Increased concern for rising health care costs in the United States has led to the passage of legislation to reform physician payment for Medicare services based on resource inputs. In January 1992 the Health Care Financing Administration began implementing the new law, which replaces the existing Medicare system of physician payment with a fee schedule based on the resource-based relative value scale (RBRVS). We summarize the methods and data used to derive the RBRVS for urology. A national random sample of 115 practicing urologists completed structured telephone surveys to provide ratings of physician time and work required before, during and after most frequently performed urological services. Subsequent survey cycles with urologists provided further refinement. Urologists then participated in a cross-specialty physician panel to link services from all specialties onto a common scale. This common scale was adjusted for geographic differences in practice overhead costs and malpractice insurance premiums. A monetary conversion factor, determined by the Health Care Financing Administration, was then applied to convert the RBRVS into a Medicare fee schedule. The merits and demerits of the scientific process used to develop and maintain the relative value scale are extensive. While statistically valid and reproducible, the study results have been altered in the political arena. The results and impacts of the new Medicare payment system on urology will be significant, although it is not yet clear how urological practice will be affected. Although faring better than most surgical specialties, urologists stand to lose approximately 8% of their Medicare income when the new fee schedule is fully implemented. There will be relative gains for evaluation and management services and losses for most invasive procedures.