When calculating a Relative Value Unit (RVU), it’s easy to become overwhelmed by the math. However, if you can look beyond the calculations, you’ll find that the RVU is actually a good barometer of practice efficiency and patient complexity—and it can provide helpful insights into performance, says Andy Swanson, vice president of consulting services at the Medical Group Management Association (MGMA).
In this article, we’ll explain how to calculate an RVU and describe how RVUs can benefit physicians working in independent private practice.
Calculating an RVU
An RVU represents the total of three component RVUs, each of which is adjusted based on the geographic location in which a physician practices. The three component RVUs are:
- Physician work RVU, including the time and clinical skill necessary to treat a patient during an encounter.
- Practice expense RVU, including labor costs as well as expenses for building space, equipment, and office supplies.
- Professional liability insurance expense RVU, including the cost of malpractice insurance premiums.
The Centers for Medicare & Medicaid Services (CMS) adds each geographically-adjusted component RVU to arrive at a total RVU for every CPT code. The agency then multiplies the total RVU by the Medicare Conversion Factor, a national value that converts the RVU into a dollar amount. In 2017, the conversion factor is $35.89.
Consider the following example that compares RVUs for codes 99211 and 99214 for a physician practicing in Manhattan, NY.
To calculate his or her total RVU for code 99211, add the following geographically-adjusted component RVUs together:
(Work RVU [0.18] x 1.057) + (Practice expense RVU [0.38] x 1.165) + (Malpractice RVU [0.01] x 1.518)
Thus, the total RVU for code 99211 is 0.4632.
To calculate his or her total RVU for code 99214, add the following geographically-adjusted component RVUs together:
(Work RVU [1.50] x 1.057) + (Practice expense RVU [1.43] x 1.165) + (Malpractice RVU [0.10] x 1.518).
Thus, the total RVU for code 99214 is 3.4033, which makes sense given the fact that code 99214 denotes a more complex patient.
Unfortunately, it’s a tedious process to calculate RVUs for every code that a physician bills. Instead, Swanson says to focus on your top 10 high-volume codes. Determine the RVU for each code, and use your total RVUs as an approximation for your performance as compared with national benchmarks.
Why RVUs matter for independent physicians
Independent physicians may not pay too much attention to RVUs because they’re usually more relevant in arrangements where physicians are employed directly by hospitals, health systems, or groups. That’s because a physician’s base salary usually requires a minimum number of work RVUs.
Yet there are three important reasons why physicians working in independent private practices should have a general idea of the number of RVUs they generate, says Swanson.
- A physician wants to grow his or her practice. If your RVUs are low compared to national benchmark data—but your patient volume is high—chances are likely that you must take a closer look at practice efficiency in an effort to expand the practice. If your RVUs are already high, you may need to think about hiring additional physicians or mid-level providers who can increase the patient volume even more.
- A physician wants to merge his or her practice with that of another physician. RVUs should be a part of the discussion, says Swanson. How many RVUs does each physician generate, and what is expected so both individuals pull their own weight?
- A physician wants a hospital or health system to purchase the practice. Once a physician is employed by the hospital, he or she will probably be paid based on RVUs, says Swanson. In addition, the total RVUs is a metric that helps hospitals understand the volume and level of patient care that physicians typically provide in a day, week, or month—information that’s helpful as hospitals decide whether to move forward with the acquisition, he adds.
RVUs and payment reform
In a value-based payment model, payers are less interested in individual productivity and more interested in population health management. Yet RVUs will remain important because they are a “metric that everyone can wrap their arms around,” says Swanson.
“RVUs are important. I think we’ve over-emphasized their importance over the past 10 years because of their alignment with compensation, but that doesn’t mean that it’s not an important metric to examine your productivity and how effective you are in delivering patient care,” he says. “They hold a purpose even if they diminish in compensation alignment due to population health management and risk-based payment models.”