Summary: Do you understand Relative Value Units (RVUs) as they relate to Medicare reimbursement? Is your physician compensation model based upon RVUs or a derivative thereof?
What is an RVU?
RVU stands for Relative Value Unit and is currently used by Medicare to determine the amount of reimbursement to providers. RVUs are basically a way of standardizing and comparing service volumes across all continuums. Traditionally reimbursement has predominately been based upon volume. The more services you provided, the more you earned. While this has served as a standard for many years, volume isn’t the end-all, be-all. Other factors such as acuity and skills required to perform the service have risen to the forefront. The key concept of RVUs is “relative value”. In theory, a physician who performs 3 complex surgeries would have a higher RVU than a primary care physician who sees 3 patients for wellness visits. In this example, the surgeon would receive more reimbursement.
How are RVUs calculated?
There are 3 components or separate calculations required to calculate RVUs – RVU, GPCI, and a Conversion Factor:
Relative Value Units (RVUs)
- Physician work RVU (work RVU) – this is the combination of time and acuity for each service based upon individual CPT codes.
- Practice Expense RVU (PE) – these are the expenses that go into running the practice aside from the physician time. They include things such as rent, equipment, supplies, and staff other than physicians.
- Malpractice RVU (MP)– these are costs associated with professional liability expenses.
Geographic Practice Cost Indices (GPCI)
GPCI is used to differentiate reimbursement based upon geography. For example, the GPCI could be higher for a metropolitan city than it would for a rural area. The GPCI is calculated for each of the RVU calculations above (physician work, practice expense, and malpractice).
This component converts the RVU to a dollar unit or the amount of reimbursement.
RVUs are additionally calculated differently depending upon whether the service is facility or non-facility based. Facilities can include settings such as inpatient, outpatient, and emergency rooms. Non-facilities are generally free-standing physician practices.
According to CMS, the 2014 RVU calculations are as follows: