The Health Care Financing Administration issued the scheduled updates to the Resource Based relative Value Scale (RBRVS) in November 2000. The update reflects changes mandated by the balanced Budget Act of 1997 and subsequent legislation, but contains some surprises, as we will see below.

The 2001 physician fee schedule conversion factor is $38.2581 per RVU (relative value unit), an increase of 4.5% over the 2000 factor of $36.6137. This conversion factor is applied to the number of RVUs for each CPT code under the RBRVS to determine the base fee that Medicare pays. Local geographic adjusters are then applied to determine the payment rate in a given area.

The workings of the annual physician fee schedule update are complex. HCFA first determines the Medicare Economic Index, which measures the weighted average price change for various inputs involved with producing physicians’ services. The MEI is then multiplied by the update adjustment factor. For 2001, the result of these factors was 1.051 (5.1% increase). A series of additional adjustments are then made to this adjustment. There is a Volume and Intensity Adjustment which is designed to reflect the impact of changes in the number and coding of physician services (.9986); a specific legislated adjustment which applies to what would otherwise by the 2001 update (.998); and finally, a adjustment for 2001 caused by changes in certain elements of home health care services (.997). The net effect of multiplying all of these factors together is the 4.5% increase cited above.

The changes in the number of RVUs for each CPT code are a result of the changes in the Practice Expense Component. This component looks at the cost of delivering services by physician type, for example family medicine versus cardiac surgery. Significant changes were made in HCFA’s estimates of the cost of providing office visits and office consultation services. These changes have major implications for evaluating the forecasted cashflow for practices such as Internal Medicine and Family Medicine that make the greatest use of these codes. The following Table summarizes the changes in the established patient visit codes, the most commonly used of all the CPT codes. The "old" column shows what the fee in 2001 would have been based upon the RVUs originally scheduled to be in place for 2001 (as published in the November 2, 1999 Federal Register) using the 2001 conversion factor and the "new" reflects the actual 2001 fee using the revised RVUs:

The next table summarizes the changes in reimbursement for the office consultation codes, customarily used by sub-specialists such as cardiologists.

The following table summarized the percentage impact of all of these changes in the practice expenses component of the RBRVS on the income of various specialties:

There are 89 geographic cost areas for the Geographic Practice Cost Index (GPCI) adjustment. HCFA announced that only 14 of the areas will change by at least 2%, 16 areas will change by 1% to 1.9%, and the remaining 59 by less than 1%.

You can download the fee schedule for your particular area at http://www.hcfa.gov/medicare/pfsmain.htm.