Provider Fee Schedule (Complete Guide)

📌 What Is the Provider Fee Schedule?

The Provider Fee Schedule (PFS) defines how payers such as Medicare, Medicaid, or commercial insurers determine the allowed amount for each CPT/HCPCS code. Payments are calculated using components such as RVUs, GPCIs, and the Conversion Factor.

📑 Types of Provider Fee Schedules

• Medicare Fee Schedule (MFS): Uses the RBRVS system.
• Medicaid Fee Schedule: State-specific, generally lower.
• Commercial Fee Schedule: Negotiated between payer and provider.
• Workers' Compensation Fee Schedule: Separate state rules.
• Facility vs. Non-Facility PFS: Payments differ based on where services are performed.

🎯 Why Do We Need a Provider Fee Schedule?

• Ensures standardized payment for services.
• Improves transparency in reimbursement.
• Helps reduce healthcare cost variations.
• Allows RCM teams to detect underpayments.
• Supports contract negotiation for providers.

🧩 What Are RVUs?

The Resource-Based Relative Value Scale (RBRVS) uses three types of Relative Value Units (RVUs) to determine the value of a medical service:

• Work RVU (wRVU): Measures provider effort, time, skill, and intensity.
• Practice Expense RVU (peRVU): Covers overhead such as staff, rent, and equipment.
• Malpractice RVU (mpRVU): Represents the cost of liability insurance required to protect providers from legal claims.

⚖️ What Is Malpractice in PFS?

Malpractice RVU is based on the cost of professional liability insurance. Specialties with higher legal risks (such as surgery or OB-GYN) have higher malpractice RVUs, while low-risk specialties have lower values. This ensures payment aligns with the level of legal exposure.

🌍 What Is GPCI?

Geographic Practice Cost Index (GPCI) adjusts RVUs based on cost differences in different locations. Each RVU component has its own GPCI:

• Work GPCI
• Practice Expense GPCI
• Malpractice GPCI

High-cost cities receive higher adjustments, while low-cost regions receive lower ones.

💵 What Is the Conversion Factor (CF)?

The Conversion Factor is a fixed dollar amount updated annually by CMS. It converts total RVUs into the final allowed payment amount. For example: 1 RVU × CF = Payment.

🧮 How Is the Final Allowed Amount Calculated?

The Medicare payment formula includes three steps:

1. Multiply each RVU by its corresponding GPCI.
2. Add the adjusted RVUs to get the Total RVU.
3. Multiply the Total RVU by the Conversion Factor (CF).

Final Allowed Amount = (wRVU × wGPCI) 
                     + (peRVU × peGPCI) 
                     + (mpRVU × mpGPCI)
                     × CF

📘 Example Calculation (CPT 99213)

Using sample values:

• wRVU: 1.30, PE RVU: 1.00, MP RVU: 0.10
• wGPCI: 1.02, PE GPCI: 1.05, MP GPCI: 0.90
• Conversion Factor (CF): $36.09

Total Final Allowed Amount = $88.95