Your Practice Made Perfect

This podcast series provides support, protection, and advice for today’s medical professionals. Brought to you by SVMIC, a mutual insurance company that is 100% owned and governed by our policyholders.


Dec. 14, 2018

Episode 045: Reviewing RVUs

Host Brian Fortenberry and guest Jackie Boswell discuss the ins and outs of Relative Value Units (RVUs), how they work, and how they're calculated. They discuss how important it is for physicians to be educated when it comes to RVUs, especially for compensation purposes. RVUs have a wider reach as well, being used to evaluate specialties, compare physicians, and assess practices across the nation.

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  • Transcript

    Speaker 1: You are listening to Your Practice Made Perfect, support, protection, and advice for practicing medical professionals, brought to you by SVMIC.

     

    Brian: Hello, and thanks for joining us today on our episode. We're going to be looking at how RVUs work. And if you're already confused by that, well, that's why we have an expert here to tell us. Fortunately, we have Jackie with us today. Jackie, welcome.

     

    Jackie: Thank you very much. Brian. Thanks for having me.

     

    Brian: Absolutely. And yes, I'm Brian Fortenberry, and today we're going to be discussing all about RVUs, and how they work, and how they're calculated, and things of that nature. Jackie, before we even jump into our discussion, why not tell our listeners a little bit about yourself, your experience, your background, and your time here at SVMIC?

     

    Jackie: Sure. I have been with SVMIC just over 12 years now. I came to SVMIC from what was then Baptist Hospital, it's now Saint Thomas Midtown, and I was there for seven years. Prior to that, I was with Blue Cross and Blue Shield for seven years ...

     

    Brian: Okay

     

    Jackie: ... negotiating managed care contracts and installing practice management systems in doctors offices.

     

    Brian: So you have a background in not only the hospital side of things, but the insurance side of things, too. So that's going to be great for our discussion today. Let's start out with a question that some may be asking, I'm certainly asking, is what is an RVU?

     

    Jackie: That's a good question, Brian. As you know in healthcare, we have a lot of acronyms, and the acronym RVU stands for Relative Value Unit.

     

    Brian: Okay.

     

    Jackie: It's the resource-based relative value system that Medicare uses to reimburse physicians for the services they provide, and any procedures they do are assigned relative value units.

     

    Brian: Okay, so it really is a compensation type acronym that they use for compensation with the government types of things. Is Medicare the only ones that use that?

     

    Jackie: No, Medicare developed the system, but other commercial payers use this system as well. Now, they often tweak the relative value, so you have to pay careful attention because it's not necessarily Medicare's relative values.

    Brian: I got you. So it's not a constant figure of relativity across the board for all organization necessarily?

     

    Jackie: Yes, you're correct.

     

    Brian: So, that brings up the interesting point on these relative value units. How are they calculated? And it sounds like maybe, as you said, they're going to be different at different places. How do they go about calculating that?

     

    Jackie: Well, a relative value consists of three different components. A relative value unit is made up of a work component, a practice expense component, and a malpractice component, which calculates the risk that goes into that service. So those three components come together to make a total relative value. To get the total reimbursement for a specific CPT code or service, then you would multiply a conversion factor by that relative value unit to come up with what the physician would be reimbursed for that service.

     

    Brian: So whenever we talk about the variances and what that relativity looks like, those three components, is it the factor unit that is going to be different? Or is it part of those three components that are going to be different for, say, a Blue Cross Blue Shield versus Medicare, Medicaid or a hospital?

     

    Jackie: The conversion factor is constant, it remains constant across the reimbursement system, but the three components will change based on the service. So for example, a 99213 is an established patient visit.

     

    Brian: Okay.

     

    Jackie: And that would not have as many total relative value units as, for example, a brain surgery.

     

    Brian: Okay, I see what you're saying. So part of it is risk factor, I guess-

     

    Jackie: Sure, yeah.

     

    Brian: ... as well, because you were talking about the malpractice component of that. So an RVU for brain surgery, or a baby, or a surgery of any kind is going to be different than, say, a dermatology visit, or something of that nature?

     

    Jackie: Correct, yes.

     

    Brian: I gotcha. That does make sense. So obviously for compensation purposes, physicians need to be educated when it comes to these RVUs. What might be some other reasons why it would be important to understand these RVUs and exactly how they work?

    Jackie: RVUs are often used by practice executives to determine how to pay physicians, how to benchmark in the practice. So a practice executive might look at comparing different departments, for example, the radiology department to the laboratory, or certain radiology procedures like-

     

    Brian: Sure, like an MRI or-

     

    Jackie: ... bone density or an MRI, correct. And you can look at that expense per RVU or cost per RVU to compare those different departments.

     

    Brian: You can do them like within radiology, but is it an accurate comparison to say the radiology department to maybe orthopedics or family medicine? Or can you use it to do across specialties like that?

     

    Jackie: Yes, yes, you can use it across specialties, and you can use it to compare the physicians, your physician practice to other physician practices in a similar specialty across the region or across the nation.

     

    Brian: So you can gather that kind of data, and it can be as macro as physician to physician within the department doing the same type of procedures, all the way to specialty versus specialty, to how we as radiologists compare to radiologists in Seattle, Washington, or something of that nature?

     

    Jackie: Absolutely. It can also be used to compare payer to payer.

     

    Brian: Oh, okay. So the reverse works as well?

     

    Jackie: Sure.

     

    Brian: I gotcha, okay.

     

    Jackie: Sure. You can look at what Blue Cross is paying per RVU versus what Cigna pays per RVU.

     

    Brian: How long have these RVUs been around? Is this part of that “Today, the hot topic is value-based care” and all of those types of things, and healthcare is changing in how the reimbursements work. Are these RVUs ... Is this a fairly new concept, or has it been around for a long time?

     

    Jackie: It's been around for a few decades now. The typical reimbursement in health care used to be based on UCR, which was Usual Customary and Reasonable. And that became so relative and so hard to determine what was usual customary and reasonable that Medicare looked for a standard way to reimburse physicians. So this system was actually developed by Harvard back in the early '80s.

     

    Brian: Okay, so this was the system that replaced then the UCR?

     

    Jackie: Yes, it is.

     

    Brian: Okay. I've heard that employed physician contracts often use this RVU system to compensate physicians. Apparently, they look at several different ways to compensate physicians, but I've heard RVU mentioned when they're talking about compensation. How does that work?

     

    Jackie: Well, in a recent MGMA report, approximately 35% of physician groups and hospital systems were using RVUs to determine physician compensation. So a hospital or a group might look at the specialty of gastroenterology, and gastroenterology might have a benchmark, this is not definite, but might have a benchmark of $55 per work RVU, which is one of the components of the total RVU, or $85 per total RVU.

     

    Brian: I gotcha.

     

    Jackie: So they will base their reimbursement to the physician on that, and that takes out of the equation the payer mix. So-

     

    Brian: I gotcha.

     

    Jackie: ... where TennCare might reimburse less dollars per total RVU, then Blue Cross, the physician would be reimbursed the same regardless of the payer tide.

     

    Brian: Is this the most popular way to compensate physicians right now in the different models they have out there?

     

    Jackie: It is currently the most common reimbursement methodology. What we're starting to see is a component of quality added to that reimbursement methodology. But at this point, RVUs are used, and probably will continue to be used, in some form or fashion in that compensation model.

     

    Brian: Yeah, I was just thinking that as you were saying with the value-based care and quality-based care on the horizon, and the ever increasing push that we have now to compensate based on that, how RVUs played into that as a compensation model. So you believe that the RVU will probably still be, for a lack of better term, a base that they use, but tweak it with these other components as well then?

     

    Jackie: Yes. What we're seeing now is RVUs Medicare will continue to pay fee for service. And as long as they continue to pay fee for service, they will use the RVU methodology to determine what those fees are, and then they will make some adjustment on the backend, for example, penalties or incentives based on the quality data that they collect from the physicians.

     

    Brian: Okay, that certainly makes sense. So these practices, and hospitals, and whoever, using this as a compensation model. And we've already talked about commercial insurance companies using these RVUs as well. How did they use them to develop their fee schedule out there?

     

    Jackie: Well, they will take Medicare's RVU system, and then they will either tweak the conversion factor. So instead of maybe $38 for their conversion factor, they might use $35 or $40 based on how they want their model to look, how they want to reimburse the physicians, or what network they're developing that fee schedule for. Some plans will also tweak the work values or the practice expense values. So when a practice looks at contracts, and it's based on Medicare's RVU system, they need to be careful of what year they're looking at, what year of RVUs they're looking at, or be careful of exactly what the payer is tweaking in that RVU model.

     

    Brian: When you start gathering this information, is this fairly easy for practices and people to calculate on their own? Or is this the kind of thing they have to reach out for help for?

     

    Jackie: Typically, practice management systems do have a model or a package that will calculate these RVUs. Practices often don't know to ask how to calculate RVUs within their practice management system. So that's what I encourage practices to do, to talk to their vendors, their practice management vendors, about making sure the most recent versions of RVUs are loaded into their system. And, that they can report these by physician or provider, even nurse practitioner within the practice. So then, they can evaluate those RVUs, and often use those as internal benchmarks comparing productivity by physician or provider, and then comparing those to external practice groups and benchmarks as well.

     

    Brian: As we were talking about earlier, the value in being able to use these as benchmarks, certainly, it sounds like though that the main thing is, it's garbage in garbage out. If you don't have the right information loaded in the right year or whatnot, you're going to be getting data that isn't benchmark appropriate.

     

    Jackie: Absolutely. And Medicare may, from year to year, change the work value because of changes in technology, or they may change the practice expense. And speaking of practice expense, there's also a factor called a Geographic Practice Cost Index that's referred to as GPCI because the cost of the living expenses and cost to live in Miami versus Waverly, Tennessee is different. So that also is a factor.

     

    Brian: So that's a factor?

     

    Jackie: Yes, it is.

     

    Brian: So there's going to be different factors, say, for New York City or Chicago, Illinois, rather than maybe a Little Rock, Arkansas?

     

    Jackie: Absolutely.

     

    Brian: And so, is that part of one of those three factors, or is that an additional factor?

     

    Jackie: That's a great question because each of the three are adjusted by the GPCI.

     

    Brian: Okay.

     

    Jackie: So Tennessee has a GPCI, that Geographic Practice Cost Index. That's a factor that adjust each of those three values: the work value, the practice expense value, and the malpractice.

     

    Brian: Yeah. So, it's kind of like those three fall under the umbrella of this GPCI?

     

    Jackie: Right.

     

    Brian: I love that name.

     

    Jackie: Yes, I do too, *laughs*

     

    Brian: By the way, that is great. Of all the acronyms that are in healthcare, every once in a while we hit a home run.

     

    Jackie: Yes. *laughs*

     

    Brian: And GPCI is certainly that. As we get ready to wrap things up, Jackie, I see how this can be incredibly valuable. I see how the benefit not only in the paying system and negotiating things, using this and physician compensation, but it sounds like if you really don't know what you're doing, it can be confusing.

     

    Jackie: Absolutely.

     

    Brian: It could be a tough road to understand. What are some bullet point things that you think would be really important not only for physicians, but certainly policyholders, or even practice managers, or executives that they really need to make sure they know about RVUs to get the best across the board use from compensation, to benchmarking, to whatever?

     

    Jackie: I think it's especially important to ensure that you can get RVUs out of either your practice management system, or that you use a tool like MGMA offers, and even CMS on their website has an RVU look up tool and a tool that you can use to calculate work RVUs. So ensuring that you have those RVUs that are accurate in your practice, again, by total practice and physicians, is very important. And then often, again, practice executives use those to allocate expenses to benchmark and to negotiate managed care contracts. Again, it levels the playing field. So instead of looking at patient visits, where a high complexity visit is more RVUs than a low complexity visit, it kind of levels the playing field so you can compare apples to apples.

     

    Brian: Well, that is fantastic information. And if people need additional information on this, and have some specific questions, or still need further understanding, they can reach out to you or SVMIC? Who would they need to contact?

     

    Jackie: Yes, they can contact me directly, or they can contact the medical practice services department, then someone in the department can reach out to me. And I'm happy to help practices understand the use of RVUs, and even help them work with their vendor to get the RVUs from their system.

     

    Brian: And we will make sure we put some of that contact information down in the show notes of the podcast as well. Jackie, I really appreciate you coming in, taking your time to tackle this important thing that is sometimes confusing. Thanks for being here.

     

    Jackie: Sure, thank you.

     

    Speaker 1: Thank you for listening to this episode of Your Practice Made Perfect with your host, Brian Fortenberry. Listen to more episodes, subscribe to the podcast, and find show notes at svmic.com/podcast.

     

    The contents of this podcast are intended for informational purposes only and do not constitute legal advice. Policyholders are urged to consult with their personal attorney for legal advice as specific legal requirements may vary from state to state and change over time.

The contents of this Podcast are intended for educational/informational purposes only and do not constitute legal advice. Policyholders are urged to consult with their personal attorney for legal advice, as specific legal requirements may vary from state to state and/or change over time. All names have been changed to protect privacy.


About our Guest

Jackie Boswell

Jackie Boswell is an Assistant Vice President in SVMIC’s Medical Practice Services Department. Her background includes over 25 years as a medical management executive including hospital and physician practice administration. She obtained a Bachelor’s degree in Computer Information Systems from Murray State University and a Masters Degree in Business Administration from Belmont University. She is a Fellow in the American College of Medical Practice Executives and has served as Finance Chair for MGMA’s Financial Management Society and as the ACMPE Forum Rep for the Tennessee MGMA. Jackie is a member of the Board of Directors and Finance Committee at Three Rivers Hospital in Waverly, TN. She also serves on the United Way Allocations Committee in Humphreys County.


About our Host

Brian Fortenberry is Assistant Vice President of Underwriting at SVMIC where he assists in evaluating risk for the company and assisting policyholders with underwriting issues. He has been involved with medical professional liability insurance since 2007. Prior to his work at SVMIC, Brian worked in the clinical side of medicine and in broadcast media.