Key Takeaways
- Healthcare providers are assigned reimbursement values for each procedure based on relative value units (RVUs).
- RVUs were created to address healthcare expenses and reimbursement rates through a collaboration between Medicare and the American Medical Association (AMA).
- Productivity for practitioners is commonly measured by RVUs and used to determine compensation packages.
The term RVU refers to the ‘Relative Value Unit. In the medical billing system, RVUs are a crucial aspect of physician compensation for doctors and practitioners across the United States. Basically, doctors and healthcare providers are incentivized for more complex patient services and intricate procedures.
This methodology is utilized by the Centre for Medicare and Medicaid Services and private payers to evaluate physicians’ payments. It is determined by the range of services a doctor provides, including clinical and non-clinical aspects, as well as their expertise in delivering healthcare to the patients.
What is the role of RVUs in physician compensation?
Not all physician services represented by a Healthcare Common Procedure Coding System (HCPCS) or Current Procedural Terminology (CPT) code are created equal. Some services require a considerable amount of time and expertise, along with specialized equipment and clinical staff.
The RVUs system is established to create a fee schedule that reflects the costs of medical procedures and services provided by the physician. Physician incentives are calculated based on relative value units for each service.
Relative value units or RVUs are meant to calculate reimbursement for treatment or services provided by healthcare providers. To put it simply, every Current Procedural Terminology (CPT) code used by a healthcare provider (HCP) is given a Relative Value Unit (RVU). This RVU is used to calculate how much the HCP will be reimbursed when they bill for that CPT code. However, determining the exact amount of compensation is a complicated process that involves multiple adjustments and calculations.
How do Healthcare Providers (HCPs) use RVUs?
RVUs are extensively used to capture and monitor Healthcare Providers’ productivity, reflecting the time, skill, and training required to provide a service.
The RVU model assigns a higher RVU to more complex procedures and patients compared to low-acuity patients and procedures. Instead of relying on the number of patients seen per day, the RVU model captures the actual work involved in caring for patients. Consequently, many healthcare systems use RVUs to determine the compensation structure for healthcare providers (HCPs) based on their productivity. This often includes a salary bonus potential that depends on the RVU.
RVUs are used to:
- Determine reimbursement rate for specific procedures
- Measures the group or practitioners’ productivity
- Measures the performance analytics by payer, provider, or health system
- Serve as a pricing gauge for complex patient procedures
How are RVUs relevant for patients?
- Usually, patients are not concerned with the pricing plans, incentives, or reimbursement costs for the doctor related to an intricate procedure or surgery.
- RVUs give an idea of how a diagnosis, surgery, or treatment plan can be accurately charged and reimbursed.
- However, patients are usually concerned about the service fees. Essentially, the RVU elaborates costs to the patient efficiently.
- While these relative value units do not represent exact costs in dollars, Current Procedural Terminology (CPT) codes that correspond to RVUs to determine total financial handling and payments. Cost transparency allows patients to determine what their eventual out-of-pocket payments are likely to be.
Pros and Cons of Relative Value Units (RVUs) for Healthcare Providers (HCPs):
- While the relative value unit system allows for more accurate standardized reimbursement, it is not an ideal system for doctors and practitioners.
- Relative Value Units are meant to determine the total amount of HCP tasks performed. However, monitoring administrative tasks — such as electronic health record (EHR) charting, is challenging. It is calculated that HCPs spend an additional three hours of administrative time on different tasks and procedures for every hour of direct patient care. However, this timeline is difficult to monitor in the current Relative Value Unit system.
- More critics of the Relative Value Unit (RVUs) system identify that time-consuming appointments, like those that require complex surgeries or disease management, have low incentives and compensation compared to other diagnostic and procedural plans and services. This gives doctors or specialists a monetary advantage.
- Relative Value Units (RVUs) also may not accurately determine workload, surgical time, and complexity — even among surgical procedures and specialties.
- Since the Health Care Providers (HCPs) compensation and incentives structure includes Value Unit-based productivity outcomes and measures, a doctor or practitioner must carefully determine if the plan is proper and attainable and whether it’s balanced and proportionate to their basic salary.
The Bottom Line
- RVUs-Relative Value Units system is used to calculate reimbursement and compensation for the treatment and services provided by healthcare providers.
- Independent practitioners or physicians should consider the RVU System as an essential tool for better healthcare management.