The Building Blocks of a Fee Schedule
Fee schedules translate the relative value of medical services into dollar amounts providers are paid. RHIA candidates should understand how relative value units (RVUs) and conversion factors work together to determine reimbursement.
RVU-Based Schedules
The resource-based relative value scale (RBRVS) assigns each CPT code a total RVU composed of three components: physician work, practice expense, and malpractice expense. Each component is adjusted by a geographic practice cost index (GPCI) to reflect regional cost differences.
Medicare Physician Fee Schedule
CMS publishes the Medicare Physician Fee Schedule annually, applying a conversion factor, a dollar amount, to the total adjusted RVUs for each code to calculate the Medicare-allowed payment amount. The formula is: Payment equals total RVU multiplied by the conversion factor.
Conversion Factors
The conversion factor is set annually and can be adjusted through legislative action or budget neutrality requirements. Even small changes in the conversion factor have a significant financial impact across the entire fee schedule.
Negotiation with Commercial Payers
Commercial payers often build their own fee schedules as a percentage of the Medicare fee schedule, such as 110 percent or 130 percent of Medicare rates, depending on market competitiveness and negotiating leverage.
Updates and Maintenance
Fee schedules require ongoing maintenance to reflect new CPT codes, changes in RVU values recommended by the AMA's RVS Update Committee (RUC), and annual regulatory updates published in the Federal Register.
Exam Tip
Memorize the RVU components (work, practice expense, malpractice) and the basic payment formula for the Medicare Physician Fee Schedule.