What Are Relative Value Units (RVUs) and How Can They Help Your Bottom Line?

Is your private practice struggling to operate in the black? Perhaps you feel caught between a growing client caseload and continually delayed insurance reimbursements—regardless of the mountain of compliance paperwork your office generates every day. These are tough financial times for private practices, and the ability to turn a profit becomes more challenging every year.

However, there is one identifiable factor that can restore profitability to your private practice: relative value units or RVUs. Medicare’s Resource-Based Relative Value Scale (RBRVS) system assigns an RVU amount to each CPT code, and they’re used to measure a physician’s productivity during the workday. With 9 out of 10 hospitals now incorporating RVUs to determine the dollar amount of a physician’s compensation, it’s essential that private practices get on board and learn how this calculation can bolster their bottom line.

Making sure your practice carefully tracks the amount of RVUs per client visit is an essential part of receiving full billing reimbursements. And accurately evaluating physician productivity and practice costs can provide consistency and predictability to your monthly bottom line. In other words, using RVUs to analyze the financial viability of your practice will remove those variables that cause confusion when it’s time to set your fees for the coming year. Leora F. Ardizzone, a healthcare attorney in Long Island, states, “The RVU eliminates any risk to the physician related to employer negotiated rates, captivated fees, reductions in reimbursement rates or failure or delays in collections.” In essence, RVUs have become the standard measurement for reimbursement analysis.

Traditionally, there have been a number of ways to calculate physician productivity and compensation. Most notable among these are volume-based metrics attached to the number of clients physicians see or the amount of revenue they bill per office visit. However, with government insurance programs taking the lead, physician productivity and compensation are moving toward models based on RVUs, which are most often derived from three basic components: the physician’s work, the expenses of the physician’s practice, and professional liability insurance.

For the most part, RVU physician work values are determined by The Centers for Medicare & Medicaid Services (CMS), which seeks input from the 29-member American Medical Association/Specialty Society Relative Value Scale Update Committee (RUC). Most of the RUC members are chosen by a major physician specialty society. After hearing testimonies from specialty groups on how much time it takes, the level of skill required, the level of education/training required, and the practice expense associated with a particular procedure, the CMS assigns an RVU amount for it. And these amounts are re-evaluated every five years.

For example, a well-patient visit would be assigned a lower RVU value than an invasive surgical procedure. Thus, a physician who deals with only a few complex cases could accumulate more RVUs in a day than a physician who handles 10 less complicated cases. Using RVUs rather than the number of client visits to calculate physicians’ billing rates will provide a more accurate picture of the work being measured.

Other productivity and quality measures can be used to determine a physician’s overall compensation and productivity. But with government insurance programs and hospitals both using RVUs, it would be prudent for private practices to adopt this up-and-coming method of compensation calculation as well.

While there are a plethora of RVU formulas being used in employment contracts to determine a physician’s salary, many medical billing companies now offer their own specialized RVU algorithms to help ensure that physicians are being paid fairly and accurately for the services they provide.

Is your practice operating in the red? How might an in-depth analysis of your physicians’ RVUs help your practice turn a profit in 2013?

 

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