Medicare fees are established through a complex formula that attempts to adjust payments based on the work and resources required to deliver a service to a Medicare patient.
First, Medicare attaches a work-based numerical value to each service or procedure. Those values are reviewed and changed periodically.
Next, the number is multiplied by a "conversion factor" specific to primary care, surgery or nonsurgical procedures. Current conversion factors are $40.80 for surgery, $35.42 for primary-care services and $34.63 for all other procedures.
Finally, fees are adjusted based on geography. Doctors also are compensated for such practice expenses as staff salaries, equipment and malpractice insurance.