Facility versus Non-Facility in the Physician Fee Schedule

Accurate billing under the Medicare Physician Fee Schedule (MPFS) depends on understanding where a service is performed. The same CPT code can result in different payments depending on whether it is provided in a facility or non-facility setting. This difference occurs because Medicare calculates Relative Value Units (RVUs) differently depending on the practice expenses incurred in each location.

This guideline explains the distinction between facility and non-facility settings, how RVUs and payments are affected, and how to correctly select the place of service to ensure proper claim submission and reimbursement.

Facility vs. Non-Facility Fees in the Medicare Physician Fee Schedule

The Medicare Physician Fee Schedule assigns different values to certain CPT codes, reflecting both facility and non-facility fees. Each code within the schedule is built on three components: work Relative Value Unit (wRVU), practice expense Relative Value Unit (peRVU), and malpractice expense Relative Value Unit (mpRVU).

Why Facility Settings Have Lower Practice Expense RVUs?

When a service is provided in a facility such as a hospital, ambulatory surgical center (ASC), nursing home, or similar setting, the practice expense RVU is lower. This reduction occurs because the physician's practice is not responsible for the overhead costs, staff, equipment, or supplies required to deliver the service. A facility also includes outpatient departments. Some medical practices designated as provider-based use the outpatient setting as the correct place of service.

Why Non-Facility Settings Have Higher Practice Expense RVUs

The non-facility rate is the payment rate for services performed in the office, home, or other non-facility setting. This rate is higher because the physician's practice has overhead expenses for performing that service.

Selecting the Correct Place of Service for Claims

When submitting a claim, always include your usual fee. The carrier or Medicare Administrative Contractor (MAC) processes the claim based on the place of service you select. It is essential to carefully choose the correct place of service and know whether the service is being performed in an outpatient department or a physician's office.

Some codes may only be performed in one specific setting. For example, an initial hospital visit typically incurs only a facility fee because it is always performed within a facility. Office visits, on the other hand, may be performed either in the office (non-facility setting) or in the outpatient department (facility setting).

Maximize Your Reimbursements with BillingFreedom’s Facility vs. Non-Facility Expertise

Accurate billing starts with understanding the difference between facility and non-facility settings under the Medicare Physician Fee Schedule. Selecting the correct place of service is critical to ensure proper RVU calculation and full reimbursement. Mistakes in identifying outpatient departments, physician offices, or provider-based facilities can lead to underpayment, claim rejections, or compliance issues.

BillingFreedom takes the complexity out of medical billing. Our team of experts ensures your claims are coded correctly, with the right facility or non-facility designation, so you receive every dollar you deserve. From CPT code validation to precise place-of-service selection, we help you stay compliant while maximizing revenue.

Let BillingFreedom handle the details so that you can focus on patient care. Boost accuracy. Increase revenue. Stay compliant.

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