Medicare Reimbursement Information VIII

The Medicare Reimbursement series continues with a look at physician reimbursement in more detail. The source of this information is MedPAC’s Payment Basics.

Physician Reimbursement
Physicians payment is based on 3 factors: RVU, GPCI and the MEI conversion factor.

  • Relative value units (RVUs) measure the relative costliness of three types of resources used to provide different physician services: physician work, practice expenses, and expenses for physicians’ professional liability insurance (PLI). Each of these three components of the RVU payment is adjusted separately for geographic cost variation (see GPCI discussion below).
  • Geographic practice cost indexes (GPCI): Measures payments based on variation in the costs of providing services across 89 different geographical areas. Thirty four of these 89 geographical areas are state-wide. GPCI’s have a national average of 1.0. The law requires that the GPCIs be revised at least every three years.
    • Physician work GPCI: based on the earnings of professionals (lawyers, engineers, and others) reported in the decennial census
    • Practice expense GPCI: constructed to account for geographic differences in nonphysician staff wages (40% of the GPCI practice expense), office space costs (27% of the GPCI practice expense), and equipment and supplies (33% of the GPCI practice expense).
    • PLI GPCI: based on data CMS periodically collects from the largest malpractice insurers in each state
  • Medicare Economic Index (MEI): Changes in the input prices for physician services are measured using the Medicare Economic Index (MEI), a weighted measure of average national prices for inputs needed to produce physicians’ services.

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