Relative Value Units (RVU): Independent Physicians Need To Know

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Relative Value Units (RVU) Independent
Physicians Need To Know
For managing finances, computation of values or
formula is used in the United States Medicare for
reimbursement of independent physicians. Known as
Relative Value Units (RVUs), it was devised in
1988 to calculate the work rendered by physicians
for treating patients. It differs chiefly from
physician to physician in terms of services
rendered for e.g. the RVU of a patient visit
will be lower than an invasive surgical procedure
conducted on a patient. However, RVUs are useful
in not just valuation of work/determining
compensation but also to decide if a buyout offer
from a hospital/clinic is worthy or not. RVUs
are decided by Medicare on a number of factors.
It decides how much will each physician be
reimbursed on the basis of services and
procedures listed under the Physician Fee
Schedule and those that are assigned CPT code
numbers (reviewed every five years). Further,
each service is determined by the physicians
work, his/her practice expenses, and malpractice.
Each of the three aspects is assigned an
RVU. How Are Relative Value Units
Calculated? Physicians Work (RVUw)
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Relative Value Units (RVU) Independent
Physicians Need To Know
This constituent takes into account the time
(taken prior, during, and after the service),
training, technical skill, the stress or mental
effort, judgment, and intensity required to
perform a service. This usually accounts for
almost 50-53 of the total RVU where time is 70
and effort is 30 also, a global fee comprises
the predicted physician inputs used in the global
period (from the day of the surgery to the
follow-up day). Costs (RVUpe) This component
takes into account the rent, office expenses,
medical supplies and equipment, staff
administration, administrative payroll, and
benefits, required to run the practice almost
45 of the total RVU. Also, this differs for
physicians performing the services in a facility
as here the facility incurs the costs of
equipment, etc. Hence the physicians are given a
facility-based practice expense RVU which is
usually lower than the office-based practice
expense for the same service. (For example, if a
diagnostic colonoscopy is provided in the
physicians office, the physicians payment would
be based on a practice expense RVU of 6.78 if
the procedure is performed in a facility, the
payment would be based on a practice expense RVU
of 1.94. nhpf.org)
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Relative Value Units (RVU) Independent
Physicians Need To Know
Malpractice Expense (RVUmp) This liability
varies (e.g. it could be higher for obstetrics
than a primary care physician). These three
factors are then multiplied by geographical
adjustment Geographic Price Cost Index (GPCI)
which gives the cost for a particular location.
This is then converted to a dollar amount by
multiplying it with a conversion factor
determining what Medicare or HMO has to pay for
any service/procedure, and is location-specific.  
The Formula (RVUw x work GPCI) (RVUPE x PE
GPCI) (RVUMP x malpractice GPCI) x CF for the
year in question. Why Were Relative Value Units
(RVUs) Created? RVUs were created to bring about
uniformity in the payment system and reduce the
upward trend. Further, from a practice management
perspective, RVUs were created as they are (the
language) used by most payers for contracts and
reimbursements.
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Relative Value Units (RVU) Independent
Physicians Need To Know
RVUs are also used to pay for multi-physician
practices that can determine how much to pay
physicians based on straight productivity (the
practice multiplies the work RVUs with its
conversion factor) and a salary plus a bonus tied
to a number of RVUs that have been generated over
a base number (especially for adding productivity
incentive) to arrive at the reimbursement number.
It is also imperative that RVUs aid in recruiting
and retaining physicians. As RVUs are validated,
they have gone to become the customary
measurement for cost benchmarking. They are
consistent, formula-based, and the standard and
acceptable norms for setting fee-for-service
payments by Medicare and almost all other private
insurance payers. Medical Billers and Coders
(MBC) is a leading medical billing company
providing complete revenue cycle services. To
know more about our medical billing services,
contact us at info_at_medicalbillersandcoders.com/888
-357-3226.