RVUs in Medicare Reimbursement

Relative Value Units, or RVUs, relate to Medicare reimbursement, so it is important to understand them and the role they play. Look at your physician compensation model and see if it is based upon RVUs or a derivative. Knowing your compensation model will help you make the most out of it.

But what is an RVU?

Relative Value Units are currently used by Medicare when determining the amount of Medicare reimbursement providers receives. RVUs are how service volumes are standardized and compared across all continuums. Typically, reimbursement is mostly based on volume, which means the more services provided, the more money the practice earns. While this has been the standard for years, volume isn’t everything anymore. There are other factors that come into play, such as skills required to perform the service and acuity. In theory, a surgeon who performs three difficult surgeries would have a higher RVU than a physician who sees three patients for checkups. In this case, the surgeon would receive more money.

RVU Calculation

There are three different calculations that are used to calculate RVUs. They are RVU, GPCI, and Conversion Factor.

•    RVU calculation – Physician Work RVU, Practice Expense RVU, and Malpractice RVU. These are all of the relative Value Units used to calculate reimbursement. They take into consideration time put into patient care, the expenses that go into running the practice, and the costs associated with medical liability expenses stemming from malpractice claims.
•    Geographic Practice Cost indices (GPCI) – GPCI is used to differentiate reimbursement based on geography. For instance the GPCI could be higher for a large city than it would a rural area. The GPCI is calculated for each of the aforementioned RVU calculations.
•    Conversion Factor – The RVU is converted to a dollar unit after all other factors are considered, which results in the amount of the reimbursement.

RVUs are also calculated differently depending upon whether the service is a non-facility or a facility. Facilities have different patient settings, such as outpatient, inpatient, and emergency. Non-facilities are usually physician offices.

To better understand how this works and to align your practice or facility with optimal Medicare Reimbursement, an experienced medical consulting firm can help you streamline your processes. One area that can be streamlined is reporting so that the Medicare reimbursement that is received is accurate. Physicians and facilities lose a great deal of money each year because their reporting is not accurate. In fact, the amount of money lost is in the millions of dollars.

RVU-Based Compensation Recommendations

To obtain the optimal Medicare reimbursement in order to have a positive impact on your office or facility’s bottom line, there are some recommendations. They are:

•    Keep it Simple Stupid (KISS Principle) – The physician compensation formulas can be very difficult. One of the best ways to achieve physician buy-in is by using a formula that is straightforward, simple, and easy to comprehend. In general, the dollar amount for each work RVU should be calculated. Physicians can set a minimum threshold.
•    Remain up-to-date on RVU and CPT Code changes – RVUs are usually tied to CPT codes. Staying up-to-date with the changes and revising RVU calculation procedures will ensure a dynamic and fluid RVU methodology. Revisions are made at least once per year.
•    Hospital and physician goals should be aligned – Aligning goals between those treating patients will create a solid atmosphere of loyalty and profitability, while ensuring the best possible treatment for patients.
•    Quality incentives should be included – Healthcare legislation is highly focused on the quality of outcomes. This is why compensation models take quality into consideration.

Even with the physician shortage that has occurred, physicians have to ensure that they provide the highest quality of care although they may feel as if they are bombarded by patients. There are some physicians that have absolutely no space to accept new patients because they are currently overbooked constantly.

At the same time, it has to be ensured that physicians are compensated accordingly so they will buy-in. If physicians start leaving in droves because of a poor compensation package or the inability to understand the packages being offered, the result could be devastating. This is why physicians need to capitalize on what is available to them in order to receive the most in Medicare reimbursement.

 

Learn about RVUs and other factors that can play a role in Medicare Reimbursement. Call MD Pro Solutions at 508-946-1665 or fill out our contact form for more information.