Practice Management Alert

The basics: Medicare's 2005 conversion factor is 37.8975. Medicare and other payers use this conversion factor to determine payments by multiplying the relative value units (RVUs) for a given code by the conversion factor. For example, if procedure X has 10 RVUs, the payment would be $378.98.
 
Geography: Payments are also subject to geographic adjustments. The fee schedule may assign an adjustment of 1.1, for example, to a more expensive area, thereby raising the payment to $416.78 ($378.89 x 1.1). Conversely, the schedule may assign an adjustment of 0.95 to a less expensive area, thereby lowering the payment to $359.95.
 
Little-known fact: The geographic adjustments aren't really "based on any logical socio-economic or demographic breakdowns" for a given region, says Frank Cohen, senior analyst with Medical Information Technology Solutions in Clearwater, Fla. CMS divides regions based solely on the market area of each Medicare carrier, he says.
 
Therefore, a practice in an expensive urban area may suffer from a negative geographic adjustment, and a rural practice may benefit from a positive geographic adjustment - it all depends on your carrier.
 
Editor's note: You can find the RVUs for each code in addendum B to the fee schedule and the geographic adjustments in addendum D. View the final fee schedule online at www.cms.hhs.gov/physicians/pfs/.