Understanding how Medicare fees for psychological services are determined

By Office of Health Care Financing

Every psychological and neuropsychological service has a Current Procedural Terminology (CPT^®) code. Additionally, every one of those CPT codes has a relative value in the Medicare fee schedule. In order to help figure out how much Medicare should pay for the services, the RUC (short for Relative Value Scale Update Committee), an American Medical Association (AMA) committee, serves as an expert panel providing recommendations to the Centers for Medicare and Medicaid Services (CMS) regarding the relative values of health and medical services for the Medicare fee schedule.

The Medicare fee schedule is the basis for payments to psychologists and other health practitioners in the program and is frequently used as the benchmark for commercial insurers and other federal insurance programs. So, even if you don’t think the Medicare fee schedule applies to you, it actually does. (For more discussion of this, please see the “Who Sets Psychologists' Payment Rates?” column from Feb. 25, 2016.)

For every CPT code that psychologists use, there is a relative value connected to it. Relative values are the payment weights assigned to each procedure and service, allowing them to be ranked from low to high. Every procedure and service is measured in relative value units (RVUs) and then multiplied by a dollar figure to determine the Medicare reimbursement. For example, in terms of relativity, a 45-minute psychotherapy session (CPT code 90834) has a higher relative value than the 30-minute session (CPT 90832), but lower than neuropsychological testing (CPT 96118). The relative values are shaped by APA Office of Health Care Financing’s (OHCF) recommendations based on data collected from APA and Practice Organization members, through the RUC surveys.

The Valuation Process in Five Easy Steps

Very briefly, here’s how the Medicare valuation process works:

1. The surveys — requesting quantifying data that reflect the survey respondents’ expert opinions on psychology and neuropsychology services — are sent out to randomly selected APA members.
2. The responses are gathered by APA’s Office of Health Care Financing, collated and then translated into metrics set by the AMA RUC process.
3. APA’s Office of Health Care Financing (OHCF) takes the metrics and uses them to determine its recommended relative values to present to AMA RUC in a formal review.
4. The RUC considers the APA recommendations alongside recommendations from other societies regarding their own services and procedures. All the reviewed service recommendations are placed in a rank order that includes the existing relative values in the Medicare fee schedule.
5. Officials from Centers for Medicare and Medicaid Services perform their own review of all the relative value recommendations from the RUC, refines them for the Medicare fee schedule, and then publishes them for the annual fee schedule changes. 

When RUC surveys are conducted, it’s because either a) CMS has required that a service’s relative value be carefully reviewed by the specialty performing the service, or b) the specialty society has determined that there is sufficient evidence that the relative values need to be reviewed for potential updates. Either way, specialty societies like APA and the Practice Organization have to collect data from people in active practice by way of standardized surveys.

The data from survey responses become the basis of the Practice Organization’s arguments for adjusting the relative values. Obviously, a more robust response rate makes for more robust survey data. Stronger data also allows OHCF to approach negotiations with Centers for Medicare and Medicaid Services with a solid basis for assertions about appropriate relative values based on current psychological and neuropsychological practice.

How OHCF is Working for You

The Office of Health Care Financing and the Practice Organization are always concerned that psychologists receive appropriate reimbursement for their work with Medicare beneficiaries. RUC surveys are the primary vehicle by which specialty societies like the Practice Organization advocate for appropriate values in the Medicare fee schedule. This direct input from psychologists to the fee schedule relative values is based on the work done in the Office of Health Care Financing.

The OHCF sends representatives to all RUC meetings each year to advocate for psychology’s tangible value to the Medicare system. In addition, OHCF regularly comments on initiatives underway in the overall RUC process and in the Medicare fee schedule process.

If you have questions about the RUC process or about the Medicare fee schedule, contact the Office of Health Care Financing.

Additional Resources

A slide presentation on the RUC process (PDF, 420KB) is available online.

Information on how relative values are determined is available in the Federal Register update of the Medicare fee schedule.