The Basics of Making RVUs Work for Your Medical Practice

July 1, 2014

Knowing how to calculate RVU values is critical if you are going to apply them to any other applications. Here's a primer for your medical practice.

RBRVS stands for Resource-Based Relative Value Scale and it's important to understand what the name means. The first two words tell us that the values assigned within the database measure the amount of resources consumed and not any particular cost, as some folks think. In fact, numbers associated to any given procedure within the database have no financial value at all. That comes to play only after the assignment of the conversion factor, which I will discuss shortly. The last three words describe the nature and characteristics of RBRVS in that relational databases depend upon a given data point within the database to assign values to the others.

So, for example, a total relative value unit (RVU) value of 4 means that the resources consumed in delivering that service are four times as much as a procedure with a value of 1. It's really that simple. It gets more complex, however, when broken down into its component structure, which is the basis of this post.

RBRVS is the name given to the database but the components hold the actual values and there are three of them; the work RVU, the practice expense RVU, and the malpractice expense RVU. These RVUs are the standard units of measurement within the RBRVS database.

Work RVU

The work RVU is perhaps the best known and most-often utilized component. The work RVU makes up around 53 percent of the total RVU across all procedures with RVU values. It is calculated based on an estimate of time and effort expended by a provider in performing the procedure or delivering the service associated to the specific procedure code to which the RVU values are assigned. For example, a 99213 (office/outpatient visit; established patient) has a work RVU of 0.97. A 99203, the same level for a new office visit, has a work RVU value of 1.47, meaning that it is assessed about 50 percent more time and effort than the 99213. It is important to note that not every procedure has a work RVU and that is because those procedures may not involve the direct work effort of a physician or other provider.

Practice Expense RVU

The practice expense RVU is made up of six different cost centers, including nonphysician salaries, lease and rent, consulting and professional services, etc. Interestingly, because this is a true resource-based model, it also uses the same time metrics that are used to assign work RVUs, with the addition of assigned expenses. The work RVU accounts for, on average, 44 percent of the total RVU value.

Malpractice Expense RVU

The third component is the malpractice expense RVU and as it only accounts for 3 percent of the total, it rarely is accounted for on its own. The truth is, it has nothing to do with malpractice expenses and is only used when calculating the total RVU.

Here's the twist: While you can just add the three together to get the total RVU, that's not how Medicare sees it. CMS applies a geographic adjustment factor (GAF) to each of the component RVU values and then adds them together to get the total geographically adjusted RVU - the value that is used to calculate the Medicare fee for that specific geographic location. As you might guess, there are three GAF components as there are three RVU components, each called a geographic practice cost index (GPCI) and they are named the same as the RVU components. To get the geographically adjusted total RVU, you first factor each RVU by the associated GPCI and then get the sum of the products.

The formula looks something like this:

(RVUw * GPCIw) + (RVUpe * GPCIpe) + (RVUmp * GPCImp)

Finally, to get the Medicare payment amount, multiply the current total geographically adjusted RVU times the current conversion factor. For 2014 (so far), that is 35.8228. This means that, for each RVU, CMS allows approximately $35.82. For our example of the 99213, assuming that the geographically adjusted total RVU is 0.97, Medicare would allow $34.75.

While the calculations may seem a bit tedious, knowing how to calculate RVU values is critical if you are going to apply them to any other applications. For fee scheduling, cost accounting, physician productivity, even for compliance risk, every practice should be prepared to create their own RBRVS analysis and understand what the results mean.

Frank Cohenis director of analytics and business intelligence for DoctorsManagement. He is a healthcare consultant who specializes in data mining, applied statistics, practice analytics, decision support, and process improvement. Cohen is also a member of the National Society of Certified Healthcare Business Consultants. E-mail him here.