Rachael Brashears, DO, MBA
PGY3, University of Missouri School of Medicine
The business side of medicine lives in a world of acronyms. One of the most important acronyms that residents need to become familiar with as we transition from training as residents to practicing as attendings is the Relative Value Unit (RVU). Medicare uses the RVU, along with the Geographic Practice Cost Indices (GPCI) and a Conversion Factor (CF) to calculate the payment a physician will receive for a given service. Medicare describes this fee schedule as a Resource-Based Relative Value Scale (RBRVS) and utilizes it to determine the payment amount for more than 7,500 physician services that are described or billed using Current Procedural Terminology (CPT) codes1. The purpose of this article is to explain the subtypes of RVUs and how to calculate reimbursement using the RVUs, GCPI, and the CF, see figure 1.
Figure 1. Total physician reimbursement is determined by the sum of the Physician Work Relative Value Unit, Practice Expense Relative Value Unit and Malpractice Expense Relative Value Unit, each adjusted for by the Geographic Practice Cost Index, and ultimately converted to a dollar amount using the Conversion Factor. Image obtained from: https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/MedcrephysFeeSchedfctsht.pdf
The Physician’s Work RVU takes into account the technical skill, the stress related to, and the mental and physical effort it takes to perform a given service or procedure1. It also takes into account the amount of prep time, the time it takes to actually perform the service, and the time it takes the physician to wrap everything up after the service is complete. Altogether, it encompasses your professional skill, medical knowledge, and your time for various services. For instance, the Physician’s Work RVU for CPT code 63685 (inserting a spinal cord stimulator) is 5.192, while the Physician’s Work RVU for CPT code 99213 (low complexity office follow-up visit, approximately 15 minutes) is only 0.973. A service is assigned a higher Physician’s Work RVU to reflect the increased complexity and additional technical skills and effort it takes to perform over other services, thus creating a relative scale. This higher RVU will ultimately translate to increased reimbursement.
Practice Expense RVU’s cover the general overhead expenses of a practice4. This includes labor costs of non-physician clinical staff and nonclinical or administrative staff. It also covers business expenses including medical equipment, office supplies, and the rent for an office space1,5. This RVU will vary depending on the location in which the procedure or service is provided. The location can be categorized as either “facility,” including hospitals, surgical centers, or other ambulatory settings, or as “non-facility,” generally referring to a physician’s office. The practice expense RVU for an office-based service is typically higher than the practice expense RVU for the same service performed in a facility, such as a hospital. The lower RVU value for a facility-based service is based on the fact that when a physician provides a service in a facility, the costs of clinical personnel, equipment, and supplies are typically incurred by the facility, not the physician. Compare this to an office-based service in a private practice where the physician practice does incur all the practice expenses related to the delivery of that particular service, it makes sense that Medicare would reimburse a higher practice expense RVU to the physician practicing in this setting over a facility setting to help offset the associated costs. For example, using a CPT code of 64635 (radio-frequency ablation of a lumbar face), if the procedure is performed in the physician’s office, the physician’s payment would be based on a practice expense RVU of 7.66; if the same procedure is performed in a facility, the payment would be based on a practice expense RVU of 2.306. This difference in RVU value is referred to as the “Site of Service” differential4. Only the practice expense RVU can vary based on the health care setting, the Physician’s Work RVU, and the Professional Liability Insurance RVU (or Malpractice RVU) for a given code remains the same whether the service is provided in the physician office, an inpatient hospital, or any other health care setting7.
The cost of malpractice insurance premiums is accounted for by the Professional Liability Insurance (or Malpractice Expense) RVU. Malpractice information must be weighted both geographically and across specialties because malpractice costs can vary considerably by state and by medical specialty. These RVUs are based on insurance premiums that are reported by each specialty1. Congress requires CMS to review each of the categories of RVUs at least every 5 years and it must develop RVUs for new services8.
RVUs for individual CPT/HCPCS codes can be accessed from the CMS website via the Physician Fee Schedule Look-Up Tool, https://www.cms.gov/apps/physician-fee-schedule/search/search-criteria.aspx. First, select a year. Then under the type of information tab, choose Relative Value Units. Under select HCPCS criteria, choose Single HCPCS Code. Then type in the CPT/HCPCS code for the service/procedure of interest. Under the modifier tab, choose either global or all modifiers and finally click submit. This will give you values for the 3 subtypes of RVUs for a given CPT code. The following link has a list of the most common CPT codes used in a PM&R and interventional pain management clinics: http://thepainsource.com/homepage/cpt-codes-pmr-pain-management-billing-and-coding/
In addition to RVUs, another variable that Medicare uses to determine the final payment a physician will receive for a given service is the Geographic Practice Cost Indices (GPCI). Because things in New York are more expensive than things in St. Louis, the RVU is adjusted for cost factors related to various geographic locations and is updated by CMS every 3 years4,7. The value for the GPCI is relative to 1.000, where 1.000 is considered the national average. For instance, a Practice Expense GPCI of 1.300 indicates that practice expenses in that area are 30% above the national average, whereas a Practice Expense GPCI of 0.700 indicates that practices expenses in that area are 30 percent below the national average8. Each of the 3 different RVU types are multiplied by a separate GPCI factor to get an adjusted RVU for that category. These adjusted RVUs are then added together to get a total adjusted RVU for a given service in a given location, see figure 1. For Instance, the GPCI for the St. Louis Metropolitan in 2017 is 1.000 for the Physician Work RVU, 0.957 for the Practice Expense RVU, and 1.039 for the Malpractice RVU9. Comparing those values to the GPCI values for Manhattan New York: 1.052 for the Physician Work RVU, 1.174 for the Practice Expense RVU, and 1.690 for the Malpractice RVU10, one could see how these higher GPCI values would increase overall reimbursement. This would effectively give a higher reimbursement amount to a physician practicing in Manhattan than a physician practicing in St. Louis who is performing the exact same service. This is intended to counteract the cost of practicing expenses for various geographic locations.
GPCIs for various geographic locations can be accessed from the CMS website via the Physician Fee Schedule Look-Up Tool, www.cms.gov/apps/physician-fee-schedule/search/search-criteria.aspx. Select a year, under the type of information tab choose Geographic Practice Cost Index, under select MAC option choose Specific MAC or Specific Locality. Then use the drop-down menu under MAC to choose your specific location of interest. Click submit and this will give the GCPI information for each of the RVU subtypes for the specific geographic location you chose.
The last variable that contributes to the final physician payment amount is the Conversion Factor. The purpose of this variable is to convert the adjusted RVU total into a dollar amount for reimbursement. The conversion factor is a set dollar amount that is determined by Medicare and is adjusted on an annual basis5. For 2017, the Conversion Factor (CF) has been set at $35.888711 and the CF for 2018 will be $35.9996. This number is multiplied by the sum of each RVU component adjusted by the GPCI for each RVU, see figure 1.
The complex task of calculating physician reimbursement for medical services becomes easier to understand when each of the components of the equation are broken down. Assigning an RVU to Physician’s Work, Practice Expense, and Professional Liability Insurance helps create a universal standard value for each service. Then, to account for cost variances based on geographic location each RVU subtype is multiplied by a GPCI for a given location. Finally, the sum of the adjusted RVUs are converted from an arbitrary number to a dollar amount using the CF. As our health care system starts to focus more on quality of care and as we begin transitioning into a pay-for-performance payment model, look for this payment calculation to include a variable that will adjust payment based on quality indicators in the very near future.
- Coberly, Sally. “The Basics: Relative Value Units (RVUs).” National Health Policy Forum, 12 Jan 2015, https://www.nhpf.org/library/the-basics/Basics_RVUs_01-12-15.pdf. Accessed 23 Aug 2017.
- “Physician Fee Schedule Search.” Centers for Medicare and Medicaid Services, 05 Oct 2017, https://www.cms.gov/apps/physician-fee-schedule/search/search-results.aspx?Y=0&T=2&HT=0&H1=63685&M=5. Accessed 9 Oct 2017.
- “Physician Fee Schedule Search.” Centers for Medicare and Medicaid Services, 05 Oct 2017, https://www.cms.gov/apps/physician-fee-schedule/search/search-results.aspx?Y=0&T=2&HT=0&H1=99213&M=5. Accessed 9 Oct 2017.
- Quan, J. “The Basics of RVUs & RBRVS.” UCSF.edu, 04 Apr 2007, http://medgroup.ucsf.edu/sites/medgroup.ucsf.edu/files/the_basics_of_rvus_and_rbrvs_0.pdf. Accessed 23 Aug 2017.
- U.S. Department of Health & Human Services (HHS). “MLN Fact Sheet: Medicare Physician Fee Schedule.” CMS.gov, Feb 2017, https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/MedcrephysFeeSchedfctsht.pdf. Accessed 08 Sep 2017.
- “Physician Fee Schedule Search.” Centers for Medicare and Medicaid Services, 05 Oct 2017, https://www.cms.gov/apps/physician-fee-schedule/search/search-results.aspx?Y=0&T=2&HT=0&H1=64635&M=5. Accessed 9 Oct 2017.
- Verhovshek, John. “Relative Value Units: The Basis of Medicare Payments.” AAPC: Advancing the Business of Healthcare, 01 Jan 2016, https://www.aapc.com/blog/33228-relative-value-units-the-basis-of-medicare-payments/. Accessed 08 Sep 2017.
- MaCurdy, Thomas, et al. “Final Report on the CY 2015 Update of the Malpractice Relative Value Units for the Medicare Physician Fee Schedule.” CMS.gov, Nov 2014, https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/Downloads/CY2015-PFS-FR-Malpractice-RVU.pdf. Accessed 23 Aug 2017.
- “Physician Fee Schedule Search.” Centers for Medicare and Medicaid Services, 05 Oct 2017, https://www.cms.gov/apps/physician-fee-schedule/search/search-results.aspx?Y=0&T=3&CT=2&C=61. Accessed 16 Oct 2017.
- “Physician Fee Schedule Search.” Centers for Medicare and Medicaid Services, 05 Oct 2017, https://www.cms.gov/apps/physician-fee-schedule/search/search-results.aspx?Y=0&T=3&CT=2&C=100. Accessed 16 Oct 2017.
- “2017 Final Medicare Physician Fee Schedule Analysis Exclusively for MGMA Members.” MGMA-ACMPE, 2016, http://www.mgma.com/Libraries/Assets/Government%20Affairs/2017-Final-Medicare-Physician-Fee-Schedule-Analysis-12-1-16.pdf?ext=.pdf. Accessed 16 Oct 2017.