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. This includes some E/M services and some procedures.

• CMS develops and publishes the Physician Fee Schedule in November of each year, as part of the Physician Fee Schedule Final Rule
• The fee schedule includes relative value units and payment indicators, for example, global days, if an assistant at surgery is allowed, if the procedure can be billed with bilateral modifier 50

The Medicare Physician Fee Schedule has values for some CPT^® codes that include both a facility and a non-facility fee. The facility fee is typically lower because the medical practice doesn’t have the expense for staff and supplies when a service is done in the facility setting.

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. (Place of service 19 or 22)

The non-facility rate is the payment rate for services performed in the office.  This rate is higher because the physician practice has overhead expenses for performing that service. (Place of service 11)

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.)

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)?