In today’s healthcare world, out-of-network billing is a major financial hurdle. It is often misconstrued not only by physicians but also by payers and patients, too. As in dealing with OON claims, when a patient is receiving treatment, you do not have a contract with an insurer, and there is no set rate.  This gap is typically bridged through reasonable and customary (R&C) charges, which are a pricing benchmark used to calculate out-of-network reimbursement rates.  The insurer then uses these Reasonable and Customary (R&C) charges to decide payments. 

These benchmarks not only act as a middle ground for reimbursement but deeply affect your revenue as a whole. As a busy CRO or doctor, you must know how these numbers are picked. 

What Is Out-of-Network Billing? 

Out-of-network billing mainly happens when you treat a patient without a signed contract. Being quite different from in-network providers, who agree to discounted rates in exchange for patient volume, out-of-network providers bill their full standard rates instead. And this difference often led to higher costs for patients until 2022, but has changed with the No Surprises Act of 2022. 

However, this only happens when patients have few in-network options. This, in fact, leaves the physician with no choice but to check the patient out-of-network, at which point the insurer initiates a separate payment process. Since there is no contract, the main problem that most physicians struggle with here is when the insurer uses its own internal standards to pay physicians like you with Reasonable and Customary (R&C) charges. 

What are Reasonable and Customary Charges 

Reasonable and Customary (R&C) charges are also called usual, customary, and reasonable (UCR) rates. These are the maximum amounts an insurer will pay for a specific service, which is mostly based on the geographic area where you practice is and, in certain cases, the state regulations. 

How These Charges Guide Payments: 

• When you submit a claim, the insurer checks your bill against its R&C limit. If your bill is higher than their limit, they only pay up to that cap.  
• Insurers use these rates to keep their costs predictable. Without a benchmark, they would have no way to judge if a bill is fair.  
• However, every insurer calculates these rates differently and the lack of a single standard leads to many billing disputes. 

How Are These Charges Determined? 

Calculating R&C charges is undoubtedly a complex affair with multi step process involving the geography, data sources and specific billing codes. However, here are the main factors that set your reimbursement rates. 

1. The Impact of Geography 

Location is the biggest driver of medical costs. It costs more to run a practice in Manhattan than in rural Mississippi. Factors like rent, local wages, and competition all together do play a role here. 

Furthermore, there are times when insurers use ZIP code based models to track these costs. They segment their data so the rates reflect the local market, so they don’t overpay in low-cost areas or underpay in expensive cities. 

2. Databases and Percentiles 

Insurers rarely guess at these numbers. They use huge databases to see what other doctors’ charge. One common source is FAIR Health, which is a non-profit that tracks billions of private medical claims. Also, insurers often pick a “percentile” for reimbursement here.  

3. Medicare-Based Pricing 

Some plans do not use market data at all. Instead, they use Medicare fee schedules as a baseline. This is called reference based pricing. The plan might pay 150% or 200% of the Medicare rate. This method is very transparent. However, Medicare rates are often much lower than actual market costs. This can lead to significant underpayment for specialized care. 

4. The Power of CPT Codes 

Your billing accuracy is vital here and as every service has a specific CPT code. The R&C benchmark is tied directly to the code you submit. So if your team uses the wrong code, the insurer might apply a lower R&C limit. This results in denials or lower payments. Upcoding or downcoding can also trigger audits. You must ensure your coding team stays current on all annual updates. 

Related Reading: Out-of-Network Billing: What Providers Need to Know in 2026 

Common Challenges with R&C Rates dealing with out-of-network claims: 

The R&C system is far from perfect and creates several hurdles for healthcare managers every day. This is mainly because insurers often hide how they calculate their benchmarks. So, you might not know why a claim was cut until after it happens. This makes it hard for you to verify if the payment is fair. 

Additionally, two patients can receive the exact same surgery in your office. If they have different insurance, your reimbursement might be totally different. One plan might use FAIR Health data, while another uses Medicare rates. This inconsistency makes financial planning very difficult for a busy practice. 

Arbitration confusion is quite common here, as not all providers bill the same way. Some bundle services, while others bill the arbitration separately. This can be quite confusing to many. 

The Effect on Your Practice and Physicians: 

When an insurer pays less than your bill, balance billing occurs and the patient gets a bill for the difference. However, with the 2022 NSA, getting insurance reimbursement is a pain. 

Out-of-network claims take much longer to process and often require extra notes, appeals, and phone calls. This stretches your revenue cycle, tires out your staff and makes it hard to forecast your monthly income. 

However, you can make this process smoother by taking a proactive approach that reduces stress for everyone by outsourcing your OON claims to expert like CollectionPro. 

Related Reading: Understanding all About Out of Network Billing and Balance Billing

How CollectionPro Simplifies Your Workflow 

Managing these complex rates manually is nearly impossible for a busy manager. This is where CollectionPro makes a difference. We offer a specialized tool built for out-of-network billing. 

CollectionPro helps you navigate the R&C maze with ease, as our system uses advanced data to track current benchmarks along with an in-house lawyer. We help you spot errors before you hit “submit.” By choosing CollectionPro you not only reduce the time spent on appeals but improve your revenue cycle and focus on patient care. 

While the system is often opaque, you do not have to navigate it alone. As determining reasonable and customary charges are a complicated science that relies on location, vast databases, and precise coding, our expert achieves a 92 % success rate. In short, you no longer have to worry about it anymore.  

Resolving all your out-of-network claims, where you only pay when you win, CollectionPro standardizes your workflow in the best way to ensure fairness. With the right strategy, we are here to minimize disputes and keep your practice financially healthy. 

Stuck with underpayment? Get in touch with our expert over a no-commitment call today and get all your due reimbursements.