Understanding Relative Value Units

The Role of RVUs in Medical Bills

what does rvu stand for
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RVU stands for relative value unit. and it is used specifically in the United States Medicare system. RVUs are factors used to determine physician fees for services provided to people insured by Medicare B (which provides outpatient medical coverage). Understanding this method of billing can help if you receive a medical bill and want to understand how your costs are calculated.

Doctors are usually compensated based on a combination of salary (a set amount paid out over a year's time) plus relative value units (RVU). In general, when you receive a bill, the HCPCS (Healthcare Common Procedure Coding System) code is what will be listed on the bill—the RVU is one of the factors that goes into computing the bill.

The Three Types of RVUs

RVUs are calculated for three aspects of medical care:

Physician work RVUs account for amount of work a physician must do to treat a patient. For example, a surgical procedure requires a higher level of time, skill, and intensity compared to a simple well-patient visit. Based on this model, a surgeon will typically charge more for the work they did operating on a patient than a primary care doctor will for a check-up. In other words, a surgical procedure will yield a higher RVU. With the RVU method, the physician will get paid regardless of the financial or insurance status of the patient.

Practice expense RVUs account for the labor and expenses of the practice itself, like the office, staff, materials, and equipment. Generally, medical services that happen in a hospital have a lower practice expense RVU than those that happen in offices or clinics, because hospitals will incur some expenses themselves.

Professional liability insurance RVUs account for the cost of malpractice insurance for the physician and/or the practice.

Each of the three RVUs are also adjusted because costs can vary greatly based on the geographic area where you receive medical care. These adjustments are based on the geographic cost price index and are called GPCIs. Every three years, the Centers for Medicare and Medicaid Services updates the GPCI numbers.

Physician work is generally the most changeable aspect of an RVU.

How RVUs Are Calculated

There are multiple factors involved in calculating RVUs. For example, the medical center or hospital where a doctor provides treatment may give an RVU rate that's different from another facility (even one that provides similar services).

The actual cost for the physician’s services is calculated when a conversion factor (CF), dollar per RVU, is applied to the Total-RVU. 

Here are the steps used to calculate relative value units:

  • Determine the RVU for each service provided based on the CPT or HCPCS code: CPT codes are developed by the American Medical Association to identify the codes used for procedures and services provided by physicians. For Medicaid, HCPCS (Healthcare Common Procedure Coding System) are used instead of CPT codes. HCPCS are closely related to CPT codes. They're expressed according to numbers ranging from 90000 to 99999. The lower the code, the less involved the procedure. For instance, CPT code 99210 might be equal to 1 RVU, while code 99211 might equal to 1.5 RVUs.
  • Determine the compensation for each RVU: If the compensation for 1 RVU equals $30.00, then the incentive for 99210 would be $30.00 [1 (RVU) x $30.00 (rate)]
  • Determine the threshold for receiving an incentive: This depends on whether or not the physician is on a salary plus RVU model, or a model that also includes incentives based on total RVUs per month (this is more rare). If on an incentive model, for example, if the threshold for receiving an incentive is 300 RVUs per month, then the physician would receive an incentive for every RVU over 300. If a doctor has 350 RVUs for the month, then the physician would receive an incentive of $1500.00 (50 RVUs x $30.00). If the physician is on a straight commission pay scale, then the compensation for 350 RVUs for the month would be $10,500.00.
  • Include the geographic practice cost index (GPCI): Geographic cost price index is another important factor in calculating RVU. When RVU is calculated, the RVU for each of the three factors is calculated, then multiplied by the GPCI in the area.

How RVUs Can Help You Understand Your Medicare B Bill

When you receive a bill and want to understand it better, you will first look up the HCPCS codes listed on your bill. Doing so will let you know what service or procedure the HCPCS code represents. Look up HCPCS codes on the Centers for Medicaid and Medicare Services website, which has a "Physician Fee Schedule" look-up service.

Type the HCPCS code listed on your bill into this website. You can also choose to look up the pricing information, payment policy indicators, RVUs or GPCIs (or all of the above) associated with that HCPCS. Doing this will help you learn how much Medicare pays a doctor and a facility in your area for that service or procedure. This will better help you understand what you are paying on your medical bill and why.

The Future of RVUs

While RVUs have been popular, there is a possibility that in the future this system will be replaced with a pay-for-performance system. Not all physicians or practices find this system useful or beneficial to patients.

Many healthcare trends forecast that healthcare costs eventually will not be based on quantity or productivity, but rather on quality.  Patient satisfaction, safety, and quality of care are beginning to influence the way health care providers are being paid.

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Article Sources

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