There are many approaches to paying physicians for their work. Some practices pay physicians a salary, while others base payment on the services a physician provides to patients. Relative value units (RVUs) are a simple option for paying physicians based on the care they provide. Here is what your practice needs to know about RVU physician compensation.
What Is an RVU?
An RVU, or relative value unit, is a value assigned to each Current Procedural Terminology (CPT) code. The Centers for Medicare and Medicaid Services (CMS) uses RVUs to determine physician payment in Medicare. RVUs do not specify a dollar amount for each CPT code. Instead, they estimate the value of a service or procedure relative to all other covered services and procedures.
RVUs are developed based on three factors:
- Work RVU (wRVU): The amount of physician work involved in the service or procedure, including the time, skills, and effort required. The estimated work RVU makes up about 51 percent of the overall RVU value.
- Practice expense RVU: The cost of supplies, staffing, facilities, and other expenses related to patient care, pro-rated for a given service or procedure. Estimated practice expense RVUs account for about 45 percent of the overall RVU value.
- Malpractice RVUs: The cost of malpractice insurance is based on the relative risk of the service or procedure. Estimated malpractice RVUs account for about 4 percent of the overall RVU value.
CMS works with the American Medical Association’s Relative Value Scale Update Committee to set and update RVUs for each service and procedure.
How Does RVU Physician Compensation Work?
Paying physicians based on RVUs is a two-part process. First, your practice must total the RVUs provided by each physician over the payment period. In most cases, a physician’s total will include only the work portion of each RVU, called the wRVU. Physicians are generally not paid based on the full RVU because many physicians do not directly pay for their own supplies, facilities, or malpractice insurance. Because each CPT has an assigned RVU and wRVU, it is simple to calculate the total wRVUs over a payment period for each physician. However, your practice must ensure that physicians quickly and accurately log all CPT codes into your Electronic Health Record (EHR) or practice management system to ensure proper payment. Because RVUs are not dollar amounts, your practice must then convert total RVUs into payment amounts. CMS sets an annual conversion factor for translating RVUs to dollars for Medicare each year. In 2022, that conversion factor is $33.59, with adjustments available to account for regional cost variations. If your practice uses the CMS conversion factor, you will pay each provider $33.59 times their total wRVUs for the payment period.
What Are the Benefits of RVU Physician Compensation?
RVU physician compensation has several benefits. Because RVU compensation is used in Medicare, it is simple for most practices to implement. RVUs, wRVUs, and the conversion factor are pre-defined and aligned with the CPT codes your practice already uses. Physician RVU compensation aligns physician pay with the work portion of Medicare payments for each service provided. RVU compensation may require some adjustments for non-Medicare payers, however. For example, private insurers may use a higher conversion factor than Medicare to pay more for each service. Your practice should align physician payments to both the service provided and the patient’s insurance type. RVU physician compensation can also be helpful for practices with a salary model for physician payment. Many salary-based practices require each physician to log a minimum number of RVUs each payment period, with bonuses available for higher RVU loads. Finally, RVU-based payment can help your practice compare productivity across physicians. Physicians with more RVUs per payment period may be more productive than those with fewer RVUs. RVU payment also encourages physicians to increase patient throughput, improving the efficiency of your practice.
What Tools Do You Need to Implement RVU Physician Compensation?
Paying physicians based on RVUs requires a robust EHR system and EHR workflows. Your EHR system must capture all CPT codes associated with each office visit. To do that, physicians have to be comfortable using the system. Your practice must also have strong workflows to ensure timely and accurate coding. Your EHR system also needs to be integrated with your other office systems. If you do not use an EHR and EPM system with built-in billing capabilities like NextGen, you will need to integrate your billing system with your EHR. Any updates to CPT codes as part of the billing process need to flow back to your EHR to ensure physician payment aligns with billed charges. You should also integrate your accounting or general ledger system with your EHR. Manually entering RVUs and conversion factors could lead to errors. Your accounting system should receive direct data transfers from your practice management system to help you calculate and disburse physician payments.
How TempDev Can Help With RVU Physician Compensation
Paying physicians based on RVU requires an up-to-date EHR system. TempDev’s NextGen experts can help you get your system ready to calculate RVU physician compensation. TempDev can also help integrate your general ledger system with your NextGen EHR and EPM to make it easy to pay your providers on time and error-free. Call us at 888.TEMP.DEV or contact us here to get started using RVUs to compensate physicians.