The Medicare conversion factor
The Medicare conversion factor is a scaling factor that converts the geographically adjusted number of relative value units (RVUs) for each service in the Medicare physician payment schedule into a dollar payment amount. The initial Medicare conversion factor was set at $31.001 in 1992. Subsequent conversion factor updates have been based on three factors:
• The Medicare economic index
• An expenditure target “performance adjustment”
• Miscellaneous adjustments including those for “budget neutrality”
History of Medicare Conversion Factors
| Year | Conversion Factor | % Change | Primary Care Conversion Factor | % Change | Surgical Care Conversion Factor | % Change | Other Nonsurgical Conversion Factor | % Change |
| 1992 | $31.0010 | N/A | N/A | N/A | ||||
| 1993 | N/A | $31.9620 | $31.2490 | |||||
| 1994 | N/A | $33.7180 | $35.1580 | 10.0 | $32.9050 | 5.3 | ||
| 1995 | N/A | $36.3820 | 7.9 | $39.4470 | 12.2 | $34.6160 | 5.2 | |
| 1996 | N/A | $35.4173 | -2.7 | $40.7986 | 3.4 | $34.6293 | 0.0 | |
| 1997 | N/A | $35.7671 | 1.0 | $40.9603 | 0.4 | $33.8454 | -2.3 | |
| 1998 | $36.6873 | |||||||
| 1999 | $34.7315 | -5.3 | ||||||
| 2000 | $36.6137 | 5.4 | ||||||
| 2001 | $38.2581 | 4.5 | ||||||
| 2002 | $36.1992 | -5.4 | ||||||
| 2003 | $36.7856 | 1.6 | ||||||
| 2004 | $37.3374 | 1.5 | ||||||
| 2005 | $37.8975 | 1.5 | ||||||
| 2006 | $37.8975 | 0.0 | ||||||
| 2007 | $37.8975 | 0.0 | ||||||
| 2008 | $38.0870 | 0.5 | ||||||
| 2009 | $36.0666 | -5.3 | ||||||
| 2010 | $36.0791* | 0.0 |
Initially, the Medicare Physician Payment Schedule included distinct conversion factors for various categories of services. In 1998, a single conversion factor was offset by elimination of the work adjustor and increases in the practice expense and PLI RVUs. The reduction in the 2009 conversion factor was offset by elimination of the work adjustor from the third Five-Year
Review.