Which statement best describes Medicare reimbursement for physicians?

• A. The payment is based on relative value units.
• B. The payment is determined by conversion factors and geographic adjustments.
• C. The payment is a fixed fee schedule independent of services provided.
• D. The payment is set by the physician's negotiation.

Answer: (A)

Medicare payment for physician services is driven by relative value units. Each service is assigned RVUs that reflect the resources required, including physician time and effort, practice expenses, and liability costs. These RVUs provide a standardized measure of value for services. The dollars paid are then derived by applying a conversion factor and, for geographic variation, adjusting with geographic cost indices. So the core idea is that the value of the service, as captured by RVUs, is the basis for reimbursement, with conversion factors and geographic adjustments translating that value into actual payment. The other statements describe parts of the process (like the use of a conversion factor and geographic adjustments) but do not capture the fundamental mechanism as directly.