Fee Schedule
A fee schedule is a payer's list of maximum allowed amounts by CPT/HCPCS code — the prices that actually get paid, as opposed to the chargemaster prices that get billed. Medicare's Physician Fee Schedule prices via RVUs times a conversion factor ($33.4009 in 2026); commercial contracts are often set as a percentage of Medicare.
- Contains
- Allowed amount per CPT/HCPCS code
- Medicare formula
- Total RVUs × conversion factor ($33.4009 in 2026)
- Commercial norm
- Often expressed as % of Medicare
- Belongs in
- Your PM system, as expected-pay values
What is a fee schedule?
A fee schedule is the payer's answer to "what is this code worth": one allowed amount per CPT/HCPCS code, per locality, per year. Every in-network claim prices against it, and the gap between your chargemaster charge and the scheduled amount becomes the contractual adjustment. If the chargemaster is what you ask, the fee schedule is what you get — which makes it the most financially important document in every payer contract, and the one practices most often fail to obtain in full.
How does Medicare build its fee schedule?
The Medicare Physician Fee Schedule prices each code as RVUs × conversion factor, with the RVU components geographically adjusted. Example for a code totaling 3.5 adjusted RVUs in 2026: 3.5 × $33.4009 = $116.90 allowed. Deductible met, Medicare pays 80% ($93.52) and the patient owes 20% ($23.38). You can pull the exact locality-adjusted amount for any code with the Medicare fee calculator instead of hand-working GPCIs.
The fee schedule updates every January 1 via the PFS final rule, and the conversion factor moves with it — budget planning that assumes last year's rates is planning with stale prices.
How do commercial fee schedules work?
Most commercial contracts express rates one of three ways: a percentage of Medicare (e.g., 115–140% of current-year PFS), a proprietary fee schedule (a flat list of amounts), or a hybrid with carve-outs for specific codes. Two contract terms deserve special scrutiny: which year's Medicare the percentage references, and whether the payer may amend the schedule unilaterally with notice — many contracts let them, and those notices arrive quietly.
How do you use fee schedules to catch underpayments?
- Load every payer's schedule into your PM system as expected allowed amounts, effective-dated.
- Run a paid-vs-expected variance report monthly. Sort by total variance dollars, not per-claim amounts — systematic $6 underpayments on a high-volume code outrank one dramatic miss.
- Dispute with the contract page attached. A written variance dispute citing code, date, expected, and paid gets fixed; a phone complaint gets sympathy.
- Recheck after every January and every contract amendment — payer systems misload new schedules often enough that the first 30 days of a rate change deserve their own audit.
Frequently asked questions
The chargemaster is the provider's price list (what you bill); the fee schedule is the payer's price list (what they allow). Payment is the lesser of the two after cost sharing, which is why charges must always be set above every fee schedule you participate with.
Each CPT carries work, practice expense, and malpractice RVUs, each adjusted by geographic indices (GPCIs), summed, and multiplied by the annual conversion factor — $33.4009 for 2026. That is why the same code pays differently in Manhattan and rural Kansas, and why the conversion factor announcement matters every fall.
The payer's allowed amount is Medicare's fee schedule amount for the code and locality multiplied by 1.2. Always check which year's Medicare the contract references: "120% of current-year Medicare" moves with CMS updates, while "120% of 2023 Medicare" freezes your rates in the past — a real and expensive difference.
Often, yes — especially at renewal, with data. Payers respond to utilization volume, quality metrics, and specifics: bring your top 20 codes by revenue and ask for targeted increases on those rather than an across-the-board percentage. Small practices get further with focused asks than blanket ones.
Sources & further reading
Reviewed by the ImmediCare Solutions RCM team
Certified billers and coders handling claims across 50+ specialties nationwide. This entry is reviewed against current payer policy and CMS rules. Last review: Jul 5, 2026.
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