5.1 RBRVS and the Medicare Physician Fee Schedule
Key Takeaways
- The Resource-Based Relative Value Scale (RBRVS) sets physician payment using three Relative Value Units (RVUs): Work, Practice Expense, and Malpractice.
- Each RVU is adjusted to local cost by a matching Geographic Practice Cost Index (GPCI) for the payment locality.
- The Medicare Physician Fee Schedule (MPFS) payment formula is: [(Work RVU x Work GPCI) + (PE RVU x PE GPCI) + (MP RVU x MP GPCI)] x Conversion Factor.
- CMS publishes a single national Conversion Factor (CF) each year that converts total adjusted RVUs into a dollar amount.
- Practice Expense RVUs are higher in non-facility settings, so an office service often pays more than the same service performed in a hospital.
Why RBRVS Matters for Billers
Most physician and non-facility outpatient claims under Medicare Part B are paid from the Medicare Physician Fee Schedule (MPFS), which is built on the Resource-Based Relative Value Scale (RBRVS). As a Certified Professional Biller, you will not calculate fee schedules from scratch, but you must be able to verify that a posted payment is correct, explain an underpayment, and recognize when a service paid at a facility rate instead of a non-facility rate.
The Three RVU Components
Every CPT/HCPCS service on the MPFS carries three Relative Value Units (RVUs). RVUs are unitless measures of relative resource cost.
| RVU Component | What It Measures | Example Driver |
|---|---|---|
| Work RVU (wRVU) | Physician time, skill, mental effort, and stress | A complex surgery has a far higher wRVU than a simple office visit |
| Practice Expense RVU (peRVU) | Clinical/administrative staff, supplies, equipment, rent | In-office services carry more practice-expense cost than facility services |
| Malpractice RVU (mpRVU) | Professional liability insurance cost | High-risk specialties carry larger MP RVUs |
Geographic Adjustment with GPCIs
Costs differ by region, so CMS assigns each payment locality three Geographic Practice Cost Indices (GPCIs) — one for each RVU component. A GPCI above 1.00 means that locality costs more than the national average; below 1.00 means it costs less.
The MPFS Payment Formula
Payment is calculated by adjusting each RVU by its GPCI, summing the results, then multiplying by the annual Conversion Factor (CF):
Payment = [(Work RVU x Work GPCI) + (PE RVU x PE GPCI) + (MP RVU x MP GPCI)] x CF
Worked Example (Generic Values)
Assume a service with wRVU 2.00, peRVU 1.50, mpRVU 0.20, locality GPCIs of 1.00/1.05/0.95, and a conversion factor for the current year of $33.00.
- Work: 2.00 x 1.00 = 2.000
- PE: 1.50 x 1.05 = 1.575
- MP: 0.20 x 0.95 = 0.190
- Total adjusted RVUs = 3.765
- Payment = 3.765 x $33.00 = $124.25
The CF and exact RVU values change every year; for the current year, always pull figures from the CMS-published MPFS file rather than memorizing a dollar amount.
Site-of-Service Differential
Many services have two PE RVU values: a non-facility (office) rate and a lower facility (hospital, ASC) rate. When a service is performed in a facility, the facility separately bills its overhead, so CMS pays the physician the lower facility PE RVU to avoid paying twice. Place of service on the CMS-1500 drives which rate applies — a wrong POS code can cause an over- or under-payment.
Budget Neutrality
By law, changes to RVUs cannot increase total Medicare spending beyond a set threshold without an offsetting adjustment. To stay revenue-neutral, CMS adjusts the conversion factor (and at times a separate budget-neutrality factor) so the overall fee schedule stays within budget. This is why the CF can fall even when individual RVUs rise.
A practice performs a procedure in its own office. The same CPT code is also performed at a hospital outpatient department. Which statement about MPFS payment is correct?
A service has total geographically adjusted RVUs of 4.00. The current-year conversion factor is $33.00. What is the approximate allowed amount?