In 1992 HCFA initiated a new payment system known as the Resource-Based Relative Value Scale (RBRVS). The RBRVS includes three major components of resource costs that are required for physician services: physician work, practice expense, and the cost of professional liability insurance. The relative value established for each service is supposed to reflect the resources used in furnishing the service. As a "resource-based" relative value scale, the fee schedule does not reflect factors such as the value of a service to the patient.

Physician Work: This component reflects the physician time and intensity in providing the service. Factors such as mental effort and judgment, technical skill, physical effort, and psychological stress involved in providing the service all measure the overall work involved in providing a service.

Practice Expense: This component reflects the overhead costs involved in providing a service. This includes such things as rent, utilities, equipment, and staff salaries (other than physician compensation and malpractice costs).

Malpractice Expense: This component reflects the malpractice expenses associated with the service, such as costs of insurance, etc.

The national uniform relative values for each of these components are then adjusted for each locality by geographic adjustment factors (GAF). As a result, Medicare providers are paid differently between each state and also within each state. New York, for example, has five separate payment localities due to the GAF. The law also establishes a Medicare volume performance standard that sets a target rate of increase for expenditures for Medicare physician services. Finally, each of the adjusted components are multiplied by an annual conversion factor that translates these values into reimbursement dollars.

Psychologists and the RBRVS

As of January 1, 1997, the psychologist fee schedule was set at 100% of the physician fee schedule.¹² However, because psychologists are not considered "physicians" by HCFA, technically psychologists are still not paid under the RBRVS system for their therapeutic services. Psychologists are paid under RBRVS only for their diagnostic services, while therapeutic services are reimbursed under a fee schedule specifically for psychologists. Reimbursement for services provided by psychologists is, however, exactly the same as psychiatrists' reimbursement when providing the same service.

Return to Top
Return to Table of Contents