Method for Computing Fee Schedule Amount

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 carriers 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


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.