Medicare reimbursement under RBRVs FAQs

Q: Where can I find the Medicare payment rates?  

A: The current and past fee schedules can be obtained from the Centers for Medicare & Medicaid Services (CMS) Web site.

In addition, a very useful file containing a Microsoft Excel spreadsheet of all CPT/HCPCS codes with accompanying relative value unit values can be obtained on the CMS Web site. Look for the file: “RVU”YEAR_QUARTER”.ZIP” It contains a table of relative value units, geographic practice cost indices, instructions on how to calculate payments for any given locale and designated supervision levels for certain clinical diagnostic tests, among other payment details.

Q: How are Medicare payment rates set? 

A: The formula for calculating the payment update is applied in the following manner:
 

 

[(Work RVU x Work GPCI) + [(Work RVU x Work GPCI) +

 

Payment =

(PE RVU x PE GPCI) +

x CF

 

(Malpractice RVU x Malpractice GPCI)]

 

The above formula includes the following seven elements:

  • Physician Work Relative Value Unit (Work RVU)
  • Physician Work Geographic Practice Cost Index (Work GPCI)
  • Practice Expense Relative Value Unit (PE RVU)
  • Practice Expense Geographic Practice Cost Index (PE GPCI)
  • Malpractice Relative Value Unit (Malpractice RVU)
  • Malpractice Geographic Practice Cost Index (Malpractice GPCI)
  • The Conversion Factor (CF).

These elements are defined further below.

Q: How are anesthesia services valued for Medicare payment? 

A: Anesthesia services are based on values from a uniform relative value guide developed and maintained by the American Society of Anesthesiology. Because these services use a separate conversion factor there is a separate payment system for anesthesia services. Q: What is a Relative Value Unit (RVU)? A: Relative Value Units (RVUs) are a component of the Resource Based Relative Value Scale which sets reimbursement rates for services paid for by Medicare. The RVU is a measure of work, practice expense or malpractice resources used to deliver a medical service. CMS is mandated to update physician work RVU values every 5 years. To make updates to RVU values, CMS relies on an advisory group known as the Relative Value Update Committee (a subcommittee of the American Medical Association) and data submitted by the American Medical Association and medical specialty societies.

CMS is required by statute to make periodic modifications to the three types of RVU values. Modifications to the RVU values must, by statute, be conducted in a manner that does not increase aggregate costs to the Medicare system by more than $20 million per year. To prevent Medicare expenditures from exceeding this cap, CMS must lower the conversion factor, thereby reducing physician compensation for all services.

Q: What are the geographic practice cost indices (GPCIs)? 

A: The geographic practice cost indices (GPCIs) are a component of the Resource Based Relative Value Scale which sets reimbursement rates for services paid for by Medicare. The GPCI considers variations in the cost of providing medical products and services across the country and adjusts inputs reflecting the cost differential. Each area is attributed its own GPCI for each of the work, practice expense and malpractice factors. The CY 2004 fee schedule recognized 89 different GPCI localities. CMS is required to update GPCIs at least every three years. These updates are greatly affected by the availability and accuracy of census data.

Q: Why are there two practice expense relative value units? 

A: The location where a service is provided determines which of the two practice expense relative value units (RVUs) is used to calculate payment. If a service is provided in a hospital inpatient or outpatient department, an ambulatory surgical center (ASC), skilled nursing facility (SNF) or community mental health center (CMHC), it is considered to have been performed in a facility and that facility can bill Medicare for overhead costs. Services performed in these institutions use the “facility” practice expense RVU. If, however, a physician performs a service in his/her own office, then the higher “non-facility” practice expense RVU is used to compensate for the cost of maintaining her/his office.

A full list of place of service codes and the facility/nonfacility designation is available on the CMS Web site.

Q: What is the conversion factor? 

A: The “conversion factor” is a multiplier which converts the geographically adjusted inputs for work, practice expense and malpractice to the full Medicare allowable rate for a given service. Accordingly, fluctuations in the conversion factor affect all services paid under the system. The law governing the Medicare program initially required a single conversion factor. Beginning in 1993, two conversion factors were applied for surgical and non-surgical services. In 1994, a third conversion factor was added for primary care services. With the advent of the Sustainable Growth Rate (SGR) system, the factors were combined into a single dollar amount. (Table 1.)

Table 1. Conversion Factors for the Medicare physician reimbursement system 1992 to present
 

 

1992

general services

$31.001

 

anesthesia

$13.94

1993

surgical services

$31.96

 

non-surgical services

$31.249

 

anesthesia

$14.05

1994

surgical services

$35.158

 

non-surgical services

$32.905

 

primary care

$33.718

 

anesthesia

$14.20

1995

surgical services

$39.447

 

non-surgical services

$34.616

 

primary care

$36.382

 

anesthesia

$14.77

1996

surgical services

$40.7986

 

non-surgical services

$34.6293

 

primary care

$35.4173

 

anesthesia

$15.28

1997

surgical services

$40.9603

 

non-surgical services

$33.8454

 

primary care

$35.7671

 

anesthesia

$16.68

1998

general services

$36.6873

 

anesthesia

$16.8762

1999

general services

$34.7315

 

anesthesia

$17.24

2000

general services

$36.6137

 

anesthesia

$17.77

2001

general services

$38.2581

 

anesthesia

$17.26

2002

general services

$36.1992

 

anesthesia

$16.60

2003

general services

$36.7856

 

anesthesia

$17.05

2004

general services

$37.3374

 

anesthesia

$17.70

2005

general services

$37.8975

 

anesthesia

$17.7594

2006

general services

$37.8975

 

anesthesia

$17.7594

2007 

general services

$35.9848

 

anesthesia

$15.3328



Updates to the conversion factor are made annually and are stipulated in a formula established by Congress. Congress is the only body able to authorize changes to the conversion factor or the underlying calculation. The update formula looks at estimates of the percentage change in physicians’ fees, the average number of Medicare beneficiaries, growth in the real per capita GDP and costs to the Medicare program due to changes in law or regulation. These four estimates are used to create a percentage by which the previous year’s conversion factor is modified. The SGR, however, simply establishes a target rate for growth. The target does not bind actual expenditures. However, if spending exceeds the target, the conversion factor for the following year is reduced. Conversely, if spending falls below the target, the next year will see an increased conversion factor. 

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