MEDICARE PHYSICIAN FEE SCHEDULE
Medicare Part B pays for physician services based on the MPFS, which lists the
more than 7,000 covered services and their payment rates. Physician services
include the following: Office visits; Surgical procedures; and A range of other
diagnostic and therapeutic services.
Physician services are furnished in all settings including
: Physicians’ offices;
Hospitals;
Ambulatory Surgical Centers;
Skilled Nursing Facilities and other post-acute
care settings;
Hospices;
Outpatient dialysis facilities;
Clinical laboratories; and
Beneficiaries’ homes
Payment rates for an individual service are based on three components:
1) Relative Value Units (RVU)
The three separate RVUs that are associated with the calculation of a payment
under the MPFS are:
Work RVUs reflect the relative levels of time and intensity associated with
furnishing a physician fee schedule service and account for more than 50
percent of the total payment associated with a service. By statute, all work
RVUs must be examined no less often than every five years.
Practice expense (PE) RVUs reflect the costs of maintaining a practice such as
renting office space, buying supplies and equipment, and staff costs. PE RVUs
account for approximately 45 percent of the total payment associated with a
given service.
Malpractice RVUs represent the remaining portion of the total payment
associated with a service.
Conversion Factor (CF)
To determine the payment rate for a particular service, each of the three
separate RVUs is adjusted by the corresponding geographic cost index. The sum
of the geographically adjusted RVUs is multiplied by a dollar CF. The CF is
updated on an annual basis according to a formula specified by statute. The
formula specifies that the update for a year is equal to the Medicare Economic
Index (MEI) adjusted up or down depending on how actual expenditures compare to
a target rate called the Sustainable Growth Rate (SGR). The MEI is a measure of
inflation faced by physicians with respect to their practice costs and general
wage levels. The SGR is calculated based on medical inflation, the projected
growth in the domestic economy, projected growth in the number of beneficiaries
in fee-for-service Medicare, and changes in law or regulation.
3) Geographic Practice Cost Indices (GPCI)
GPCIs are adjustments that are applied to each of the three relative values
used in calculating a physician payment. The purpose of these adjustments is to
account for geographic variations in the costs of practicing medicine in
different areas within the country. We are required to review and, if
necessary, adjust GPCIs at least every three years.
Where to Find Additional Information About the Medicare Physician Fee Schedule Additional information about the MPFS is available at
http://www.cms.hhs.gov/PhysicianFeeSched/01_overview.asp on the CMS website.
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