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Background
To help determine reasonable and customary charges, Cigna HealthCare uses data from the Prevailing Healthcare Charges System (PHCS),
owned by Ingenix, a subsidiary of UnitedHealth Group. Ingenix is a health-care information company that provides knowledge and
information tools to improve health-care delivery and business operations.
Ingenix does not determine reasonable and customary charges. Ingenix provides a range of data to subscribers for informational
purposes and any interpretation or use of the data is solely and exclusively at the discretion of the subscriber.
Methodology
The United States is divided into geographic areas, or “geozips.” Geozips are groupings of zip codes identified by Ingenix. Charges
collected over a specific period of time are sorted into geozips according to providers’ zip codes. If there are at least nine
charges in the database for a particular CPT® code in a given geozip during a given period of time, that data is used to calculate
reasonable and customary percentiles.
When the number of billed charges used to create the database for CPT code/geozip combinations falls below nine, Ingenix provides
an alternative mathematical process that may populate the PHCS database. Under this process, billed charges from a range of
related CPT codes are combined and normalized using “relative values.” Relative value systems relate medical procedures to each
other in terms of difficulty and expense. Therefore, reasonable and customary charges for each CPT code listed on the schedule
can be calculated for every geozip.
Formula
Billed charges for a particular CPT code in a given geozip are sorted in ascending order and assigned a number based on ranking.
The lowest charge is number one; the second lowest is number two, etc.
The total number of charges is then multiplied by 0.8 to determine the 80th percentile (Cigna default (.08) is overridden by
plan provisions specifying other percentiles). The charge associated with that number is the amount that is greater than or
equal to 80 percent of the charges for that CPT code and geozip combination. Any other percentile can be calculated the same
way (multiplying the number of charges by 0.x).
Updates
Cigna's reasonable and customary schedules are updated semiannually with Ingenix data.
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