How Are RVUs Used In Medical Practice Management?

Updated on July 26, 2022

The Relative Value Unit is one of the best tools available to doctors for managing to practice budgets. RVUs can be utilized for a variety of purposes, from selecting whether to accept a buyout offer from a hospital system to assisting in determining remuneration in a multi-physician practice.

Relative Value Units (RVU) are a component of the U.S. Medicare reimbursement system that is used to calculate how much doctors are paid for their services. The amount of RVUs delivered is frequently used in hospitals, health systems, or big group practices to determine a physician’s compensation. However, independent physicians should also pay close attention to RVUs because this information can assist you in several ways, including establishing competitive prices, negotiating payer agreements, accurately predicting payments, expanding your practice, and assessing merger and acquisition opportunities.

Why they were created?

RVU/RBRVS system was developed to increase Medicare’s reimbursement systems’ consistency while also attempting to control the skyrocketing cost of healthcare. Before that, Medicare based its payments on what is considered to be the “uniform, usual, and reasonable” costs associated with a certain service in a particular market.

How RVUs Work?

RVUs are not equivalent to cash. Instead, they represent the proportion of labor, resources, and knowledge needed by doctors to care for patients. Only after applying a conversion factor (CF) — $1 per RVU — to the total RVUs accumulated does the actual dollar amount of payment for such services become available. The CF’s annual value is decided by Congress, so it can change from year to year.

The total RVUs consist of three components:

Physician’s work: This statistic represents the amount of effort, training, skill, and time required to carry out a specific procedure. 53% of the total RVU is accounted for by the work RVU;

Practice expense: These costs include salary for staff members as well as rent, materials, equipment, and professional services.

Malpractice expense: This expenditure refers to the responsibility costs that the provider is responsible for paying. This RVU only accounts for 3% of the total and is rarely taken into account separately.

How practices can use RVUs?

Practices of all sizes can use RVUs to assess if they are being paid what their services are worth in those terms. Large medical groups frequently utilize RVUs to determine how to reward their physicians.

It can be challenging to negotiate contracts with insurance providers, therefore many practices discover they should work along with a revenue cycle management company on this duty. Giving such a corporation all the data on available practice productivity, including RVUs, can assist it in starting contract negotiations with insurers from a stronger position supported by evidence.

Although easier, other metrics for doctor and practice productivity also play a role in assessing the state of the business. This could involve the number of patients each doctor sees over a certain period or the amount of money each doctor is expected to receive from patients. It’s crucial to keep in mind that measurements should be directly related to the factors that contribute to the practice’s greatest success. Practices should consider how often and who performs a procedure if it is highly profitable. Knowing this can aid in increasing the number of patients who receive this particular procedure or improving its effectiveness and cost.

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