RVU’s are the standard unit of measure used for most CPT codes. The RVU details the value of the service provided by the Physician, Physician Assistant or other healthcare provider.
“Medicare pays physicians for services based on submission of a claim using one or more specific CPT® codes. Each CPT® code has a Relative Value Unit (RVU) assigned to it which, when multiplied by the conversion factor (CF) and a geographical adjustment (GPCI), creates the compensation level for a particular service. To understand this more fully, the calculations can be broken into three components – RVUs, the geographical adjustment and the conversion factor.
Relative value units (RVUs) – RVUs capture the three following components of patient care.
1. Physician work RVU – The relative level of time, skill, training and intensity to provide a given service. Each CPT® code is targeted for review at least every five years to determine the work RVU for a particular service and consider if it remains the same as the value previously set. Code values can increase or decrease if the components of service have changed during the preceding years. A code with a higher RVU work takes more time, more intensity or some combination of these two. Some radiation oncology codes, such as treatment codes, have no associated physician work.
2. Practice Expense RVU – This component addresses the costs of maintaining a practice including rent, equipment, supplies and non-physician staff costs. The practice expense RVU is now calculated using a “bottom up” methodology where the direct costs of providing a service are calculated (staff time, supplies and equipment time) and indirect costs are allocated. Indirect costs are those that cannot be directly attributed the provision of a service, such as having a waiting room or a billing service. Direct costs are those that can be assigned to a specific service; a direct cost would be the actual supplies, equipment and staff time used for a given CPT code. Frequently, a CPT® code will be assigned a practice expense RVU for a facility setting, such as a hospital, and a different practice expense RVU for a non-facility setting, such as a freestanding center. Generally, freestanding radiation oncology centers receive more practice expense compensation than hospital-based centers, since the practice expense of owning and operating equipment and providing staff resources are significantly more than the practice expenses covered by the physician in a hospital setting. As an aside, the hospital is paid under Hospital Outpatient Prospective Payment System (HOPPS or OPPS) for the radiation oncology equipment and services. Hospital-based physicians are paid under the Medicare Physician Fee Schedule (MPFS) in the same manner as freestanding-based physicians. 2009 is the third year of transition to a new methodology for calculating practice expense. The new methodology will be fully implemented in 2010. Therefore, the 2009 practice expense RVUs are often described as “transitioned” or “transitional.”
3. Malpractice RVUs – These are generally the smallest component of the RVU values and represent payment for the professional liability expenses. RUC and CMS rules suggest that these expenses are to be reviewed and updated on a bi-annual basis, but in practice, that has frequently not occurred. “