How Doctors Are Paid Today: Understanding

Relative Value Units (RVUs)

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Mary Pat Whaley, FACMPE, CPCManage My Practice, LLC

www.managemypractice.com

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There was, however, a need to find a “better” way of paying for medical services due to:

•Wide geographic region-related variations in fees.•A rapid rise in payments.•Payments not reflecting the resources used.•The disparity between physicians in different specialties receiving different payments for the same service.

In The Beginning…it was typical for insurance companies to pay physicians what each payer considered “usual and customary” or market-rate.

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December 1985The Harvard National RBRVS Studyis initiated.

RBRVS was created at HarvardUniversity School of Public Healthin their national RBRVS study from December 1985 and published on September 29, 1988. William Hsiao was the principal investigator who organized a multi-disciplinary team of researchers, which included statisticians, physicians, economists and measurement specialists, to develop the RBRVS.

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December 1985The Harvard National RBRVS Studyis initiated.

RBRVS stands for: • Resource-Based

• Relative• Value

• Scale

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September 1988Harvard submits Phase I of the RBRVS Final Report to the Health Care Financing Administration (HCFA) – now called CMS (Centers for Medicare andMedicaid Services.)

December 1989President George Bush signs the Omnibus Budget Reconciliation Act of 1989, enacting a physician payment schedule based on an RBRVS.

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November 1991Initial Meeting of the AMA/Specialty Society RVS Update Committee (RUC) takes place: RUC Charter documents are created; RUC is approved for the formation of the Research Subcommittee, RUC Advisory Committee, and Health Care Professionals Advisory Committee.

January 1992The Medicare RBRVS is implemented.

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The relative value for each medical service provided by a physician is composed of three distinct parts:

A physician work component that measures the time, skill, and intensity associated with the service provided - this component accounts for 54.5% of a service's relative value.

Digging Down Into the Relative Value Unit (RVU) 1

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Digging Down Into the Relative Value Unit (RVU) 2A practice-related expense component that

measures average practice expenses such as office rents and employee wages and that varies on a code-by-code basis depending on whether the service is performed in a facility or non-facility setting - this accounts for 42.3% of a service's relative value.

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Digging Down Into the Relative Value Unit (RVU)

A malpractice expense component that reflects average malpractice insurance cost - this accounts for 3.2% of a service's relative value

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Physician services are reported using the Current Procedural Terminology (CPT) coding system. Each CPT code has the three components and each component has an RVU. The sum is the total RVU for that CPT code.

CPT codes, descriptions and other data are copyright 2012 American Medical Association. All rights reserved. CPT is a registered trademark of the American Medical Association (AMA).

Digging Down Into the Relative Value Unit (RVU)

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Adding the three portions together equals the Total RVU.

Work RVU wRVU+Practice Expense RVU + PE RVU+Malpractice Expense RVU + ME RVU Total RVU Total RVU

Digging Down Into the Relative Value Unit (RVU)

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Digging Down Into the Relative Value Unit (RVU)

For example:

99213 = Established patient office visit, level 3

wRVU = .97PE RVU = 1.10ME RVU = .07TOTAL RVU = 2.14

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Digging Down Into the Relative Value Unit (RVU)

Q: How do RVUs translate into the physician payment?

A: The Total RVU is multiplied by a conversion factor. Medicare has one conversion factor and other payers use different conversion factors. For example, 99213 is 2.14 Total RVUs x 2013 Medicare conversion factor of $34.0320 = Medicare payment of ~$72.83. Note that this payment will vary slightly based on locality.

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A History of the Medicare Conversion Factor

1992....$31.001993…. $31.961994....$33.711995....$36.381996....$35.411997....$35.761998…. $36.681999…. $34.732000…. $36.612001…. $38.252002…. $36.19

2003….$36.782004….$37.332005….$37.892006….$37.892007….$37.8972008….$38.0872009….$36.062010….$36.872011….$33.972012….$34.032013….$34.0320

A Recap of Payments to Physicians Through the Years:

1980s…………….... Usual & Customary1990s……………… RBRVSIntermittently…….. Capitation2000s……………… Concierge2013……………….. Pay for Performance

Value-based PaymentsDirect Pay Models

Tomorrow………….??????

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Questions? Please contact:

Mary Pat Whaley, FACMPE, CPCPractice Management Consultant

Manage My Practice, LLC(919) 370-0504

marypat@managemypractice.com

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