The Relative Value is based on three things:

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