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American Association for Physician Leadership
American Association for Physician Leadership

RVUs - Recent History and Background of Units of Measurement

by Max Reiboldt, CPA, MBA

September 5, 2022


Summary:

RVUs, over time, have proved to be a most useful source for measuring productivity. It is universally accepted as the standard for measuring physician and related provider productivity. RVUs serve as the basis for determining reimbursement and compensation, plus appropriate cost indicators.



Historically, productivity has been measured in various ways, including gross and net charges, gross and net collections, patient encounters, or the number of procedures within a healthcare provider’s purview. These types of productivity measures allow for inconsistencies. Further, even the definitions vary in some instances.

When RVUs were introduced, they quickly became the prevailing system for measuring and monitoring physician and related provider productivity, transcending to a reliable basis for determining reimbursement and, later, compensation. The mere presence of current procedural terminology (CPT) codes and their relationship with units of production and RVUs continue to be the most consistent and fair way of measuring productivity.

RVUs AT A GLANCE

RVUs are made up of three components: work, practice expense, and malpractice. By far, the most prominent of the three is work-only RVUs (wRVUs); they represent just over 50% of the total RVU value. The practice expense component (overhead) is worth about 44%, with malpractice at 4% percent. These percentages make up a single RVU unit.

Traditionally, RVUs (mainly, wRVUs) are converted to a compensation total via the conversion factor. This formula also applies to the reimbursement structure, though it is applied to the total RVU. The Centers for Medicare and Medicaid Services (CMS) has continued to use this methodology with some variations, such as the geographic adjustment factor or geographic cost indices. These elements adjust for cost differences based on geographical locations and also consider cost of living and social, economic, and environmental factors. The geographical practice cost indices are multiplied by each RVU component and then added to obtain the total RVU value. Thus, RVUs continue to function as a viable form of reimbursement methodology in calculations and are relevant to all areas of evaluation of performance by governmental payers and private payers alike.

RVUs AND EVOLVING MEASUREMENT

The use of RVUs began in the late 1980s and early 1990s. Their history has been one of consistent development, and today they serve as a significant part of every medical practice’s evaluation of performance and reimbursement. Beginning with the American Medical Association’s (AMA) relative value scale, RVUs have continued to be a fundamental way to measure productivity.

The relative value scale update committee (RUC) was created in 1991 to act as an advisory group to CMS and has served as a means to update RVU values by CPT code every five years. CMS has accepted most of the RUC’s recommendations for many years.

Medicare has utilized a conversion factor to derive total reimbursement not-withstanding the geographical adjustments as outlined above. Thus, RVUs have continued to evolve as the most prominent means of measuring productivity. In a value-based reimbursement system, they most likely will continue to serve as a major area of productivity measurement and reimbursement determination. (Note: We believe that even in an evolving value-based reimbursement system, volume-based payments will continue to prevail for some time and may always be the most prominent means of reimbursement.)

Thus, the uses of RVUs today are myriad, including as a:

  • Means to determine reimbursement;

  • Means to measure and evaluate provider productivity;

  • Means to measure cost;

  • Benchmarking standard for surveys;

  • Determinate of provider compensation; and

  • Basis (or foundation) for negotiating contract rates with payers.

Will each of these uses of RVUs continue in a value-based system? We believe that most or all will remain; therefore, it is important to continue to learn more about RVUs and to apply them to the day-to-day management of medical practices.

RVUs likely will continue to evolve as the industry shifts toward value-based reimbursement. Due to their flexibility and their capacity to level the playing ground, they will continue to be applicable and significant. For example, as bundled payments become a part of the value-based reimbursement structure, RVUs should help to determine how those bundled payments are allocated among the various providers. What better means is there to complete such allocations than via RVUs among those providers that generate professional fees?

It is important to note that RVUs probably will continue to have a place in our evaluation process, and value-based reimbursement will not impugn their use. Nevertheless, other forms of productivity measurement, including various units of measurement, may be considered increasingly in the future.

OTHER UNITS OF MEASUREMENT

Over time, while RVUs continue to be the predominate units of measurement, other types of measurements have evolved over the years. Let’s take a brief look at some examples.

Time RVUs

An alternative to the traditional RVU measurement is measuring value (or unit of productivity) based on the time spent delivering the service. Depending on the interest and actual utilization, time RVUs may be most applicable or even a fair method of assessment in some settings, such as when processes take more time, even though they may be awarded fewer RVUs under the standard system of measurement—such as dental procedures. The use of this methodology is especially pertinent to specialties like cardiology.

While time RVUs are not a standardized system, they may increase in prominence, as value-based reimbursement is becoming more the norm. In other words, if the time that is involved in completing a procedure or a particular encounter is more relevant (and particularly more pertinent to the value-based reimbursement structure), such units of productivity may likewise be more applicable than the standard RVU system.

Assignment of Qualitative or Non-Procedural Work and RVUs

The assignment of qualitative or non-procedural work structure awards RVUs for services not directly tied to a CPT code. We have always used these (somewhat arbitrarily) and without substantial standardization. However, when consistently applied within each setting, they may be applicable.

Activities that consume a provider’s time and do not necessarily contribute directly to a patient care revenue yet are still valuable to the overall service offering often fit this metric. Factors such as serving the community, performing leadership or administrative duties, as well as quality clinical outcomes, patient satisfaction, and effectively controlling cost are all a part of such qualitative RVUs.

Although these measures are often subjective, with more standardization within the value-based reimbursement settings, these forms of productivity may well have a greater emphasis.

Total Cost of Care and Resource Use Measurement

In 2012, the U. S. National Quality Forum endorsed the total cost of care and resource use (TCOC) measure developed by HealthPartners in Minnesota (2017).(1)

This measure essentially equates to total cost as being equal to resource use times price.

TCOC uses total cost relative resource value (TCRRV), which are units designed to evaluate resource use across all types of medical services, procedures, and places of service and facilitate the comparison of them. TCRRVs are based on weighing Medicare Severity-Diagnosis Related Groups (MS-DRGs), RVUs, and ambulatory payment classifications. They are calibrated to reflect a uniform resource value for services that require similar resources regardless where they are performed, such as a laboratory or even in a physician’s office performing EEGs, etc.

These types of measurements can be used to evaluate providers, hospitals, and health plans against their peers on their efficiency of resource use in treating similar conditions and overall care of a population. This form of reimbursement is pertinent in a value-based setting. In fact, these metrics form the essence of such a unit of measurement process evaluation.

Thus, while RVUs in the traditional sense will continue to be a significant part of performance measurement, even in a value-based structure, some of these newer forms of measurement units will become more applicable in a value-based setting.

RVUs IN A VALUE-BASED REIMBURSEMENT ERA

After considering the above variables and continuing to highlight the importance of RVUs in a value-based reimbursement structure, there are some key points to consider.

While value-based reimbursement encourages healthcare providers to deliver the best care at the lowest cost, RVUs and measurements of productivity (even those other units of measurements discussed in the previous paragraphs) will continue to be a necessary component of the overall process and evaluation. Under the value-based system, providers should focus on care management, reducing cost, collecting and utilizing data, and overall population health management. This will be done in various manners and through various mediums or vehicles. Clinically integrated networks (CINs), accountable care organizations (ACOs), medical home and the like will all be a part of this process.

Value-based reimbursement programs will include specific forms of payment tied to procedural and surgical bundles, pay for performance, and shared savings plans. Inevitably, the measurement of productivity will still be relevant, and RVUs should be accumulated, even though they may not have quite the impact on reimbursement that they do today.

Another factor to consider is how fast we will move to value-based reimbursement. RVUs may still be the predominant methodology for measuring productivity and reimbursement and provider compensation, even into the next 5 to 10 years. Why? The reason may well lie in the fact that value-based reimbursement, while being spoken about and logical, may not materialize from both the government and the commercial payer marketplace. Simply stated, if the payers do not actively and more aggressively move to value-based reimbursement, it just will not exist, and RVUs may return to the level or predominance that they hold today and have held for the past 15 to 20 years or more.

Though RVUs are expected to be in use for the foreseeable future, there may be adjustments to their structure or use. Possibilities may include incorporating a quality- or performance-based component to the total RVU.

Another consideration would be shifting the use of RVUs more to performance evaluation measures or efficiency measures, based on cost per RVU. Again, this fits the value-based model well as we will explore later in this book.

Another example of changes anticipated is using RVUs to determine the most efficient allocation of resources under bundled payment models. This could entail a new breakthrough in the utilization and importance of RVUs in a value-based reimbursement paradigm.

Finally, the changing RVU utilization could be that we recognize new and current Medicare payment CPT codes for non-face-to-face or prolonged evaluation of management services and increase the RVU values, and, thus, the payment rates for such services. Telemedicine, for example, is becoming a prominent non-face-to-face provider strategy.

As technology continues to improve, the ability for physicians and other providers to have appropriate and effective contact with the patient yet not in the same room, face-to-face, is likely. This arrangement will help to account for the types of services and time spent in value-based services, such as coordinating care, providing education to the patient and local caregiver, and working toward wellness and prevention activities.

While strictly speaking, we may be considering value-based reimbursement, applying these types of metrics and expanding definitions of RVU values (such as a quality RVU component) will continue to result in the applicability of RVUs.

CONCLUSION

RVUs, over time, have proved to be a most useful source for measuring productivity. It is universally accepted as the standard for measuring physician and related provider productivity. RVUs serve as the basis for determining reimbursement and compensation, plus appropriate cost indicators. As we move to a value-based reimbursement structure, the question of the viability and usefulness of RVUs is valid.

Collecting performance data based on RVUs will become increasingly important, not only in continuing to capture and analyze productivity, but also in using these data as at least a portion of the basis for measuring quality and clinical outcomes and related distribution formulas.

Flexibility in the utilization of RVUs under new structures—however it develops—will be necessary. New forms of unit productivity measurements may be introduced, even to the extent of including a quality component within the standard RVU derivation. In other words, what has always been a three-component RVU (work, practice expense, and malpractice premiums) may have a fourth added tied strictly to quality. That indicator will be determined based on the overall performance and outcomes of the practitioner.

Our overarching conclusion is that RVUs will continue to be relevant in our healthcare delivery system and the measurements of productivity and overall performance of physicians and related providers.

REFERENCE

  1. HealthPartners. Total cost of care (TCOC) and total resource use. HealthPartners. September 21, 2017. https://www.healthpartners.com/ucm/groups/public/@hp/@public/documents/documents/ dev_057649.pdf. Accessed August 28, 2017.

Excerpted from RVUs at Work: Relative Value Units in a Changing Reimbursement World, 3rd Edition by Max Reiboldt.


Max Reiboldt, CPA, MBA

Max Reiboldt, CPA, MBA, is the president/CEO of Coker Group. He has experienced first-hand the ongoing changes of healthcare providers, which uniquely equips him to handle strategic, tactical, financial, and management issues that health systems and physicians face in today’s evolving marketplace. Max understands the nuances of the healthcare industry, especially in such a dynamic age, and the need of healthcare organizations to maintain viability in a highly competitive market.

As president/CEO, Max oversees Coker Group’s services and its general operations. He has a passion for working with clients and organizations of all sizes and engages in consulting projects nationwide.

A graduate of Harding University, he is a licensed certified public accountant in Georgia and Louisiana, and a member of the American Institute of Certified Public Accountants, Georgia Society of CPAs, Healthcare Financial Management Association, and American Society of Appraisers. He is also a member of the American College of Healthcare Executives.



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