What Can RVUs Do for You?

Imagine you are an administrator tasked with ensuring each provider in your organization has reached productivity targets. You could look at the amount each clinician has billed over the past year, or how much revenue every individual has generated to find your answer; unfortunately, neither would paint an accurate picture. Fees charged don’t necessarily correspond with the amount of work needed to perform a service because market pressure, or other unseen factors, can affect the charge amount. Reimbursement is not an accurate guide either, because it fluctuates according to the allowed amount of each payer.

Breaking down services into units of work is the most accurate way of determining productivity – and these units of work are called RVUs. At first glance, RVUs can seem a bit daunting to understand because there are several factors that determine how many RVUs are assigned to a CPT code, and the reimbursement for each RVU. Therefore, we’ve created this easy-to-use beginner’s guide to help de-mystify what they are and how to use them. 

What is an RVU?

RVU stands for Relative Value Unit (RVU) and is a useful measurement to determine productivity and reimbursement for a healthcare provider’s work. Each CPT used by Medicare is composed of three distinct parts: 

  • labor (work RVU) – includes four components: time, technical skill, medical decision making and risk to the patient
  • practice expenses (PE RVU) – based upon average costs 
  • malpractice costs (MP RVU) – based upon average costs 

All components of an RVU are easily found using the Physician Fee Schedule Search at CMS.gov. 

To calculate the base RVU, which is the basic compensation rate, combine the three components: 

W RVU + PE RVU + MP RVU = Base RVU

The base RVU is then multiplied by the Geographic Practice Cost Index (GPCI).  This accounts for the geographic differences in practice expenses and malpractice costs.

Base RVU x GPCI = Total RVU

To convert the total RVU into a dollar amount, multiply the total RVU by the conversion factor (CF), which is updated yearly by CMS and included in the CMS fee schedule search.

Total RVU x CF = Dollar Value

Voila! Now you know the dollar value of the work for the CPT code. 

How are RVUs useful?

Reimbursement comparison

RVUs create uniformity in Medicare reimbursement. However, many practices find them useful to compare one payer’s compensation against another’s for the same service. Calculate your practice’s cost per RVU by dividing your total expenses by total practice RVUs, which will yield a dollar amount per RVU specific to your organization. The dollar amount can be compared to the reimbursement per RVU from each payer. After an analysis of cost vs. reimbursement, you have the information you need to make educated decisions about which payers you would like to keep with your practice, and which ones to re-think. 

Provider productivity comparison

Practices use RVUs to analyze provider productivity.  Many practices use work RVUs to calculate their physician compensation.  Typically, the practice multiples the total work RVUs generated by a provider by a set practice-generated CF to determine the provider’s compensation.  

A base RVU productivity target can also be set by the practice for their providers.  RVUs above this target can be converted into a bonus amount.

Evaluation of potential upside or downside

In today’s environment of constant health system acquisition of private practices and each other, knowledge of your RVU performance can come in handy. Often, compensation and bonuses are based upon RVUs. Knowledge of RVU performance can help you evaluate if the proposed terms are realistic and your likelihood of bonusing under the new structure.

RVU pitfalls

Patient mix

After taking account of all the ways RVUs are used to determine financial productivity, it is essential to understand circumstances that could affect RVU calculations. One factor to bear in mind is the patient population. If your practice decides to use the revenue generated by each provider to determine compensation (rather than using a practice total), providers that see larger amounts of lower-reimbursed patients will suffer. For example, physicians that practice in a clinic that sees a large number of Medicaid patients will not generate the same amount of revenue as privately insured patients at another location, and will make less money. 

Medical coding and billing practices

If there is a provider who  does not agree with work RVU calculations, consider auditing claim CPT coding. Incorrect CPT coding may be the source of the deflated RVUs. For example, there are two physicians in the same location, practice the same specialty, and see roughly the same number of patients every week. However, one physician’s work RVUs are 15% less than the other. Upon closer inspection, it is noted that physician #1 is billing a lot of 99214 evaluation and management (E/M) codes, while physician #2 is billing mostly 99213s. It is also noted that the patient mix is essentially the same (one physician doesn’t see all the patients with multiple comorbidities or those requiring more advanced decision-making). However, it is recognized that Cindy is the lead coder for physician #1 and Rose is the coder for physician #2. 

Evaluation of coding practices is in order. Although Cindy and Rose are following the guidelines for E/M coding, one of them may not be doing it properly, resulting in lower (or higher) RVUs and affecting provider reimbursement. In addition to E/M coding practices, audits of procedures can also reveal deficiencies resulting in lower RVUs and consequently reducing overall provider and practice revenue. 

In addition to auditing the coders, evaluation of documentation is also in order. It could be that physician #1 is merely providing more information about visits, which allows Cindy to code more accurately and capture more revenue. 

Ensure you are compensated fairly for the work you do

Once identified, medical coding and billing issues can often be solved with proper education. Even if you use third-party coding, patient-facing providers need to understand coding techniques because the revenue cycle is a team effort.

Quality coding only happens when clinicians provide quality documentation. Providers that understand accurate and complete documentation will provide the building blocks of clean claims which accelerate payments, as well as ensure all work is captured so it can be billed – which results in greater revenue.

MDCodePro is the leading coding education choice to help healthcare providers improve compliance, accuracy and profitability at the same time. Join the hundreds of doctors that have seen an average income increase of $30,000 after enrolling with MDCodePro. Request more information and a no-obligation demonstration today.