Like every organization and business, the healthcare industry also needs finances to run the services and for this, they follow a process of reimbursement. This reimbursement process is followed by an RVU system which stands for Relative Value Units. It is a system that is used to determine the value of a healthcare service. The government, insurance companies, and healthcare providers all use RVUs to help set reimbursements for services.
RVU meaning is important to know because it affects how much a healthcare provider will be reimbursed for the healthcare services they provide in the given time. RVUs are used to calculate the reimbursement amount for each service provided. The reimbursement amount may vary depending on the payer (insurance company, Medicare, Medicaid, etc.).
Once the insurance or the patient reimburses the services from the providers, hospitals and organizations are responsible to pay the providers according to RVU criteria without the fear of reimbursement failure. Keep reading to know RVU meaning and how it works in the medical healthcare industry.
RVU Meaning in Medical Billing?
RVU stands for relative value unit and is a way to measure the value of a particular procedure or service. Due to these specified units of reimbursements, compensation to doctors and healthcare staff becomes easier.
In addition, these units help identify the volume of services provided by the range of providers in a hospital facility. These standards of RVU may vary according to the specialities and the practice of doctors. For instance, relative value units for such physicians who perform complex surgeries such as Coronary Artery Bypass Grafting (CABG) and open-heart surgeries will be higher due to relatively intricate and challenging surgeries. This means here, the RVUs do not mainly depend on the number of services a provider performs but on the complex and intensive surgeries. This makes it quite clear why RVUs are significantly low for dentists treating oral disease comparatively to providers performing open-heart surgery.
Determining RVU in Medical Billing
One thing that needs to be understood here is that relative value units do not determine the monetary value of the services a physician performs but signify the relevant amount that a provider is eligible to receive for the services provided, the expertise required, and the resources utilized for service. The amount that would be compensated will be decided when the conversion factors are applied to these relative value units.
In order to determine the RVU for a given procedure, a few factors are taken into account, such as the time, equipment, and supplies needed for the procedure, as well as the complexity of the procedure itself.
There are three types of RVUs:
1. Physician’s work RVUs: These take into account the time, effort, and skills required to provide a service.
2. Practice expense RVUs: These take into account the costs of running a medical practice, such as staff salaries, equipment, and office space.
3. Malpractice expense RVUs: These take into account the costs of malpractice insurance.
It’s important to note that RVUs are not static and can change over time, depending on various factors. Therefore, it’s important to stay up-to-date on the latest RVU values in order to correctly bill for procedures.
Once all of these factors have been taken into account, the RVU for a given procedure can be determined. These units will then be multiplied by Geographic Practice Cost Index – GPCI.
The RVU can then be used to calculate the reimbursement amount for that procedure by adding all these factors, and multiply them by conversing factors (GPCI).
Total RVU = (Work RVU * Work GPCI) + (Practice Expense RVU * Practice Expense GPCI) + (Malpractice RVU * Malpractice GPCI)
The product of the calculation is the amount in dollars that hospitals and Medicare pay to a physician as reimbursement.
How to Calculate RVUs?
RVUs are discussed and can be calculated by the three factors mentioned above but there are other factors that affect RVUs largely. They are RVUs per visit, per hour, and per cost.
1. RVUs Per Hour
As it is understood that nobody can limit the time when a patient visits a doctor as it may take longer than usual to treat or examine a certain ailment. As for patients, they look for an experienced person for their complex health conditions and intensive surgical requirements. Hence, with the increasing demands of patients for an experienced doctor and a complex surgery, at the end of the day, doctors will gain high RVUs.
“The number of RVUs credited relates directly to the CPT codes, and those relate to what’s on the chart,” Dr. Parker said. “That’s why it’s necessary to put in all relevant factors, including the patient’s history, results of the physical exam, any decision-making, what the doctor did, how the patient responded, the critical care involved, and the appropriate diagnosis. Be as accurate and detailed as possible.”
“All those minutes add up, so be disciplined and document the time,” he said.
2. Per Visit
As said time cannot be specified for a patient when there’s a problem creating diseases that are under-diagnosed. Therefore, the service and patient’s health condition will decide the time a physician will spend with them to satisfy their medical needs. With this relatively dependent on RVUs, as many patients a physician sees in the given time with excessive and intense health issues, they will have a higher relative value unit number compared to the one who sees lesser patients with less complex issues.
“In the ED, a doctor who sees approximately two patients per hour is considered the norm,” he said. “However, he may only see one per hour if the patients he encounters are in critical condition. Based on the quality of his documentation, that provider could actually accumulate more RVUs than a physician who sees more patients.”
On the other hand, Dr. Phill addresses the potential of seeing more patients without depending on their acuity to generate more RVUs.
“It helps our hospitals more if we emphasize speed and efficiency,” he said. “Seeing higher acuity patients can generate more RVUs but seeing lower acuity patients is the most efficient way to generate RVUs.”
3. Cost Per Hour
“Hospitals want to control how much they have to pay a physician per hour,” Dr. Parker said. “A facility with extremely low volume will have to pay a provider more than one with a higher volume, to make up the difference.”
Dr. Parker explains the area with an example;
“Hospital A has physician coverage 24 hours a day and sees 48 patients per day (an average of 2.0 patients per hour) with a provider compensation of $200 per hour. Hospital B has the same amount of coverage but only sees 36 patients each day (an average of 1.5 patients per hour) with provider compensation of $180 per hour. While Hospital B pays less overall, the doctor gets paid more per patient and per amount of work.”
He added that professionals’ financial efficiency would be indirectly proportional to their RVU. If there’s high profitability, an RVU will be generated.
“Ideally, if reimbursement and provider costs were equal, the practice would pay for itself,” he said. “The more imbalanced reimbursement is to provide compensation, the more likely a program will require hospital subsidy.”
How RVUs are Profitable
There are several pros and cons to using the RVU system. on the one hand, it is a very objective way to determine the value of a service. This can be helpful in setting fair prices for medical services. On the other hand, the RVU system does not take into account the unique circumstances of each patient, which can lead to some patients being overcharged or undercharged for their care.
History says that the profitable way to calculate RVU in the past was volume-based metrics. With this approach, providers are compensated according to the number of patients who visit in an hour and for the services they rendered.
With RVUs, healthcare organizations are encouraging providers to create more RVUs by compromising on their finances. This is how Dr. Phill contributed to this theory;
For example, let’s say the hospital pays doctors $100 per hour, with 75 percent guaranteed and 25 percent tied to RVUs based on acuity, volume, and how hard the doctor works. The average doctor would make the $100 hourly rate while the above-average would exceed that target.”
However, there can be some reasons why someone can earn a low RVU which is a disadvantage for some providers. Hospitals and practices where there’s relatively lower patient fluctuation and a smaller number of patient turnover will create lower relative value units.
“If I only see 15 patients per shift as opposed to a provider who sees 25 or more during his shift, I would be at a disadvantage if my compensation was based, in part, on RVUs,” Dr. Parker said.
To reduce the effects of smaller RVUs on health organizations, Dr Phill suggests having a flat-hour rate accordingly.
It is apparently possible to provide value-based services and get a higher return. To determine RVUs for healthcare providers, healthcare facilities have to ensure that providers are providing the required patient care. Hospitals and practices should consider Dr. Phill’s advice to have safe and effective RVUs implementation.