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How Doctors Are Paid
  Today: Understanding
Relative Value Units (RVUs)
    Mary Pat Whaley, FACMPE, CPC
      Manage My Practice, LLC
    www.managemypractice.com



          c. 2013 Manage My Practice   1
In The Beginning…it was typical for
                        insurance companies to pay
                        physicians what each payer
                        considered “usual and customary”
                        or market-rate.
There was, however, a need to find a “better” way of paying
for medical services due to:

•Wide geographic region-related variations in fees.
•A rapid rise in payments.
•Payments not reflecting the resources used.
•The disparity between physicians in different specialties
receiving different payments for the same service.
                    c. 2013 Manage My Practice                2
December 1985
The Harvard National RBRVS Study
is initiated.

RBRVS was created at Harvard
University School of Public Health
in their national RBRVS study from December 1985
and published on September 29, 1988. William
Hsiao was the principal investigator who organized
a multi-disciplinary team of researchers, which
included statisticians, physicians, economists and
measurement specialists, to develop the RBRVS.

                c. 2013 Manage My Practice           3
December 1985
The Harvard National RBRVS Study
is initiated.

RBRVS stands for:
  • Resource-Based
     • Relative
        • Value
           • Scale
               c. 2013 Manage My Practice   4
September 1988
Harvard submits Phase I of the RBRVS Final
Report to the Health Care Financing
Administration (HCFA) – now called CMS
(Centers for Medicare and
Medicaid Services.)


December 1989
President George Bush signs the Omnibus
Budget Reconciliation Act of 1989, enacting a
physician payment schedule based on an RBRVS.


               c. 2013 Manage My Practice       5
November 1991
Initial Meeting of the AMA/Specialty Society RVS
Update Committee (RUC) takes place: RUC
Charter documents are created; RUC is
approved for the formation of the Research
Subcommittee, RUC Advisory Committee, and
Health Care Professionals Advisory Committee.


January 1992
The Medicare RBRVS is implemented.



               c. 2013 Manage My Practice          6
Digging Down Into the
Relative Value Unit (RVU)                       1
The relative value for each medical service provided
by a physician is composed of three distinct parts:

A physician work component that measures the
time, skill, and intensity associated with the service
provided - this component accounts for 54.5% of a
service's relative value.


                 c. 2013 Manage My Practice              7
Digging Down Into the
Relative Value Unit (RVU)                     2
 A practice-related expense component that
  measures average practice expenses such as
  office rents and employee wages and that
  varies on a code-by-code basis depending on
  whether the service is performed in a facility
  or non-facility setting - this accounts for
  42.3% of a service's relative value.

                 c. 2013 Manage My Practice        8
Digging Down Into the
Relative Value Unit (RVU)                    3
A malpractice expense component that
 reflects average malpractice insurance cost -
 this accounts for 3.2% of a service's relative
 value




                c. 2013 Manage My Practice        9
Digging Down Into the
Relative Value Unit (RVU)
Physician services are reported using the Current
Procedural Terminology (CPT) coding system. Each CPT
code has the three components and each component
has an RVU. The sum is the total RVU for that CPT
code.
CPT codes, descriptions and other data are copyright
2012 American Medical Association. All rights
reserved. CPT is a registered trademark of the
American Medical Association (AMA).
                 c. 2013 Manage My Practice        10
Digging Down Into the
Relative Value Unit (RVU)
Adding the three portions together equals the
Total RVU.

 Work RVU                                     wRVU
+Practice Expense RVU                       + PE RVU
+Malpractice Expense RVU                    + ME RVU
Total RVU                                   Total RVU

               c. 2013 Manage My Practice               11
Digging Down Into the
Relative Value Unit (RVU)
 For example:

 99213 = Established patient
       office visit, level 3

 wRVU = .97
 PE RVU = 1.10
 ME RVU = .07
 TOTAL RVU = 2.14
                c. 2013 Manage My Practice   12
Digging Down Into the
Relative Value Unit (RVU)
Q: How do RVUs translate into the physician
   payment?

A: The Total RVU is multiplied by a conversion
   factor. Medicare has one conversion factor and
   other payers use different conversion factors.
   For example, 99213 is 2.14 Total RVUs x 2013
   Medicare conversion factor of $34.0320 =
   Medicare payment of ~$72.83. Note that this
   payment will vary slightly based on locality.
                c. 2013 Manage My Practice          13
A History of the Medicare
Conversion Factor
  1992....$31.00          2003….$36.78
  1993…. $31.96           2004….$37.33
  1994....$33.71          2005….$37.89
  1995....$36.38          2006….$37.89
  1996....$35.41          2007….$37.897
  1997....$35.76          2008….$38.087
  1998…. $36.68           2009….$36.06
  1999…. $34.73           2010….$36.87
  2000…. $36.61           2011….$33.97
  2001…. $38.25           2012….$34.03
  2002…. $36.19           2013….$34.0320
               c. 2013 Manage My Practice   14
A Recap of Payments to Physicians
 Through the Years:

1980s…………….... Usual & Customary
1990s……………… RBRVS
Intermittently…….. Capitation
2000s……………… Concierge
2013……………….. Pay for Performance
                   Value-based Payments
                   Direct Pay Models
Tomorrow………….??????


               c. 2013 Manage My Practice   15
Questions? Please contact:

Mary Pat Whaley, FACMPE, CPC
Practice Management Consultant
   Manage My Practice, LLC
         (919) 370-0504
marypat@managemypractice.com




         c. 2013 Manage My Practice   16

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Understand RVUs

  • 1. How Doctors Are Paid Today: Understanding Relative Value Units (RVUs) Mary Pat Whaley, FACMPE, CPC Manage My Practice, LLC www.managemypractice.com c. 2013 Manage My Practice 1
  • 2. In The Beginning…it was typical for insurance companies to pay physicians what each payer considered “usual and customary” or market-rate. There was, however, a need to find a “better” way of paying for medical services due to: •Wide geographic region-related variations in fees. •A rapid rise in payments. •Payments not reflecting the resources used. •The disparity between physicians in different specialties receiving different payments for the same service. c. 2013 Manage My Practice 2
  • 3. December 1985 The Harvard National RBRVS Study is initiated. RBRVS was created at Harvard University School of Public Health in their national RBRVS study from December 1985 and published on September 29, 1988. William Hsiao was the principal investigator who organized a multi-disciplinary team of researchers, which included statisticians, physicians, economists and measurement specialists, to develop the RBRVS. c. 2013 Manage My Practice 3
  • 4. December 1985 The Harvard National RBRVS Study is initiated. RBRVS stands for: • Resource-Based • Relative • Value • Scale c. 2013 Manage My Practice 4
  • 5. September 1988 Harvard submits Phase I of the RBRVS Final Report to the Health Care Financing Administration (HCFA) – now called CMS (Centers for Medicare and Medicaid Services.) December 1989 President George Bush signs the Omnibus Budget Reconciliation Act of 1989, enacting a physician payment schedule based on an RBRVS. c. 2013 Manage My Practice 5
  • 6. November 1991 Initial Meeting of the AMA/Specialty Society RVS Update Committee (RUC) takes place: RUC Charter documents are created; RUC is approved for the formation of the Research Subcommittee, RUC Advisory Committee, and Health Care Professionals Advisory Committee. January 1992 The Medicare RBRVS is implemented. c. 2013 Manage My Practice 6
  • 7. Digging Down Into the Relative Value Unit (RVU) 1 The relative value for each medical service provided by a physician is composed of three distinct parts: A physician work component that measures the time, skill, and intensity associated with the service provided - this component accounts for 54.5% of a service's relative value. c. 2013 Manage My Practice 7
  • 8. Digging Down Into the Relative Value Unit (RVU) 2  A practice-related expense component that measures average practice expenses such as office rents and employee wages and that varies on a code-by-code basis depending on whether the service is performed in a facility or non-facility setting - this accounts for 42.3% of a service's relative value. c. 2013 Manage My Practice 8
  • 9. Digging Down Into the Relative Value Unit (RVU) 3 A malpractice expense component that reflects average malpractice insurance cost - this accounts for 3.2% of a service's relative value c. 2013 Manage My Practice 9
  • 10. Digging Down Into the Relative Value Unit (RVU) Physician services are reported using the Current Procedural Terminology (CPT) coding system. Each CPT code has the three components and each component has an RVU. The sum is the total RVU for that CPT code. CPT codes, descriptions and other data are copyright 2012 American Medical Association. All rights reserved. CPT is a registered trademark of the American Medical Association (AMA). c. 2013 Manage My Practice 10
  • 11. Digging Down Into the Relative Value Unit (RVU) Adding the three portions together equals the Total RVU. Work RVU wRVU +Practice Expense RVU + PE RVU +Malpractice Expense RVU + ME RVU Total RVU Total RVU c. 2013 Manage My Practice 11
  • 12. Digging Down Into the Relative Value Unit (RVU) For example: 99213 = Established patient office visit, level 3 wRVU = .97 PE RVU = 1.10 ME RVU = .07 TOTAL RVU = 2.14 c. 2013 Manage My Practice 12
  • 13. Digging Down Into the Relative Value Unit (RVU) Q: How do RVUs translate into the physician payment? A: The Total RVU is multiplied by a conversion factor. Medicare has one conversion factor and other payers use different conversion factors. For example, 99213 is 2.14 Total RVUs x 2013 Medicare conversion factor of $34.0320 = Medicare payment of ~$72.83. Note that this payment will vary slightly based on locality. c. 2013 Manage My Practice 13
  • 14. A History of the Medicare Conversion Factor 1992....$31.00 2003….$36.78 1993…. $31.96 2004….$37.33 1994....$33.71 2005….$37.89 1995....$36.38 2006….$37.89 1996....$35.41 2007….$37.897 1997....$35.76 2008….$38.087 1998…. $36.68 2009….$36.06 1999…. $34.73 2010….$36.87 2000…. $36.61 2011….$33.97 2001…. $38.25 2012….$34.03 2002…. $36.19 2013….$34.0320 c. 2013 Manage My Practice 14
  • 15. A Recap of Payments to Physicians Through the Years: 1980s…………….... Usual & Customary 1990s……………… RBRVS Intermittently…….. Capitation 2000s……………… Concierge 2013……………….. Pay for Performance Value-based Payments Direct Pay Models Tomorrow………….?????? c. 2013 Manage My Practice 15
  • 16. Questions? Please contact: Mary Pat Whaley, FACMPE, CPC Practice Management Consultant Manage My Practice, LLC (919) 370-0504 marypat@managemypractice.com c. 2013 Manage My Practice 16