Final answer:
When insurance companies determine what to pay for medical services in an area, they refer to Reasonable and Customary Charges, which reflect the standard and cost of living for that location and prevent balance billing.
Step-by-step explanation:
In determining the coverage and benefits to pay for surgery based on what is considered fair and common for an area, the concept being referred to is known as Reasonable and Customary Charges. This method takes into account what is typically charged for similar services within a geographical area and helps to prevent balance billing where patients are charged the difference between what a provider charges and what the insurance covers. Insurers use this to set the fee-for-service payments to ensure that the charges are in line with the local rates for similar procedures, reflecting the standard and cost of living in that area.
Utilization Review is a process to ensure that medical care is necessary and appropriate. Medicare Guidelines set forth the rules for coverage under the Medicare program, and a Fee Schedule is a complete listing of fees used by health plans to pay doctors or other providers.