RVUs: The Key to Improving Your Reimbursement and Profitability
Medical practices have been using Relative Value Units (RVUs) since they were adopted by Medicare in 1992. The Resource Based Relative Value System (RBRVS) was created at Harvard University in a national RBRVS study by a multi-disciplinary team of researchers. In 1988, the results were submitted to the Health Care Financing Administration (today CMS) to be used in the Medicare system as a payment methodology. The RBRVS system took effect on January 1, 1992.
In the early years, medical practices only utilized RVUs to understand the Medicare fee schedule. Now the role of RVUs has expanded. RVUs have become the standard measurement in analysis of reimbursement and payer contracts, physician compensation and productivity, and practice staffing and operating costs. RVUs are not impacted by how you set your fees, by how much money you have collected or which payor the patient has or where the service was provided. Using RVUs to analyze your practice removes other variables that can make results confusing.
The calculation of RVUs seems complicated but really is just a sum of three measures that are then multiplied by a conversion factor to create a fee schedule (allowable reimbursement). Total RVUs (TRVU) are calculated for each CPT by adding:
Physician Work RVU (wRVU)
+ Practice Expense RVU (peRVU)
+ Malpractice Expense RVU (mpRVU)
Total RVU (TRVU)
X Conversion Factor (CF)
Fee Schedule (allowable reimbursement)
The Geographic Practice Cost Index (GPCI) is then applied to the allowed reimbursement to adjust for geographic differences in wages, malpractice and practice overhead expenses. In the chart below, you will see how an established patient visit (99213) will be calculated in New York, Arkansas and Ohio. Within the chart you see the TRVUs for 99213 (2.11) and then as you move right in the chart, you can see how the GPCI alters the work, practice expense and malpractice expense RVUs for each of the three locations. These new TRVU calculations are multiplied by the Conversion Factor (CF) resulting in different allowed amounts paid across the United States.
Now that you are comfortable with how the RVUs are calculated and adjusted, we also need to mention the role of modifiers. As you know already, the Medicare fee schedule includes information about modifiers that affect payment (for example, assistant surgeon, 26/TC, bilateral, etc.). These modifiers also impact the RVUs calculated. Often practices forget to adjust RVUs due to modifiers resulting in overstated RVUs. For example, if a surgeon is operating as an Assistant Surgeon and you credit that individual with the CPT’s full RVU value without considering the modifier, then you have overstated the RVUs. Better performing practices analyze RVUs for each CPT code and for each modifier associated with that CPT code, and this does require more work. To understand this more, go to the CMS web page mentioned at the end of this article, look up a couple CPT codes and see how the modifiers change the value of the RVU.
RVUs are very helpful in analyzing reimbursement performance. You can certainly analyze your Medicare reimbursement using RVUs. You can also use RVUs to evaluate reimbursement for all of your other payers. If this is the first time you are using RVUs to analyze reimbursement, I would suggest that you start with a small subset of data – look at RVUs for your top 10 most frequent CPT codes for your top two payers. Once you are clear on what you want to look at and have become more comfortable with the data, you will be ready to analyze a larger dataset. Hopefully you already have an RVU report that is set up within your practice management system.
If you are using Kareo, as you build your standard fee schedule, you can load in the RVU for each procedure code as set by Medicare. This includes the three components of RVU (Work, Practice Expense, and Malpractice). Once RVUs are loaded into your standard fee schedule, you can use advanced productivity reporting to compare the relative productivity of providers within your practice in a manner that is independent of the insurance company that was billed. This report can be customized by service location, by CPT code and can differentiate wRVUs vs. TRVUs. Additional analysis can be done by downloading data to Excel.
To analyze your reimbursement by payer, you want to divide total collectionsby TRVUs generated for each payer that you are analyzing. You want to include collections from the payer and from the patient on those payer’s claims. Your analysis will be improved if you can exclude CPT codes that do not have an RVU assigned.