The CMS in 1992 set a national standard to calculate how much to pay physicians based on the amount of time and effort they spend treating patients for services and procedures covered under the Physician Fee Schedule. Called relative value units (RVUs), they’re an important part of medical billing and revenue cycle management and help determine reimbursement rates for Medicare and insurance companies. 

RVUs are a component of the Medicare resource-based relative value scale (RBRVS), a system the American College of Emergency Physicians (ACEP) describes as being used for “describing, quantifying and reimbursing physician services relative to one another.” More than 75 percent of public and private payers have adopted components of the RBRVS to pay physicians.

The RBRVS consists of three components of physician services:

• Work RVUs, which represent about 50.9 percent of the total RVUs for each service and account for the time, technical skill and effort, mental effort and judgment and stress to provide a service.
• Practice expense RVUs, which represent approximately 44.8 percent of the total RVUs for each service and account for the nonphysician clinical and nonclinical labor of the practice, as well as expenses for building space, equipment and office supplies.
• Professional liability insurance (malpractice) RVUs, which account for the cost of malpractice insurance premiums and of which expense relative values amount to approximately 4.3 percent of the physician fee schedule payment.

Conquering the Calculation

Like many equations that require math, calculating RVUs isn’t the easiest process. Using a tool designed specifically to accomplish this task, though, can simplify it and save physicians and medical practices time and money.

Before calculating an RVU, it’s essential to know CPT codes and the three parts of the Medicare Physician Payment System: Geographic Practice Cost Indices (GPCI), RVU and conversion factor. The CY 2020 conversion factor is $36.09, up from $36.04 in 2019.

Medicare institutes an RVU for each CPT code to determine reimbursement. ACEP offers a succinct description and corresponding equation for how to figure an RVU:

The reimbursement for a given CPT code is determined by taking the total RVUs for the service and multiplying by the conversion factor. In addition, a geographic adjustment factor (GAF) known as the Geographic Practice Cost Index (GPCI) is applied to account for locality cost differences for work, practice expense and liability coverage around the nation. 

(Work RVU X Work GPCI) + (Practice Expense RVU X PE GPCI) + (PLI or Malpractice) RVU X PLI GPCI)] = Total RVU X Conversion Factor = Medicare payment 

To calculate a“cost per RVU” measure, the formula is: Cost per RVU = (Sum of total expenses) / (Sum of total RVUs).

Providing Perks for Physicians

For many physicians, RVUs are factored into their compensation and demonstrate their value to the practice, hospital or health system that employs them. By tracking RVUs, they can compare their productivity level to that of their colleagues, peers and industry benchmarks. In healthcare, high productivity can result in less waste, decreased costs and increased patient satisfaction.

Tracking RVUs is especially beneficial for doctors who want to grow their practice or take a more active role in the business side of their practice. It provides fact-based documentation of the work they perform and enables them to track patient population, cost accounting, gross charges, net collections and areas of revenue loss.

Optimizing Hospital and Health System Operations

Through a cost analysis based on RVUs, hospitals and health systems are able to establish productivity-based compensation, evaluate and renegotiate payer contracts, evaluate procedures and services and set practice fees. By updating RVUs on a quarterly basis, they have enhanced capability to forecast staffing needs, measure their efficiency and compare physician performance to productivity objectives.

RVUs can be utilized to award physicians for extra effort and allow hospitals to compare clinicians with their peers and promote transparency, accountability and management efficiency. A recommendation for physician practices is to measure their providers’ productivity-per RVU relative to one another by calculating each provider’s revenue and RVUs as a percentage of the practice’s total revenue and RVUs and dividing the results.

Having a centralized location for custom RVU analytics and analogous reports provides a practical and invaluable option for healthcare providers to regularly monitor and address physician productivity. The maxRVU dashboard supplies the ability to pull daily, weekly or monthly RVU totals, view charges and codes per provider or hospital and export all applicable data to a spreadsheet.

Start your free trial of maxRVU to see how easy it is to make your enterprise more profitable.