What is the difference between "facility" and "non-facility" in the physician fee Schedule?

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The difference between facility and non-facility in the Physician Fee Schedule (MPFS) is the location where a medical service is performed and who pays for the overhead costs.

According to the CMS Sample PFS Searches, payment rates differ between these two settings because of how practice expenses are handled. You can learn more about how these amounts are structured through the AAPC Blog on Physician Fee Schedule.

Non-Facility Setting

  • Definition: Services are performed in private physician offices, patient homes, walk-in clinics, urgent care centers, or independent labs.
  • Reimbursement Rate: Higher.
  • Reason: The private practice or physician pays 100% of the overhead expenses, including rent, utilities, clinical staff salaries, medical supplies, and equipment. This is reflected by higher Practice Expense Relative Value Units (PE RVUs).
  • Place of Service (POS) Examples: Office (POS 11).

Facility Setting

  • Definition: Services are performed in institutional settings such as hospitals, emergency rooms, ambulatory surgical centers (ASCs), or skilled nursing facilities.
  • Reimbursement Rate: Lower for the professional service.
  • Reason: The facility itself covers the overhead, equipment, and staff costs and receives a separate payment from Medicare for those institutional expenses. Because the physician incurs fewer direct practice expenses in this setting, the PE RVUs assigned to the physician's fee are lower. Work and malpractice RVUs remain the same.
  • Place of Service (POS) Examples: Hospital outpatient (POS 22), inpatient hospital (POS 21).

What is a facility vs. non-facility?

A facility setting refers to institutional locations like hospitals or skilled nursing facilities where the institution covers overhead costs, while a non-facility setting refers to private physician offices or homes where the doctor must cover all practice expenses.

Key Differences in Medical Billing

  • Reimbursement Rates: Non-facility rates are typically higher because physicians must pay out of pocket for staff, equipment, and supplies. Facility rates are lower because the institution absorbs those operational expenses and often bills a separate facility fee.
  • Place of Service (POS) Codes: Claims require specific codes to determine the rate. For example, POS 11 indicates a private office (non-facility), while POS 22 indicates an on-campus outpatient hospital (facility).
  • Setting Examples:
    • Facility: Inpatient/outpatient hospitals, emergency rooms, and ambulatory surgical centers.
    • Non-Facility: Private doctor practices, patient homes, and independent walk-in clinics.

You can learn more about how billing rules apply via the Medicare Facility vs. Non-Facility Guide.

What are the definitions for facility and non-facility for the physician fee schedule?

Under the Medicare Physician Fee Schedule, facility and non-facility refer to the specific setting where a medical service is performed, which determines the practice expense portion of the physician's reimbursement.

Facility Definition

A facility setting is an institutional environment where the building, overhead, equipment, and support staff are provided and paid for by the institution rather than the individual physician's private practice.

  • Examples: Hospitals, ambulatory surgical centers (ASCs), skilled nursing facilities (SNFs), inpatient facilities, and hospital-based outpatient departments.
  • Payment Impact: Reimbursement is lower because the practice does not incur the direct overhead costs of supplies, equipment, or staff for that service.

Non-Facility Definition

A non-facility setting is a private or independent location where the physician or medical practice assumes the full financial responsibility for the overhead, rent, equipment, supplies, and personnel.

  • Examples: Private physician offices, a patient's home, or freestanding independent clinics.
  • Payment Impact: Reimbursement is higher to help offset the direct operational expenses paid out-of-pocket by the private practice.

Is POS 20 considered a facility or non-facility?

Place of Service (POS) code 20 is considered a non-facility setting for Medicare Physician Fee Schedule purposes.

Key Details

  • Definition: POS 20 represents an Urgent Care Facility, which is a location distinct from a hospital emergency room, an office, or a clinic.
  • Reimbursement Rate: Because it is designated as a non-facility setting, it typically pays at the higher non-facility rate (similar to an office setting, POS 11) to account for the overhead, equipment, and staff expenses covered directly by the practice.
  • Commercial Payer Variation: While the Centers for Medicare & Medicaid Services (CMS) classifies POS 20 as non-facility, commercial insurance companies maintain their own distinct contracting and pricing rules.

Is POS 22 considered a facility or non-facility type of medical billing?

Place of Service (POS) code 22 is considered a facility type of setting in medical billing.

Overview of POS 22

  • Definition: Stands for On-Campus Outpatient Hospital.
  • Setting: Used when a patient receives diagnostic, therapeutic, or surgical care in an outpatient department located on a hospital's main campus without being admitted as an inpatient.
  • Billing Impact: Because the hospital bills separately for overhead, equipment, and staff (using a facility fee), the physician's professional claim is reimbursed at the lower facility rate under the Medicare Physician Fee Schedule rather than a non-facility rate.

An Overview of the CMS Physician Fee Schedule- Part 1

9 related questions found

What is the difference between facility and non-facility fees?

Facility and non-facility fees differ primarily based on where a medical service is performed and who pays for the operational overhead.

Key Differences

  • Non-Facility Fees: These apply to services performed in a private physician office, home, or independent clinic. This rate is higher because the doctor's private practice pays for all the staff, medical supplies, equipment, and building rent.
  • Facility Fees: These apply to services performed in a hospital, ambulatory surgical center (ASC), or skilled nursing facility. This rate is lower for the physician's professional service because the institution covers the overhead costs and bills a separate facility fee directly to insurance.

Setting Types

  • Facility Settings: Hospitals, emergency departments, outpatient departments, and nursing homes.
  • Non-Facility Settings: Private doctor offices, individual walk-in clinics, and patient homes.

Why It Matters for Billing

Medical billers use specific Place of Service (POS) codes on claims (such as POS 11 for an office or POS 22 for a hospital outpatient department) to tell insurance companies which rate applies. Choosing the wrong code causes billing errors or improper payment amounts. You can read more about how these are calculated in the Medicare Physician Fee Schedule Guide.

Can a doctor charge a facility fee?

Yes, a doctor's office or clinic can legally charge a facility fee if the practice is owned or operated by a hospital or larger health system.

How Facility Fees Work

  • Separate Billing: When you visit a hospital-owned outpatient clinic, your bill is often split into two parts: a professional fee (for the doctor's time) and a facility fee (to cover overhead costs like equipment, nurses, utilities, and staff).
  • Location Does Not Matter: You can be charged this fee even if the clinic is located miles away from the main hospital building or if you only had a routine checkup.
  • Independent vs. Hospital-Owned: Standalone, private doctor practices cannot charge facility fees, but hospital-acquired practices routinely do under "provider-based billing" rules.

Regulations and Transparency

  • State Laws: A growing number of states have passed or proposed laws requiring clinics to give advance notice before charging facility fees or banning them entirely for specific services like telehealth. You can check Triage Cancer for an overview of specific state regulations regarding facility fees.
  • What You Can Do: If you receive an unexpected charge, call the billing department to request an itemized bill, ask if the clinic has provider-based status, and inquire about financial assistance or dispute options.

What method is the most common to calculate a fee schedule for physicians?

The two most common methods used to calculate a physician fee schedule are creating a cost-based fee schedule and basing the schedule on Relative Value Units (RVUs) assigned by the Centers for Medicare & Medicaid Services (CMS).

The Two Primary Methods

  • Cost-Based Fee Schedule: The medical practice calculates the total operational cost of providing a specific service or procedure. Fees are set by accounting for direct and indirect expenses, such as staff labor, office lease or rent, utilities, medical supplies, equipment maintenance, and malpractice insurance.
  • RVU-Based (Resource-Based Relative Value Scale / RBRVS) Schedule: Practices base their standard charges on the relative value units established by CMS. Many practices popularize this by multiplying the Medicare RVU value by an arbitrary or targeted percentage (such as 150% or 200% of Medicare rates). This system weighs services based on physician work, practice overhead expenses, and malpractice costs, adjusted by geographic location.

What is the definition of a physician fee schedule?

A physician fee schedule is a comprehensive list of predetermined payment rates established by government programs like the Centers for Medicare & Medicaid Services (CMS) or private insurance companies to compensate physicians and other healthcare clinicians for specific medical services.

Key Components

  • Covered Services: Outlines payment rates for thousands of distinct clinical services, including office visits, surgical procedures, and diagnostic tests.
  • Relative Value Units (RVUs): Assigns a value to each service based on physician work, practice expenses, and malpractice insurance costs.
  • Conversion Factor: Multiplies the relative value units by a fixed-dollar amount to determine the final payment rate.
  • Geographic Adjustments: Modifies payment amounts based on local cost-of-living and operational differences across regions.

What is the conversion factor for the 2026 Medicare physician fee Schedule?

The conversion factor for the 2026 Medicare Physician Fee Schedule is $33.57 for qualifying Alternative Payment Model (APM) participants and $33.40 for non-qualifying practitioners.

2026 Conversion Factors Overview

  • Qualifying APM Participants (QPs): $33.57 ($33.5675), reflecting a 3.77% increase from 2025.
  • Non-Qualifying APM Participants: $33.40 ($33.4009), reflecting a 3.26% increase from 2025.
  • 2025 Baseline: The 2025 conversion factor was $32.35.

Key Drivers of the 2026 Update

  • Statutory Increase: Includes a temporary 2.50% increase mandated by Congress under the One Big Beautiful Bill Act.
  • APM Updates: A statutory update of +0.75% for qualifying APM participants and +0.25% for non-qualifying participants.
  • Budget Neutrality: An estimated +0.49% adjustment to account for changes in work relative value units (RVUs).

For background on how these figures operate within payment calculations, see the overview of the 2026 Medicare Conversion Factor Explained, or access the raw data sets via the CMS RVU26A Files.