CMS Pub. 100-04, ch. 12, § 20.1

B3-15006

The CMS continually updates, refines, and alters the methods used in computing the fee

schedule amount. For example, input from the American Academy of Ophthalmology has led

to alterations in the supplies and equipment used in the computation of the fee schedule for

selected procedures. Likewise, new research has changed the payments made for physical and

occupational therapy. The CMS provides the updated fee schedules to A/B MACs (B) on an

annual basis. The sections below introduce the formulas used for fee schedule computations.

A. Formula

The fully implemented resource-based MPFS amount for a given service can be computed by

using the formula below:

MPFS Amount = [(RVUw x GPCIw) + (RVUpe x GPCIpe) +

(RVUm x GPCIm)] x CF

Where:

RVUw equals a relative value for physician work,

RVUpe equals a relative value for practice expense, and

RVUm refers to a relative value for malpractice.

In order to consider geographic differences in each payment locality, three geographic practice

cost indices (GPCIs) are included in the core formula:

• A GPCI for physician work (GPCIw),

• A GPCI for practice expense (GPCIpe), and

• A GPCI for malpractice (GPCIm).

The above variables capture the efforts and productivity of the physician, his/her individualized

costs for staff and for productivity-enhancing technology and materials. The applicable

national conversion factor (CF) is then used in the computation of every MPFS amount.

The national conversion factors are:

2002 - $36.1992

2001 - $38.2581

2000 - $36.6137

1999 - $34.7315

1998 - $36.6873

1997 - $40.9603 (Surgical); $33.8454 (Nonsurgical); $35.7671 (Primary Care)

1996 - $40.7986 (Surgical); $34.6296 (Nonsurgical); $35.4173 (Primary Care)

1995 - $39.447 (Surgical); $34.616 (Nonsurgical); $36.382 (Primary Care)

1994 - $35.158 (Surgical); $32.905 (Nonsurgical); $33.718 (Primary Care)

1993 - $31.926 (Surgical); $31,249 (Nonsurgical);

1992 - $31.001

For the years 1999 through 2002, payments attributable to practice expenses transitioned from

charge-based amounts to resource-based practice expense RVUs. The CMS used the following

transition formula to calculate the practice expense RVUs.

1999 - 75 percent of charged-based RVUs and 25 percent of the resource-based RVUs.

2000 - 50 percent of the charge-based RVUs and 50 percent of the resource-based

RVUs.

2001 - 25 percent of the charge-based RVUs and 75 percent of the resource-based

RVUs.

2002 - 100 percent of the resource-based RVUs.

As the tabular display introduced earlier indicates, CMS has calculated separate facility and

nonfacility resource-based practice expense RVUs.

B. Example of Computation of Fee Schedule Amount

The following example further clarifies the computation of a fee schedule amount.

Background Example

Nationwide, cardiovascular disease has retained its position as a primary cause of morbidity

and mortality. Currently, cardiovascular disease affects approximately 61.8 million

Americans. Cardiovascular disease is responsible for over 40 percent of all deaths in the

United States. However, 84.3 percent of those deaths are persons age 65 and above.

Organ transplantation is one modality that has been used in the treatment of cardiovascular

disease. Currently over 2,000 persons per year receive a heart transplant. However, another

2,300 persons are on the waiting list. Because of the disparity between the demand and supply

of organs, mechanical heart valves are now covered under Medicare.

Sample Computation of Fee Schedule

Patients fitted with a mechanical heart valve require intensive home international normalized

ratio (INR) monitoring by his/her physician. Physician services required may include

instructions on demonstrations to the patient regarding the use and maintenance of the INR

monitor, instructions regarding the use of a blood sample for reporting home INR test results,

and full confirmation that the client can competently complete the required self-testing.

Assumptions

RVUw = 0

Given the nature of the example, the physician would, under product code G0248, not be

allowed to assign work RVUs.

RVUm = .01

However, the treatment of the patient with a mechanical heart carries a level of risk.

RVUpe = 2.92

Based upon a relatively intense level of staff time for an RN/LRN, or MN, as well as a supply

list that includes a relatively sophisticated home INR monitor, batteries, educational materials,

test strips and other materials, the RVUpe can be assigned a value of 2.92.

The above values require modification by regionally based values for work, practice, and

malpractice. If the city is assumed to be Birmingham, Alabama, the values below can be

assigned based upon current data.

GPCIw = 0.994

GPCIpe = 0.912

GPCIm = 0.927

The above indices suggest that the index in Birmingham is .6 percent below the national norm

for physician work intensity, 8.8 percent below the national norm for practice expenses, and

7.3 percent below the national norm for malpractice.

If the assumption is made that the nonfacility payment for a home visit is $166.52, the full fee

schedule payment can be computed through substitution into the formula.

Payment = (RVUw x GPCIw + (RVUpe x GPCIpe) + RVUm + GPCIm x physician fee

schedule payment.

Payment = (0 x .994) + (2.92 x .927) + (.01 x .912) x $166.52 =

Payment = (0) + (2.70684) + (.00912) x 166.52

Payment = $452.26166 or $452.26 when rounded to the nearest cent.

The above example is purely illustrative. The CMS completes all calculations and provides

A/B MACs (B) with final fee schedules for each locality via the Medicare Physicians’ Fee

Schedule Database (MPFSDB). Localities used to pay services under the MPFS are listed in

Chapter 23.