Using RVUs to Improve Your Practice’s Performance

In the early years, medical practices only utilized Relative Value Units (RVUs) to understand the Medicare fee schedule. Now the role of RVU analysis has expanded. RVUs have become the standard measurement in analysis of reimbursement and payer contracts, physician compensation and productivity, and practice staffing and operating costs. Remember, RVUs are not impacted by how you set your fees, by how much money you have collected or which payer the patient has or where the service was provided. Using RVUs to analyze your practice removes other variables that can make results confusing.

The calculation of RVUs seems complicated but really is just a sum of three measures that are then multiplied by a conversion factor to create a fee schedule (allowable reimbursement). Total RVUs (TRVU) are calculated for each CPT by adding:

   Physician Work RVU (wRVU)
+ Practice Expense RVU (peRVU)
+ Malpractice Expense RVU (mpRVU)
   Total RVU (TRVU)
X Conversion Factor (CF)
   Fee Schedule (allowable reimbursement)
X Geographic Practice Cost Index (GPCI)

The Geographic Practice Cost Index (GPCI) is then applied to the allowed reimbursement to adjust for geographic differences in wages, malpractice and practice overhead expenses.

Now that you are comfortable with how the RVUs are calculated and adjusted, let’s look at how you can use them to analyze your reimbursement performance. RVUs are very helpful in analyzing reimbursement performance. You can analyze your Medicare reimbursement using RVUs and also all of your other payers. If this is the first time you are using RVUs to analyze reimbursement, I would suggest that you start with a small subset of data – look at RVUs for your top 10 most frequent CPT codes for your top two payers. Once you are clear on what you want to look at and have become more comfortable with your RVU data, you will be ready to analyze a larger dataset.

To analyze your reimbursement by payer, you want to divide total collections by TRVUs generated for each payer that you are analyzing. You want to include collections from the payer and from the patient on those payer’s claims. Your analysis will be improved if you can exclude CPT codes that do not have an RVU assigned.

Most practice management systems have standard RVU reports that can be run by physician, location, payer, and other sorts. In addition, you can often download RVU reports into Excel which will allow more advanced analysis. Many practices use RVU data to evaluate staffing and operating costs (for example, TRVU/Total Operating Costs) within their practice and in comparison to external benchmarks. Other practices utilize RVU data to calculate physician compensation and to evaluate productivity. Using RVUs provides excellent data about your practice that can help you improve performance.

Additional Resources:Medicare Physician Fee Schedule (MPFS). The MPFS website provides more than 10,000 physician services, the associated relative value units, a fee schedule status indicator and various payment policy indicators needed for payment adjustment (i.e., payment of assistant at surgery, team surgery, bilateral surgery, etc.).