Facility vs. non-facility RVUs

Under the Medicare Physician Fee Schedule (MPFS), each CPT code carries up to two sets of total Relative Value Units: one for facility settings and one for non-facility settings. The difference lives entirely in the practice expense (PE) RVU component. Work RVUs and malpractice RVUs stay constant regardless of where a service is delivered. When a surgeon performs a procedure in a hospital, ambulatory surgical center (ASC), skilled nursing facility, or hospital outpatient department, CMS assigns a lower PE RVU because the facility—not the physician's practice—supplies the staff, equipment, sterile field, and disposables. The facility bills separately under its own payment system (OPPS or ASC fee schedule) to recover those costs. When the identical procedure is performed in the office, the physician practice absorbs every overhead dollar, so CMS assigns a higher PE RVU to offset that burden.

The correct payment rate is triggered by the Place of Service (POS) code on the CMS-1500 claim form, not by how the physician perceives the setting. POS 11 (office) activates the non-facility rate; POS 19 (off-campus outpatient hospital), 21 (inpatient hospital), 22 (on-campus outpatient hospital), and 24 (ASC) activate the facility rate. Crucially, CMS mandates that for any patient who is an inpatient (POS 21) or hospital outpatient (POS 19 or 22), the facility rate applies even if the face-to-face encounter physically occurs somewhere else.

For orthopedic practices, the practical gap is substantial. A procedure like a fine needle aspiration (CPT 10021) carries roughly twice as many total RVUs in the office versus a facility setting because the non-facility PE RVU is several times larger than its facility counterpart. Provider-based clinic designations add another layer of complexity: a physician office physically attached to a health system may be required to bill under POS 22, forfeiting the non-facility premium even though the space looks and operates like a private office. The CY 2026 MPFS proposed rule introduced a further wrinkle by proposing to reduce the indirect PE allocated to facility RVUs to half the amount allocated for non-facility, which AAOS estimated would cut reimbursement for common orthopedic facility procedures by 1–11%.

Submitting the wrong POS code—say, billing POS 11 (office) for a procedure performed in a hospital outpatient department—causes the MAC to pay the non-facility rate when only the facility rate is permitted. That constitutes a recoverable overpayment under CMS Recovery Audit Contractor topic 0108, which is an automated review applied across all A/B MAC jurisdictions. The practice faces repayment demands, interest, and potential extrapolation of the error across multiple claims. Conversely, billing the facility rate for a procedure genuinely performed in the office leaves money on the table, because the higher non-facility PE RVU was earned. For orthopedic surgery groups evaluating whether to build or lease an office-based procedure room, the site-of-service differential is often the deciding financial variable: shifting eligible procedures from a hospital outpatient department to the practice's own procedure suite can meaningfully increase physician reimbursement per case, provided the clinical and regulatory requirements are met.