Facility vs Non-Facility Rates: How Medicare Pays by Setting

Facility vs non-facility is the split between Medicare's two Physician Fee Schedule rates for the same code: the non-facility rate is paid when you furnish the service in your own office or another non-facility setting, and the lower facility rate is paid when the patient is in a hospital, ASC, SNF Part A stay or other facility that Medicare pays separately for its overhead. The place of service code on the claim decides which rate applies, and the only part of the calculation that changes is the practice expense RVU.

What "facility" and "non-facility" mean

CMS describes the difference in its CY 2027 proposed rule fact sheet: "For most services furnished in a physician's office, Medicare pays physicians and other professionals at a single rate based on the full range of resources involved in furnishing the service. In contrast, PFS rates paid to physicians and other billing practitioners in facility settings, such as a hospital outpatient department (HOPD) or an ambulatory surgical center (ASC), reflect only the portion of the resources typically incurred by the practitioner while furnishing the service."

In the office you pay the medical assistant, the exam room, the supplies and the equipment, and the non-facility rate covers them. In a hospital department those costs belong to the hospital, which bills Medicare its own facility claim. Paying you the full office rate there would pay for the same resources twice.

Where the difference comes from: the PE RVU

Every PFS code has three relative value units: work, practice expense and malpractice. The fee schedule lists two PE values for each code. From the CY 2026 PFS final rule: "In calculating the PE RVUs for services furnished in a facility, we do not include resources that would generally not be provided by physicians when furnishing the service. For this reason, the facility PE RVUs are generally lower than the non-facility PE RVUs."

The formula is otherwise identical:

1. Add the RVUs: work RVU × work GPCI, plus the setting's PE RVU × PE GPCI, plus malpractice RVU × malpractice GPCI.
2. Multiply by the conversion factor for the year (33.4009 for non-QP clinicians in 2026; see the [conversion factor guide](/guides/medicare-conversion-factor-2026)).
3. The result is the allowed amount for that locality and setting, before any modifier or multiple-procedure adjustments.

Here's 99214 priced in the facility setting. Work and malpractice match the office values; only the PE bar is smaller:

For the full RVU walkthrough, see what an RVU is, or price any code at your ZIP in the RVU calculator.

Sources: CY 2026 PFS final rule, 90 FR 49266 (PE methodology; indirect PE allocation finalized at 90 FR 49296); CMS fact sheet, CY 2027 PFS proposed rule (July 14, 2026); Medicare Claims Processing Manual, Pub. 100-04, ch. 12, §20.4.2 (Rev. 12823). Verified October 6, 2026.

Which settings pay which rate

CMS ties the rate to the POS code: "The rate, facility or nonfacility, that a physician service is paid under the MPFS is determined by the Place of service (POS) code that is used to identify the setting where the beneficiary received the face-to-face encounter" (ch. 12, §20.4.2).

The full list with CMS's names is in our place of service codes guide.

A procedure example: joint injection

A joint injection or aspiration (20610) is a common office procedure with a zero-day global period. In the office the practice supplies the tray, the needle, the drape and the assistant's time; in a hospital outpatient department the hospital does. The rate panel below starts at the office rate; switch it to facility to see the drop.

Now try the same injection by place of service:

Services that pay the same in every setting

Some codes show one rate whatever the POS:

• Outpatient therapy. Physical, occupational and speech therapy services are paid at the non-facility rate "regardless of whether they are furnished in facility or nonfacility settings," as are all CORF services (ch. 12, §20.4.2). See the physical therapy billing codes guide.
• The professional component of diagnostic tests. For a test billed with modifier 26, "the facility and nonfacility payment rates are the same – irrespective of the POS code on the claim."
• Codes whose two PE values are equal, such as the annual wellness visit codes G0438 and G0439.

What changed in 2026

The PE methodology splits each code's costs into direct PE (clinical labor, disposable supplies and medical equipment) and indirect PE (overhead such as office space, scheduling, coding and billing), and part of the indirect PE is allocated in proportion to work RVUs. Until 2026 that work-based allocation was the same in both settings. In the CY 2026 PFS final rule, CMS finalized "our proposal to reduce the portion of the facility PE RVUs allocated based on work RVUs to half the amount allocated to non-facility PE RVUs beginning in CY 2026" (90 FR 49296), reasoning that facility-based practitioners, many employed by hospitals, carry less practice overhead.

The effect was lower facility rates and higher non-facility rates for most codes, with the change applied in one year rather than phased in. Services billed with modifier 26 weren't affected. In the CY 2027 proposed rule (July 14, 2026), CMS asked for comments on whether the facility/non-facility differential is still appropriate and proposed applying the same indirect PE treatment to visits for patients in a Part A SNF stay. Those are proposals only.

Comparing your office and facility rates for a whole code list is what a fee sheet is for.