Practice expense for all new and revised CPT codes is reviewed and evaluated through the American Medical Association's Practice Expense Subcommittee. Reimbursement for medical procedures, as defined by CPT codes, is divided into three components — physician work, practice expense and malpractice expense.
The physician work component became resource-based (reimburse for the actual cost associated with providing a service) under a Relative Value System (RVS) in 1992. Congress also mandated that the practice expense component become resource-based, with a four-year gradual transition, beginning in 1999. With this transition, CMS designed a two-pronged process for data collection.
The first effort by CMS was a very complex survey that failed due to an inadequate response from the survey participants. The second effort by CMS was to use the Clinical Practice Expert Panels (CPEPs). These panels included representatives from all major medical specialties who identified "direct inputs" (non-physician clinical labor, medical supplies, procedure specific equipment and overhead equipment) incurred in performing medical procedures represented by CPT codes. Congress mandated that this direct cost data be validated. In response to this mandate, CMS reassembled the CPEPs to review and evaluate data they previously developed. To this need, the AMA RUC developed a subcommittee called the Practice Expense Advisory Committee (PEAC), which was primarily responsible for the analysis and refinement of the original CPEP data. Through its last meeting in March 2004, the PEAC provided recommendations for over 7,600 codes. The PEAC was replaced by the Practice Expense Review Committee (PERC) and now those PE-related activities are addressed by the AMA RUC PE Subcommittee.
