Price Percentile Engine

CMS Fee Schedule Methodology

The foundation of our pricing model is the CMS Physician Fee Schedule (PFS) and the Outpatient Prospective Payment System (OPPS). CMS publishes annually updated Relative Value Units (RVUs) for every CPT and HCPCS code. Each RVU has three components:

• Work RVU -- reflects the physician time, skill, training, and intensity required to perform the procedure.
• Practice Expense RVU -- accounts for overhead costs including clinical staff, medical equipment, and office rent. Separate values exist for facility and non-facility settings.
• Malpractice RVU -- captures the professional liability insurance cost associated with the procedure.

The Medicare-allowed amount for any procedure is calculated as:

The 2026 CMS conversion factor is $32.35. This base Medicare rate serves as the floor for our percentile calculations. Most commercial payers negotiate rates as a multiple of this Medicare rate.

Commercial Multipliers

Commercial insurers typically reimburse at 150% to 350% of Medicare rates, depending on the facility's market power, the procedure category, and the payer's network size. We derive commercial multipliers from two sources:

• Hospital Transparency Files -- CMS V3.0 machine-readable files include negotiated rates per payer per procedure. We parse these to extract actual commercial rates for each facility, then compute the implied multiplier against the Medicare base.
• RAND Hospital Pricing Benchmarks -- published research on commercial- to-Medicare price ratios by state and procedure category provides calibration data where transparency files are incomplete.

For each procedure at each facility, we store the raw negotiated rate and the derived multiplier. This allows us to compute fair-price estimates even for payer/facility combinations not explicitly present in the transparency data.

Facility vs. Professional Fees

A hospital procedure generates two separate charges that patients often confuse:

• Facility Fee -- billed by the hospital for use of the operating room, equipment, nursing staff, and supplies. Governed by the OPPS (outpatient) or MS-DRG (inpatient) payment system.
• Professional Fee -- billed by the surgeon or specialist for their personal services. Governed by the Physician Fee Schedule and priced using the RVU methodology described above.

Privenox shows both components separately and as a combined total. For outpatient procedures in ambulatory surgery centers (ASCs), the facility fee follows the ASC payment system, which is typically 40-60% lower than the hospital outpatient rate for the same procedure.

CPT/HCPCS Code Pricing

Every procedure in our system is identified by its CPT (Current Procedural Terminology) or HCPCS (Healthcare Common Procedure Coding System) code. We maintain a mapping of over 10,000 active procedure codes with:

• Plain-language descriptions that match how patients search (e.g., "knee replacement" maps to CPT 27447)
• Code families and bundling rules so related procedures are grouped together
• Status indicators (A, T, S, etc.) that determine the OPPS payment methodology
• Add-on code relationships for procedures that are always billed alongside a primary code

Percentile Computation

For any given CPT code and geographic radius, we collect all known prices from transparency files and compute P10, P25, P50 (median), P75, and P90 percentiles. Facilities above P90 are flagged as outliers with contextual information about why they may be priced higher (e.g., academic medical center, Level I trauma designation, or market concentration).

The percentile engine updates quarterly as hospitals refresh their transparency files. Price changes are tracked over time so users can see whether a facility's prices are trending up or down relative to the market.