1. Physician work RVU = the level of time, skill, training and intensity to provide a given service.
2. Practice Expense RVU = Addresses the cost of maintaining a practice including rent, equipment, supplies and non-physician staff costs.
3. Malpractice RVU = Represent payment for the professional liability expenses. These are supposed to be reviewed on a bi-annual basis, but in practice this has not frequently occurred. This is the smallest component of the RVU.
Each CPT code is targeted for review at least every 5 years. Historically, a group of codes appear to be targeted each year by Medicare in order to reduce the amount reimbursed. Rarely do we see increases. This is for Medicare, Medicaid and Medicare Replacements. In the case of EMG’s a few years ago, the actual CPT codes were changed by the AMA as well as the definitions, allowing Medicare to assign completely new RVU’s rather than adjusting them, resulting in a whopping 50% decrease.
Another factor that is applied is the GPCI (Geographic Practice Cost Indices). This takes into consideration the cost of living differences across the country. CMS calculates an individual GPCI for each of the RVU components, i.e., physician work, practice expense and malpractice. The GPCI’s are reviewed every 3 years.
The Conversion Factor converts the RVU into actual dollar amounts. This is updated every year. This is what controls budget neutrality. There is a certain Budget amount allocated for reimbursement of Federal Funds every year (when there is a budget). If the expenses exceed the Budget, then the conversion factor is adjusted to achieve Budget neutrality.
When looking at practice RVUs it can become very complicated, especially for non-Medicare RVUs where the conversion factors are different from Medicare. Each practice can literally come up with their own RVUs, but you also have to know what the conversion factor is to turn the RVUs into a dollar amount. The safest way to proceed in that direction is to ask what their Formula is for calculating the actual dollar amount for each procedure. Then compare with each practice you is looking at.
Contributed by Elizabeth Lee, President
Physiatry Reimbursement Specialists, Inc.
A National Company serving Physiatrists all over the U.S. for 25+ years
Fort Worth, TX
The RVU formula is:
RVU = Work (technical skill) + Practice Expense/Overhead + Malpractice Cost x a Conversion Factor
A physiatry billing consultant advises against RVU-based reimbursement arrangements if possible. However, it seems to me a logical extension for entities to use RVU compensation as it reflects the formula used by Medicare to pay them.
An example of a RVU-based salary formula is:
RVU + Value (Achievement of Performance Criteria) + Advanced Practice Supervision + Other revenues
Some RVU incentive examples are $30/RVU after contract minimum (65th percentile for academic centers is around 5800 RVUs for 1 FTE). For an outpatient job in New England, the RVU reimbursement is $40/wRVU over 5100.
For an interventional job in New England, the RVU reimbursement is $40/wRVU over 5400.
For an inpatient/outpatient job in the Midwest, the reimbursement is $56/wRVU.
Another example is in the Midwest, there there are 3 tiers. Tier 1 is for 1 – 4,523 wRVU with $51.40 paid/wRVU. Tier 2 is 4,524 – 5,815 wRVU with $52.99 paid/wRVU. Tier 3 is 5,816+ wRVUs with $54.63 paid/wRVU.
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RVU-based bonus? Depending on the payor mix, either the practice or the employee may be shortchanged. In practices with a lot of self-pay (often becomes no-pay), the practice may be shortchanged because a certain level of RVU’s (i.e.-production) will result in lower practice income. In practices with a payor mix of traditional high-reimbursing carriers, the employee will be shortchanged because the same level of RVU’s (i.e.-production) will result in higher practice income.
I prefer income-based bonuses. The more or less income the practice earns based on the employee’s services, the more or less bonus the employee gets.
Also, to base a future bonus on current base-year RVU’s gives an incentive to the employee to work less in the current year, thereby raising the RVU-percentage increase for the next year. By the same token, it gives the employer an incentive to overload the new employee with work in the current year, making future year RVU-percentage increases relatively lower.
In summary. I like income-based bonuses WITHOUT REGARD to prior year income. What does one year have to do with the next? The RVU-based bonus looks like a way to “incentivize”the employee, but it is not based on actual income, only some theoretical calculation of work. It can be restated this way: Pay me based on what income I generate, not the number of hours (which will increase RVU’s) I work.
In addition, in this PM&R job market, the employee is in a good position to negotiate more favorable compensation terms.
This article Was contributed by Bruno Stillo, Physiatry Billing Specialists. 800-836-4482, [email protected]
RVU’s for Physiatry – Should We or Shouldn’t We!
The following advice was provided to the question of whether a practice should use RVU’s as a basis for payment to a new doctor:
RVUs correlate to CPT Codes, which correlate to income.
RVUs are good for physiatry employees whose PM&R practice has low-reimbursing insurance carriers, like Medicaid. In this case, the lack of reimbursement will not unfairly penalize the physical medicine and rehabilitation employee who is working hard, but does not receive correspondingly high reimbursement. In other words, their RVUs will be high, but their reimbursement will not be as high.
But, all things being equal, RVUs translate to reimbursement.
RVUs only confuse the physiatry employee. Using them is awkward, not well-understood, and confusing.
Better to stick to dollar incentives, which is understood by all.
This information was contributed by Bruno Stillo, CPA, MBA, Physiatry Billing Specialists, 800-835-4482,