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