the federal health insurance program for any Americans who are 65 and older (and some younger people with disabilities). 

But what exactly is Medicare Fee-For-Service (FFS)? This basically refers to Original Medicare (including parts A and B), which is the classic model where Medicare pays doctors and hospitals directly for each medical service they provide. 

So under this particular fee for service model, every check-up, procedure, surgery, or even test is billed individually. After this, Medicare reimburses the provider according to a published fee schedule. 

Throughout this article, we’ll take a closer look at:

– How this model actually works

– What impact it could have on your practice’s cash-flow

– Why your practice should consider outsourcing to PMN

Brief Reminder: What Is Medicare?

Before we get into this, it’s worth having a quick refresher on what Medicare is all about. Medicare is basically split into two main parts:

Part A (Hospital Insurance)

This first part covers:

– Inpatient care in hospitals

– Skilled nursing facilities

– Hospices

– Some home health services

Part B (Medical Insurance)

The other side is part B, which covers:

– Services from doctors and other health care providers

– Outpatient care

– Preventive services

– Durable medical equipment

– Ambulance services

Essentially, once you’ve met the part B deductible, Medicare is going to pay about 80% of the approved fee for covered services. It’s then the patient or supplemental insurance that covers the remaining 20%.

How the Fee‑For‑Service Model Works

At its core, the fee‑for‑service model basically just means that you bill Medicare for each covered service, and Medicare then pays that fee. How does that look in practice?

– You provide a covered medical service.

– You code the service correctly according to the Medicare Benefits Schedule.

– You submit the claim to Medicare.

– Medicare pays the approved fee (minus any deductible or coinsurance).

For example, if a private patient requires ground ambulance transport, Medicare Part B covers 80% of the hospital costs after the deductible. The ambulance company then bills Medicare and typically accepts the Medicare‑approved amount.

Parts A and B in Depth

We’ve touched on these two separate parts, but let’s look at both in a bit more detail now:

Part A (Hospital Insurance)

– Covers inpatient hospital stays, skilled nursing, and home health.

– Medicare usually pays 100% of approved costs for the first 60 days of a hospital stay after a $1,676 deductible (2025 figures).

Part B (Medical Insurance)

– Covers visits to doctors and other health professionals, outpatient procedures, medical specialist services, preventive care, and durable equipment.

– After the annual Part B deductible (it was $226 in 2023), Medicard pays 80% of approved fees.

– Ambulance services are covered if medically necessary, with Medicare paying its portion directly to the provider.

Impact on Small Practice Finances

Medicare makes up about 21% of U.S. health care costs in 2021, and payments topped $1 trillion in 2023. So because Medicare is such a big part of the U.S. health care system, there are quite a lot of rules surrounding it. The problem is that submitting claims under the FFS rules can be a hurdle for small practices:

– Mistakes in coding or billing lead to denials and delays.

– You must track medicare costs and updates to stay compliant.

– Each claim takes staff time away from patient care.

If you’re not careful, unfiled or rejected claims add up.

Why Consider Outsourcing to PMN?

Handling billing and coding in-house can feel overwhelming. We get that, so PMN steps in as your expert partner. We know all the nuances of how the fee for service model works and keep up with the medicare benefits schedule. You’ll access the following benefits by outsourcing your billing to us:

– Reduced claims errors and faster payments.

– Your team focuses on patients, not paperwork.

– We monitor denials and appeals, so you don’t lose revenue.

For a small practice owner, that means smoother cash flow and fewer billing headaches. Let PMN manage your Medicare claims so you can concentrate on patient care and growing your practice.

Schedule a meeting at our office in Laguna Hills, Orange County, California to learn more about our services and specialties. Alternatively, you can reach out to us over the phone at 9492155055.

Navigating Price Transparency

So outside of Medicare’s schedule, there are new regulations that are forcing hospitals to publish their standard charges. It’s not exactly the same as similar schemes around the world like Australia’s Medical Costs Finder, but U.S. price transparency is mainly just a way of giving patients tools so they can compare health care costs properly. 

That said, for most small practices, the primary focus is still just billing correctly under FFS and understanding health insurance rules.

Conclusion

To wrap things up, the Medicare fee for service is essentially just Original Medicare, where each health service you provide is billed and paid individually. 

You follow the Medicare Benefits Schedule and then get reimbursed for all of the claims your practice submits. Again, that can obviously mean quite a lot of extra administrative work for your physicians if you’re running a small practice, so make sure you consider outsourcing your medical billing and coding to PMN.

Medicare is worth over a trillion dollars annually, so needless to say, mastering the FFS model is fairly crucial to your practice staying successful. From filing for prescribed medical practitioners or ambulance services, just follow the schedule and you’ll be fine.

FAQ

Does Medicare Fee‑For‑Service Cover Medical Specialist Services like Radiology?

Yes! Part B covers outpatient medical specialist services, which includes fields like radiology and laboratory tests (after the deductible). Medicare pays 80% of the approved rate, and then it’s the patient’s job – or their supplemental insurance – to cover the remaining balance.

How Can I Estimate Medicare Costs for a Procedure?

You can use the publicly available Physician Fee Schedule lookup tool on CMS.gov to find the Medicare-approved fee for a given CPT code. This lets you anticipate medicare costs before submitting a claim.