Understanding facility versus non-facility in the physician fee schedule explains the RVU and payment differences that practices receive when performing the same service in different settings.

The Medicare Physician Fee Schedule has values for some CPT^® codes that include both a facility and a non-facility fee.

When CMS develops the fee schedule, each code has three components:  work Relative Value Unit (wRVU), practice expense (peRVU) and malpractice expense (mpRVU).  When a service is performed in a facility (that is, hospital, ASC, nursing home, etc.) the practice expense RVU is lower.  This is because the practice does not have the expense for the overhead, staff, equipment and supplies used to perform that service.  A facility includes an outpatient department.  Some medical practices have a designation of provider based, and use outpatient as the correct place of service.

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 practice has overhead expenses for performing that service.

When you submit a claim submit your usual fee.  The carrier or MAC processes your claim based on the place of service you select.  Be careful to select the correct place of service.  It is important to know if the service is taking place in an outpatient department or physician office.

Some codes may only be performed in one place or the other: for example, an initial hospital visit has only a facility fee, because it is never performed anywhere but a facility.  Office visits, on the other hand, may be done in the office (non-facility) or in the outpatient department (facility.)

In the Medicare Claims Processing Manual, (Ch. 12, Section 20.4.2) there is a complete list of settings that are considered facility settings and non-facility settings.

https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/clm104c12.pdf

And, if you need a refresher on RVUs and the fee schedule, see this CodingIntel article:

• Dear Resident, Do you Understand Relative Value Units (RVUs)?