RVU (Relative Value Unit) Explained Using CPT® Example.

RVU, or relative value unit, is the single most important part of your medical care.  And you've probably never even heard of it.  In the last week I have attempted to take you down that difficult, arbitrary path of coding and documentation and how it affects what doctors document and how documentation rules determine of how much is documented. 

I have shown you the ludicrous rules Medicare says we must follow and document in order to prove we have provided a level of service.  The whole process is incredibly time consuming  and leads to insurmountable loss of productivity and expense.   It takes away time devoted to patient care and creates insecurity in physicians who don't want to be accused of fraud.

When physicians  invest in EMR technology to figure it all out, they are accused of up coding.  All this has taken away from the most important part of health care delivery:  the patient and doctor behind closed doors.  However, because the Medicare National Bank controls the money, we physicians must abide by their rules, or risk going out on our own, a risk some are taking successfully and a risk some aren't quite ready to endure.  

There is a cash only system which is starting to take foothold in many areas.  It's called concierge medicine.   Both patient and doctor are happy with the services rendered.  If you stay in the system, you get paid by the system and you agree to the system's rules. So here goes. This is how the system converts a CPT® E&M 99223 (high level  hospital admission note) into cold hard cash for your doctor. These are dollars that pay the overhead and dollars that pay for  capital improvement and dollars that pay for taxes. These dollars pay for  malpractice and dollars for the doctor to take home. 

How I get paid:
To calculate the payment for every physician service, the components of the fee schedule (physician work, practice expense, and malpractice RVUs) are adjusted by a geographic practice cost index (GPCI). Payments are converted to dollar amounts  through the application of the conversion factor which is updated annually. The general formula for calculating the fee schedule amount is: Payment = [(RVU work x GPCI work) + (RVU PE x GPCI PE) + (RVU malpractice x GPCI malpractice) x Conversion Factor. The conversion factor for 2007 is $37.8975; the same as in 2006 
Courtesy of Dr Ray Sowers, Chair of the Joint Committee on Quality Reimbursement and former member of the Medicare Payment Advisory Committee (MedPAC).

Did you get that?  Of course it is.  Why didn't I think of that?

In simple terms what I get paid is a function of
1) What my service has been deemed to be worth (the "work RVU (relative value unit))
2) Practice expenses (PE).
3) Malpractice expenses.

All three of these are adjusted for your geographical location, the GPCI, who's value is based on where you live.

Living in NYC gets you higher reimbursement across the board because living in NYC is generally more expensive than living in Nebraska..  It all seems so simple, right? You can go here and navigate the Medicare Internet to find more.  Strip out the practice expenses and malpractice expense portion and you are left with your take  work RVU. This is what your service as a physician is considered to be worth.

I have in my possession a giant 1400 page file from CMS that tells me exactly what each component of every billable encounter is worth. So let's examine a 99223. Refer back to the above stated formula.

Payment = [(RVU work xGPCI work) + (RVU PE x GPCI PE) + (RVU malpractice x GPCI malpractice) xConversion Factor. The conversion factor for 2007 is $37.8975

Physician Work RVU 3.78
Practice Expense RVU 1.11
Malpractice RVU 0.13

Total RVU =5.02 for a 99233

Let us use Nebraska GPCI as an example. GPCI for Nebraska is 1.0 for work RVU, 0.876 for practice expense and 0.447 for malpractice.

So enter your data.

(1 *3.78)+(0.876*1.11)+(0.447*0.13) *$37.8975=$182.30

One hour of work (on average) for a highly complex full admission to the hospital in Nebraska is worth $182.30 from CMS. 

Lets look at Miami, Florida. The GPCI for work RVU is 1.0, 1.048 for practice expense and 2.233 for malpractice. Notice the incredible difference in payment rate for malpractice between Miami (in a crisis state) and Nebraska (currently stable). Malpractice costs Medicare money. Lots of it. 4x more money when comparing Miami with Nebraska.

Enter your data for a 99223.

Lets look at Manhattan

The difference in total payment between Nebraska and Manhattan for a 99223 if about $32, or 18% more on a relative basis for  each and every 99223.  The complexity is unbelievable.  You can see how the answer to the question, "How much does your doc get paid for a mid complex office visit" is dependent on the locality at which they live.

That code is a 99214. Moderate complex office visit

Physician work RVU 1.42
Practice expense RVU 1.05
Malpractice RVU .05

In Nebraska, this 20-30 minute visit would pay $89.51.  $90 for a 20-30 minute visit. This is total reimbursement. It covers all expenses.  A level 3 follow up visit, a 99213, the most common code, would collect about $60.

Take a blended average of level 3 and 4 and a primary care doc will collect roughly $75 for a 20-30 minute visit assuming an equal number of level 3 and level 4 visits.  This represents full collected revenue from which to pay all expenses fixed and variable. To make capital improvements. To buy that EMR. To give your RN that raise. Overhead routinely runs 50% in physician offices.  If you cut that $75 in 1/2, to remove overhead expenses, you are left with a fee to the doctor of about $35-$40 for your 20-30 minute moderately complex visit.

1.42 Physician work RVU.

Compare this to total knee arthoplasty 22447

Physician work RVU 23.04 (worth 16 times more)
Practice expense (If done at the hospital) RVU 14.14
Malpractice RVU 3.8

Compare to a laparoscopic cholecystectomy 47562
Physician work RVU 11.63 (worth 8 times more)
Practice expense (if done at the hospital )RVU 5.29
Malpractice RVU 1.46

Compare to a diagnostic colonoscopy 45378
Physician work RVU 3.69 (worth 2.6 times more)
Practice expense (facility fee if done at the hospital) RVU 1.57
Practice expense RVU (if done at your office) 6.20
Malpractice RVU 0.30

Compare to removal of a kidney stone 50081
Physician work RVU 23.32 (worth 16 times more)
Practice expense RVU 9.68
Malpractice RVU 1.54

Compare to complex brain aneurysm repair 61698
Physician work RVU 69.45 (worth 50 times more)
Practice expense RVU 27.88
Malpractice RVU 12.54

Compare to laser treatment of retina 67040
Physician work RVU 19.23 (worth 13 times more)
Practice expense RVU 13.41
Malpractice RVu 0.81

One could go on and on and on and on and compare service to service, time to time, risk to risk.  Why is a brain aneurysm repair worth more than an aortic valve replacement, or a retina laser treatment. Both are highly specialized procedures.  And why is it worth 50 times more than a primary care office visit.  Who says so?  Who made that decision?  You can see how the physician work RVU, the value established to a physician's service and the largest part of the reimbursement formula that affects physician payment.

3, 4, 5, 6, 10, 20 , 30, 50 times more. What's the right value for different encounters across a vast array of potential clinical and surgical interactions?  One need only scour the thousands of codes to understand this recurring theme.  The fixed pot of money called Medicare part B creates a constant battle between specialists, sub specialists and primary care, each battling for the same dollar from the Medicare National Bank.

You can see much more in my free lectures on hospital E/M coding and my resource links for hospitalists.


EM Pocket Reference Cards Using Marshfield Clinic Point Audit

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Here's a little Facebook humor to finish off the discussion:

I found out today our CT surgeons have a buy one vessel get one vessel free special on their coronary artery bypass graft (CABG) heart surgeries. You may think that sounds silly, but let me tell you how these guys get paid. They get paid per blood vessel. How much does Medicare pay a CT surgeon for their vein bypass surgeries? In my state, they pay a 90 day global care payment of:
1 vessel: about $1,700
2 vessel: about $1,900
3 vessel: about $2,150
4 vessel: about $2,250
5 vessel: about $2,350
6 or more vessels: about $2,450
So you see, your CT surgeon really could offer a BOGO free offer and it really wouldn't make much difference to their bottom line. I bet these amounts are less than you thought. How much does the hospital get paid? A lot more than that...

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4 Outbursts:

  1. What an amazing post. It made me dizzy and was in line with my (simpler) blog on the same subject. I will be teaching the residents about the realities of practice after residency and I am afraid once they learn about RBRVUs they will want to turn right around and climb back into the training womb. Thanks for a comprehensive look at an absurd system that is driving primary care right out of business.

  2. i don't think that pcps get paid enough but you need to compare apples to apples. I did a c/s 3 months ago she got a wound infection. I have now seen her 20 office visits for this. All of those office visits are included in the global care. So all of that is free for me.

    Also if I do a hysterectomy, I do the surgery and then see the patient for 3 days in the hospital. Last one I did had a internal medicine guy following her hypertension in the hospital. He got paid more for following her than I did for doing the surgery and rounding those 4 days.

  3. I am writing a paper for grad school and am looking to find out what Medicare would reimburse for a routine office visit verses a more complex office visit (i.e. such as one that requires more time because end of life conversation is taking place). Do you know where I could find this information? Thanks.

  4. gonna pay it forward.....


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