Relative Value Units : Impact on Physician Compensation
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Home  /  Our Blog   /  Relative Value Units Impact The Profitability Of Your Practice

Relative Value Units Impact The Profitability Of Your Practice

RVU stands for Relative Value Units and is often regarded as the essential component of the US Medicare reimbursement formula. It is mainly created to calculate the value of services offered by the physicians. Moreover, it does not directly define physicians’ compensation in dollar amounts. On the other hand, RVUs came forward with the value of service or procedure related to all systems and services.

This calculation of work is based on the extent of physician work. Sometimes also on the clinical, nonclinical resources and skills needed to deliver the healthcare facilities to the patients. So you can say that it ultimately determines the physician compensation when the conversion factor of Dollars per RVU is employed to the total RVU(Relative Value Units).

Which Factors Help To Find Out The Physician Payment For Services?​

Under the fast system of RVUs, the physician payment for services is found out by the Conversation factor (CF), Geographic Practice Cost Indices, and most importantly, the Total RVUs.

What Do You Mean By RBRVs?​

By the end of 1989, The Omnibus Budget Reconciliation Act generated a new Medicare fee schedule called the Resource-Based Relative Value Scale. This schedule nowadays defines about 9000 different healthcare services.

Later each healthcare service is stuck to a specific name called the RVU(Relative Value Units). It also determines the time spent with a patient and the complexity of the present issue. Thus it also no longer needs the total revenue consideration or payer mix. They are now regarded as the national standard for physical compensation.

Ways To Calculate RVUs​

Total RVU is defined as the sum of the three components described below. It is usually multiplied by the Medicare conversion factor. On the other hand, the Medicare conversion factor is a national number set annually that alters the RVU into the dollar amount.

Three components, such as Physical work RVUpractice expense RVU, and then professional liability insurance expense RVU, combine to make a total RVU(relative value units). They are categorized by the Medicare and Medicaid Services centers, keeping in mind your geographic information.

Relative Value Units

Practice Expense RVU:

It helps to determine the costs of labor, building space, equipment, and other supplies utilized by the office. Also, it consists of 44 percent of the total RVU(Relative Value Units).

Physical Work RVU:

It estimates the time and skill necessary to treat a patient during a specific encounter. Moreover, it also operates near about 25 percent of the total RVU(Relative Value Units).

Professional Liability Insurance Expense RVU:

It depicts about 4 percent of the total RVU and identifies the cost of malpractice insurance premiums.

Expected 2022 Medicare Conversion Rate Formula

The conversion rate is the number of dollars attributed to an RVU. It is estimated with the help of a complicated formula that accounts for the overall state of the economy of the United States.

By mid-2021, CMS announced a conversion rate of about $34.6062, which is usually less than last year. You can also calculate RVU with the help of a specific formula.

Physician Payment = (Physician Work * Related GPCI) + (Practice Expenses * Related GPCI) + (Practice Liability Insurance * Related GPCI).

Are RVUs Important For All Independent Physicians?​

Physicians who work in large health systems, small hospitals, or large practices are given payments keeping in mind the minimum number of work RVUs.

Thus independent physicians may take RVUs not a big deal, and they miss the chance to increase the profitability of their business. It also plays a vital role in improving practice efficiency.

Most of the time, some physicians also argue that it is not worth spending their quality time on the process of analyzing RVUs. This fact is not far away from the bitter truth.

So if you are an independent physician, there exist many ways to enhance the profitability of your practice. If you start utilizing the RVU (Relative Value Units) information today, there are some benefits for you.

  • Make sure that the fees you charge as an independent physician are justified, competitive, and sustainable.
  • Try to take care of the fee schedules related to the payer mixer and find out if there exist any problems between the proposed and actual reimbursement.
  • Pair it with different programs offered by the other payers. Make sure everyone is treated equally under your supervision.

Use Of RVUs Calculator​

To get a clear idea of how the overall system operates, you can get the RVU calculator’s help. It also saves your precious time and utmost effort.

You can carry on thorough research. One can also pick from the MGMA interactive RVU calculator, AAPC’s RVU calculator, and the Legal and free 2022 RBRVS calculator.

Final Words​

It plays a vital role in serving as an excellent practice management gadget, especially for independent physicians. Hence RVUs impact your practice’s profitability and give you an idea about the business insights keeping the financial data at your fingers.

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