Fee-for-service

Under fee-for-service, payment flows from payer to provider on a per-service basis: each CPT code submitted on a clean claim triggers a corresponding payment according to a negotiated or published fee schedule. For Medicare beneficiaries, the applicable schedule is the Medicare Physician Fee Schedule (MPFS), which assigns relative value units (RVUs) to every covered procedure; those RVUs are multiplied by a conversion factor and geographic practice cost indices to produce the allowed amount. Commercial payers typically negotiate their own schedules, often expressed as a percentage of the MPFS allowed amount.

In orthopedic practice, FFS directly shapes how procedures are bundled and reported. The Medicare Global Surgery package folds pre-operative, intraoperative, and standard post-operative care into a single FFS payment for major procedures (90-day global period) or minor procedures (0- or 10-day global period). Correctly distinguishing what is included in that global payment versus what may be separately billed—such as a significant separately identifiable evaluation and management visit—is central to compliant FFS billing. The National Correct Coding Initiative (NCCI) enforces bundling rules that prevent double-billing under FFS by identifying procedure pairs that should not be reported together on the same date of service.

FFS contrasts with value-based or capitated arrangements, where payment is tied to outcomes, episode-of-care bundles, or per-member-per-month rates rather than discrete services. Many orthopedic practices operate in a mixed environment, participating in traditional FFS Medicare or commercial contracts alongside alternative payment models such as Comprehensive Care for Joint Replacement (CJR) or bundled payment programs. Understanding the mechanics of FFS is therefore foundational: it underpins how RVUs are accrued, how global periods are tracked, and how payer contracts are evaluated.

Because every reimbursed dollar in a traditional FFS practice ties directly to a correctly coded and documented claim, errors carry immediate financial consequences. Under-coding (e.g., choosing a lower-level E/M code when documentation supports a higher one) leaves revenue on the table. Over-coding, unbundling separately reported procedures that NCCI edits require to be bundled, or billing a service already included in a global surgical package exposes the practice to claim denial, post-payment audit, recoupment demand, and—if the pattern appears intentional—False Claims Act liability. The AAOS Coding, Coverage & Reimbursement Committee actively monitors MPFS proposed rules and RUC valuations precisely because FFS rates set the financial baseline for the entire specialty.