Glossary Term

Physician Fee Schedule

The Medicare Physician Fee Schedule is the basis by which the payment rate is determined for medical care delivered by providers and covered by Medicare. The schedule list payment rates for more than 7,000 services. The schedule is produced by the Centers for Medicare & Medicaid Services and its rates are updated annually. The reimbursement rates are not as simple as a dollar amount for a given procedure. Instead, the schedule takes into consideration factors such as the patient’s region and the setting at which the care was delivered. This latter condition means that a procedure delivered at a hospital may be paid at a higher rate than the same procedure delivered at a private physician’s practice.

Medicare’s Physician Fee Schedule is the result of a political process with input from an advisory committee representing physician organizations. Within the schedule, value is not a determiner of price. Instead, factors such as the amount of work and practice expense are incorporated into the rate paid for a treatment. Among the concerns regarding this model is the potential for a compensation bias toward specialty care.

Medicare’s Physician Fee Schedule determines payments to a variety of health care providers within the Medicare system, from doctors and nurses to durable equipment manufacturers to ambulance firms. While CMS’ Physician Fee Schedule applies to Medicare, the schedule influences the reimbursement rate in other insurance spheres, such as private commercial insurance for individuals and families and employer-based health plans. 

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