The Medicare Physician Fee Schedule (MPFS or PFS) is the system CMS uses to determine how much it pays physicians and other practitioners for services covered under Medicare Part B. The PFS governs payment for connected care services including CCM, RPM, PCM, BHI, APCM, and associated CPT and HCPCS codes.
How Payment is Calculated:
Medicare payment for a given service is determined by a formula with three components:
Relative Value Units (RVUs):
Each CPT or HCPCS code is assigned three sets of RVUs reflecting the relative resources required: Work RVUs (physician time, effort, skill, and judgment), Practice Expense (PE) RVUs (overhead costs including staff, equipment, and supplies), and Malpractice (PLI) RVUs (professional liability insurance costs).
Geographic Practice Cost Indices (GPCIs):
Each of the three RVU components is adjusted by a geographic multiplier that accounts for cost-of-living variation across the country. Practices in high-cost areas receive higher payments; practices in lower-cost areas receive lower payments.
Conversion Factor (CF):
Conversion Factor (CF):** The total adjusted RVUs are multiplied by a national dollar conversion factor to produce a payment amount. The conversion factor is updated annually by statute.
The formula: Payment = [(Work RVU x Work GPCI) + (PE RVU x PE GPCI) + (PLI RVU x PLI GPCI)] x Conversion Factor.
Budget Neutrality:
CMS is required to maintain budget neutrality when making changes to RVUs. If changes to one set of codes increase spending, CMS must offset those increases by reducing payments elsewhere. This mechanism means that increases in reimbursement for some services can cause decreases for others, and it has been a persistent source of tension between specialty societies and primary care organizations.
Annual Rulemaking Process:
The PFS is updated through formal notice-and-comment rulemaking. CMS publishes a proposed rule in the Federal Register (typically in July), solicits public comments over a 60-day period, considers the comments, and publishes a final rule (typically in November) that takes effect January 1 of the following year. All connected care reimbursement changes flow through this process.
Sources:
Social Security Act ยง 1848; 42 C.F.R. Part 414;
AMA Medicare Physician Payment Schedule overview;
Federal Register annual PFS rulemakings.
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