Medicare Fee Schedule: What, Why, How Health care professionals—including audiologists and speech-language pathologists—who treat Medicare beneficiaries receive reimbursement for the services according to the Medicare Physician Fee Schedule (MPFS). The MPFS establishes a specific reimbursement level for every procedure based on an equation; the levels are based on a formula that takes several different factors into ... Bottom Line
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Bottom Line  |   January 01, 2011
Medicare Fee Schedule: What, Why, How
Author Notes
  • Steven White, PhD, CCC-A, director of health care economics and advocacy, can be reached at swhite@asha.org.
    Steven White, PhD, CCC-A, director of health care economics and advocacy, can be reached at swhite@asha.org.×
Article Information
Practice Management / Regulatory, Legislative & Advocacy / Bottom Line
Bottom Line   |   January 01, 2011
Medicare Fee Schedule: What, Why, How
The ASHA Leader, January 2011, Vol. 16, 3-29. doi:10.1044/leader.BML.16012011.3
The ASHA Leader, January 2011, Vol. 16, 3-29. doi:10.1044/leader.BML.16012011.3
Health care professionals—including audiologists and speech-language pathologists—who treat Medicare beneficiaries receive reimbursement for the services according to the Medicare Physician Fee Schedule (MPFS). The MPFS establishes a specific reimbursement level for every procedure based on an equation; the levels are based on a formula that takes several different factors into account. Many SLPs and audiologists find the MPFS daunting and confusing; the following questions and answers are designed to help clinicians who are taking their first look at the MPFS.
Q: What is the Medicare Physician Fee Schedule?
The MPFS is a listing of payment rates for Part B (mostly outpatient) medical procedures. The fee schedule is updated annually by the Centers for Medicare and Medicaid Services (CMS). The 2011 rates and related rules were released in late December (see article below).
Q: Why is the MPFS important to audiologists and SLPs?
The 2011 MPFS reflects a new approach for valuing speech-language pathology services, which in turn affects payment rates. In 2008, CMS began a similar transition for audiology services, which are now viewed as “professional” rather than “technical” services. Understanding these transitions requires familiarity with the resource-based relative value scale (RBRVS), part of the formula CMS uses to establish payment for procedures performed by a wide range of providers—audiologists, SLPs, physical therapists, occupational therapists, physicians, clinical social workers, psychologists, nutritionists, chiropractors, optometrists, podiatrists, nurse practitioners, and physician assistants.
Q: When did Medicare first set payment rates using the MPFS?
CMS first set Medicare Part B prospective payment rates (payment based on a predetermined, fixed amount) in 1992 for physicians and other private practitioners such as audiologists and physical therapists. Reimbursement for speech-language pathology, occupational therapy, and physical therapy outpatient services in hospitals, skilled nursing facilities, comprehensive outpatient rehabilitation facilities, and rehabilitation agencies has been included in the MPFS system since 1999.
Q: How did the Resource-Based Relative Value Scale (RBRVS) originate?
The RBRVS was developed in the 1980s for Medicare by William Hsiao, an economics and health policy professor at the Harvard University School of Public Health, and adopted by CMS (then the Health Care Financing Administration) in 1992.
The American Medical Association (AMA) formed a committee to establish recommended values for procedural codes in the Current Procedural Terminology (CPT; © AMA) and to forward those recommendations to CMS. The first meeting of the AMA/Specialty Society RVS Update Committee (RUC) took place in November 1991. This update committee includes a Health Care Professionals Advisory Committee; ASHA was an inaugural member of the committee and continues to maintain an active role in the RBRVS process.
Q: What values are included in the RBRVS?
Use of the RBRVS was a major change in payment policy—it changed Medicare reimbursement to a prospective payment system rather than one based on provider charges (a retrospective payment approach). In the RBRVS system, payment for each service is determined by the resource costs needed to provide that service.
The cost of providing each service is divided into relative value units (RVUs) for each of three components—professional work, technical expenses (practice expense or PE), and professional liability insurance (malpractice). The total RVU for each service is the sum of the three components (components are adjusted for geographical differences). The reimbursement for a service is calculated by multiplying its total RVUs by a conversion factor—an amount determined annually by CMS.
The “professional work” RVUs are established by surveys (e.g., surveys of members by ASHA to request comparison of the amount of work involved for one procedure with those on a reference list). The RVS update committee reviews the survey findings and accepts or revises them so that their relevance to other procedures is acceptable. The update committee submits its recommended values to CMS, which either accepts or modifies them with explanation.
Q: How is the conversion factor determined each year?
The conversion factor—the annually adjusted dollar amount in the formula used to yield the fees— is based on a provision in the Medicare law. That provision, known as the sustainable growth rate (SGR), mandates an adjustment when total Medicare physician expenditures in the prior year exceed a target. In the past several years, this requirement often has resulted in a conversion factor that would reduce reimbursement levels from the previous year.
To prevent cuts in Medicare providers’ fees, Congress has in past years passed legislation to delay implementation of the SGR and set the conversion factor at the previous year’s level (e.g., 2007); at a modest increase (e.g., 1.5% increase in 2005); or at a more reasonable reduction (e.g., 5.3% in 2009 when the SGR called for a reduction of 15.1%).
The examples in Table 1 [PDF] demonstrate the calculation of 2011 fees for a speech-language service and an audiology service, using the 2011 conversion factor of $33.9764.
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January 2011
Volume 16, Issue 1