In 2009, Medicare changed its payment calculation in the Physician Fee Schedule. It moved the Budget Neutrality Factor from the Work RVU to the Conversion Factor.
In 2008, Medicare applied the budget neutrality factor to the Work RVU
In 2009, Medicare applied a budget neutrality factor to the conversion factor
(Work RVU * Work GPCI) + (Practice Expense RVU * Practice Expense GPCSI) + (Malpractice Expense RVU * Malpractice Expense GPCI) = Total RVUs
Total RVUs * conversion factor * budget neutrality factor = FEE
The conversion factor decreased, but fees increased. This provided a 4-6% increase in E/M services. In previous years, applying the budget neutrality factor to the work RVU had the effect of decreasing payments more for services with high work RVU values.
Physician practices should review their third party contracts to be sure the the BNA is not included in the calcuation of fees. Contract amounts that are based on the Resource Based Relative Value Scale should be determined as a conversion factor multiplied by the total RVUs. If the fee is a percentage of Medicare, then the payer is including the BNA in the calcuation and being paid less.