How Does CMS Determine the Payment of a CPT Code

Two questions I am often asked is how does the Centers for Medicare and Medicaid (CMS) determine the payment for each CPT code and why is the same CPT code paid differently depending on where the practice or facility is located? In this article, I will answer how CMS determines the payment for each CPT code and why the same CPT code reimburses differently based on the location of your practice or organization.

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How does CMS determine the payment for each CPT code?

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What is included in the work relative value unit (RVU) of a CPT code?

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Question
What is included in the practice expense relative value unit (RVU) of a CPT code?

Answer[restrict paid-=true]
The practice expense RVU takes into account the cost of maintaining a practice such as rent, mortgage, equipment, supplies, and non-physician staff costs. Non-physician staff costs would include physical therapist assistants, occupational therapy assistants, front desk staff, billing staff and rehab aides/techs, to name a few.[/mepr-show]

Question
What is included in the malpractice expense relative value unit (RVU) of a CPT code?

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Why does the same CPT code pay different rates dependent on what state you are located in or even within the same state?

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What is the exact formula that CMS uses to determine the payment for each CPT code?

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Can you provide an example using CPT code 97110 (therapeutic exercise) and how the payment is determined?

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Question
If CMS decreases the conversion factor from one year to the next, assuming the RVU’s for each CPT code do not change, what does this mean for the payment for each CPT code?

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Do commercial and workers compensation carriers use the same process to determine the payment of each CPT code?

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I hope you found this article helpful and that you now have a better understanding how the price of a CPT code is determined by the Medicare program. Thank you for being a Gold Member!