Functions & Formulae

Each applied formula has its own function page, with a signature, implementations, and tests.

Medicare physician fee schedule payment from relative value units and the conversion factor

Fee = (W * GPCI_W + PE * GPCI_PE + MP * GPCI_MP) * CF; CF_new = CF_prev * BN * (1 + u) * (1 + k)

Turns the relative value units of a service, adjusted for local practice costs, into a dollar payment by multiplying by the conversion factor, and updates the factor each year by a chain of statutory and budget neutrality adjustments. Relative values set the ratios between services; the conversion factor sets the money level of all of them. Notation follows the Conversion Factor article, with its 2026 factors from the CMS final rule.

  • Geographically adjusted Medicare physician fee schedule amount for a service in a locality

    Fee = (W * GPCI_W + PE * GPCI_PE + MP * GPCI_MP) * CF

    Each of the three relative value components of a service is multiplied by its geographic practice cost index for the payment locality, and the adjusted total is multiplied by the conversion factor. The regulation writes the same amount as total relative value units times a geographic adjustment factor (GAF) times the conversion factor, where the GAF weights each index by the component's share of the total. In the article's notation Fee is P_s,l and PE and MP are E_s and M_s. The amount is for a participating supplier; a non-participating supplier receives 95 per cent of it.

  • Medicare conversion factor for a calendar year as a chain of budget neutrality, update and one-year increase

    CF_new = CF_prev * BN * (1 + u) * (1 + k)

    CMS takes the previous year's conversion factor and multiplies it by the budget neutrality adjustment, the statutory update for the payment group and any temporary statutory increase. For 2026 the starting point was the single 2025 factor, the updates were 0.75 per cent for qualifying participants in advanced alternative payment models and 0.25 per cent for everyone else, and the one-year increase was 2.50 per cent. Factors are published to four decimals.

  • Budget neutrality multiplier and adjusted conversion factor after a revaluation of relative value units

    BN = (q_A * R_A_old + q_B * R_B_old) / (q_A * R_A_new + q_B * R_B_new); CF_adj = CF_old * BN

    When relative value units are revised, the conversion factor is scaled so that the projected volume of services, priced at the new units, costs the same as before. The multiplier is the ratio of total weighted units before to after the change, so a cut to some services' units raises the factor and with it the fee of every service whose units were not cut. Two services are written out so that the calculator can run; SUMPRODUCT in Excel takes any number. This is the article's simplified version: CMS estimates the adjustment from prior-year utilisation and handles several adjustments in sequence.

  • Cost per relative value unit for a category of outpatient care in the HERC average cost method

    CF_c = X_c / R_tot; C_i = CF_c * R_i

    Keeps Medicare's relative values as the measure of resource use but replaces Medicare's price level with a health system's own spending: total spending on a category of care divided by the total relative value units of its encounters gives a cost per unit, and each encounter is costed at that rate times its units. This is the article's simplified stylisation of the method used by HERC, the health economics unit of the US Department of Veterans Affairs, which in practice scales a hypothetical Medicare reimbursement for each visit so that the estimates tally to national VA spending.