Contracts
Fee schedule vs allowed amount vs paid amount
The difference between the contracted fee schedule, the payer allowed amount, the amount actually paid, and patient responsibility, with a worked example.
By PayerBeacon · Published · Updated
Written and edited by PayerBeacon. Sources are listed below with the date each link was checked.
What is the difference between a fee schedule, an allowed amount, and a paid amount?
The fee schedule is what your contract says a service is worth. The allowed amount is what the payer recognizes for that service, including patient responsibility. The paid amount is what the payer actually sent.
It depends. A dollar-denominated fee schedule gives a rate per code and unit. A percentage-of-Medicare contract needs the applicable Medicare fee schedule for the locality and year. A case rate or bundled arrangement allocates payment across services differently, so one line may not have a standalone rate.
The four numbers
Underpayment review goes wrong when these terms are treated as synonyms. Keep them separate in the evidence and in the arithmetic.
| Term | What it means | What to check |
|---|---|---|
| Fee schedule rate | The contracted amount for a code and unit | Effective date, locality, code, modifier, and unit basis |
| Allowed amount | The amount the payer recognizes for the service | Payer paid plus patient responsibility where reported |
| Paid amount | The amount the payer actually sent | Deposit or EFT notice, claim status, and reversal activity |
| Patient responsibility | Deductible, coinsurance, or copay assigned to the patient | The PR adjustment and the patient-facing explanation |
| Contractual adjustment | The difference between billed and allowed under the contract | The CO adjustment and the reason code |
The conditions that change the answer
A rate comparison is only as good as the matching conditions. The same code can have different rates or rules depending on the modifier, the number of units, the place of service, the date of service, and whether the service is primary or add-on.
If any of those conditions do not match, the comparison is a hypothesis, not a finding. Write down the conditions and the source of the rate so another reviewer can repeat the calculation.
- Units: a rate may be per unit, per encounter, or per day; confirm the unit basis.
- Modifiers: a modifier can change the rate, the coverage, or the bundling result.
- Date of service: use the contract version in force on that date, not today’s rate.
- Place of service: facility and non-facility rates can differ.
- Bundling: an NCCI edit or payer policy may explain a reduction that is not an underpayment.
A patient-responsibility example
The contract rate is $100. The payer allowed $100, paid $70, and assigned $30 to the patient. The payer did not underpay the claim by $30: the allowed amount matches the contract, and the $30 is the patient’s share.
If the allowed amount were $70 and the patient responsibility were $30, the reconstructed allowed amount would still be $100. That is why the payer payment alone is the wrong comparison point.
When a line cannot be compared
Some arrangements do not produce a standalone line rate: case rates, per-diem payments, bundled services, and percentage-of-Medicare contracts without the applicable Medicare schedule. In those cases, say that the line is out of scope rather than inventing a rate.
A finding is strongest when the contract, the remittance, and the calculation all point to the same conclusion. If one of them is missing, the honest result is "needs more information."
Sources
- Fee Schedules — Centers for Medicare & Medicaid Services. Link checked .
- Medicare Claims Processing Manual, Chapter 22: Remittance Advice — Centers for Medicare & Medicaid Services. Link checked .
- Claim Adjustment Reason Codes — X12. Link checked .