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What Is a Medicare Fee Schedule?

Medicare pays hospitals and similar providers at a set fee based on the patient's diagnosis. For physician, laboratory and related services, Medicare pays based on the actual services and supplies provided at the amount set in the applicable fee schedule.

  1. Reading a Fee Schedule

    • Medicare fee schedules set a payment limit for virtually every service or item that a patient would receive. The fee schedules use a set of codes in the Healthcare Common Procedure Coding System (HCPCS) that describe each item or service and associate it with a payment limit. Doctors use these codes on claim forms to receive payment.

    Physician Fee Schedule

    • Medicare payment for physician services considers the amount of work the physician or other provider performs and the practice expense of performing the service.

    Other Fee Schedules

    • In addition to the physician fee schedule, Medicare sets payment limits for ambulance services, clinical laboratory tests and durable medical equipment through separate fee schedules.

    Local Variability

    • Medicare accounts for the local and regional differences on costs of office space, employees and supplies by applying local adjustment factors that decrease or increase the Medicare payment based upon provider location.

    Annual Updates

    • Each year, Medicare proposes fee schedule updates, requests and reviews comments from the public on its proposal, and then publishes a final fee schedule. The draft update is usually available in the summer with the final fee schedule published before December.

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