Podiatry Coding & Billing Alert

Question: Can you explain the “conversion factor” and how it impacts Medicare payment?

Pennsylvania Subscriber

Answer: The conversion factor (CF) is a numerical multiplier Medicare uses to calculate payment rates in the Medicare Physician Fee Schedule (MPFS). CMS adjusts the CF each year by using a formula that considers factors like medical economic index, budget neutrality, and legislative changes to healthcare coverage.

The primary factor used to determine the payment rate for any medical procedure is the Relative Value Units (RVUs) assigned to that procedure. RVUs are based on a resource-based relative value scale (RBRVS) that compares the “inputs” required for a procedure relative to other procedures. Each medical procedure has three, weighted RVUs: one for physician work (wRVU), one for practice expense (peRVU), and one for malpractice expense (mpRVU).

Another factor used in the payment formula is the Geographic Practice Cost Index (GPCI) that accounts for differences in value based on location (things cost more in New York than Moline, Ill.). Like RVUs, there is a separate GPCI for physician work (wGPCI), practice expense (peGPCI), and malpractice expense (mpGPCI).

If you take all these factors together, then you have the formula that determines payment for a specific procedure in a specific geographical region: [(wRVU x wGPCI) + (peRVU x peGPCI) + (mpRVU x mpGPCI)] x CF.

Resource: CMS provides a look-up tool that does this calculation for you at www.cms.gov/apps/physician-fee-schedule/overview.aspx. Or, you can use a comprehensive tool that provides pricing and coding advice, such as https://www.aapc.com/codes/.