Understanding Relative Value Units

The Role of RVUs in Medical Bills

what does rvu stand for
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Doctors usually are compensated based on a combination of salary plus relative value units, or RVUs. RVUs are based on how much work is required to treat a patient. Understanding this concept can help you if you receive a bill for medical treatment and are trying to understand where some of the numbers that determine what you're being charged come from.

Compensation Based on Volume of Work

RVUs represent the amount of work a physician must do to treat a patient. For instance, 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 typically will charge more for the same amount of time spent operating on a patient than an internist will for a check-up. In other words, a surgical procedure will yield a higher RVU and a higher incentive. 

Physicians what are paid incentives based on the amount of revenue generated run into similar problems. What happens when the patient is self-pay or the patient is underinsured? With the RVU method, the physician will get paid regardless of the financial or insurance status of the patient.

There are many factors involved in calculating RVUs. For instance, the medical center or hospital where a doctor provides treatment may offer an RVU rate that's different from similar facilities. The method of determining additional compensation also may vary. Some facilities may set an RVU threshold that providers must achieve prior to receiving any payout.

While RVUs have been popular, especially from the standpoint of recruiting new medical staff, there is a strong possibility that in the future this system will be replaced with a pay-for-performance system. 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.

Calculating RVUs

Here are the steps used to figure out relative value units:

  • Determine the RVU for each service provided based on the CPT or procedure code. CPT codes are developed by the American Medical Association to identify the codes most often used by physicians.  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 equal to 1 RVU and 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)] and the incentive for 99211 would be $45.00 [1.5 (RVU) x $30.00 (rate)].
  • Determine the threshold for receiving an incentive, if using the salary plus RVU compensation model. For instance, 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.

    How Offices Determine the RVU

    The rate for each RVU is just an example. In order to determine the compensation paid for each RVU, each medical office must factor in several elements by answering considering the following:

    1. How much skill, expertise, and effort does a physician need to adequately treat a patient for each CPT?
    2. What does the fee schedule look like? And how much does the medical office expect to receive in reimbursement for each CPT code? 
    3. Will a percentage of the expected revenue be used to determine the RVU rate?
    4. What is a competitive compensation for physicians receiving compensation based on productivity?
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