OBJECTIVE: The Centers for Medicare and Medicaid Services (CMS) assigns a relative weight to those high cost new technology drugs designated with a non-pass-through or expired pass-through payment status. This study examines the conceptual approach of relative weights for drugs and biologicals under the CMS Hospital Outpatient Prospective Payment System (OPPS) and compares this approach to the resource-based level of effort concept initially created for payment to physicians' offices in the U.S. METHODS: The underlying intent of relative value units (RVUs) in the physician's office was to create a hierarchy of resource-based level of effort involved in various types of office-based service delivery. The concept of hospital OPPS was also intended to reflect resource-based services. Thus the OPPS relative weights should be related to resource-based levels of effort. Non-pass-through high cost new technology drugs that are paid separately under OPPS are assigned a relative weight, implying that the payment includes level of effort resources. We postulate these relative weights contain no such level of effort, but instead represent only the pure drug component. This use of the relative weight concept distorts its initial intent. RESULTS: Resource-based methods initially proposed for the hospital OPPS were collected and deconstructed. CMS rationale supporting treatment of non-pass-through high cost new technology drugs paid separately under OPPS was identified. CMS drug payment computation methods were likewise deconstructed and evaluated. The evaluation sought indications of resource-based level of effort applications. CONCLUSIONS: Many researchers and policy makers assume that relative weights equate to level of effort resource consumption in all instances. We cannot find this is so in the case of non-pass-through high cost new technology drugs paid separately under OPPS. It is necessary to draw CMS attention to this issue, as the volume of forthcoming new drugs and biologics means the issue will become increasingly important.