How Doctors Are Paid Today: Understanding Relative Value Units (RVUs) c. 2013 Manage My Practice 1 Mary Pat Whaley, FACMPE, CPC Manage My Practice, LLC www.managemypractice.com

c. 2013 Manage My Practice 2 There was, however, a need to find a better way of paying for medical services due to: Wide geographic region-related variations in fees. A rapid rise in payments. Payments not reflecting the resources used. The disparity between physicians in different specialties receiving different payments for the same service. In The Beginningit was typical for insurance companies to pay physicians what each payer considered usual and customary or market-rate.

c. 2013 Manage My Practice 3 December 1985 The Harvard National RBRVS Study is initiated. RBRVS was created at Harvard University School of Public Health in their national RBRVS study from December 1985 and published on September 29, 1988. William Hsiao was the principal investigator who organized a multi-disciplinary team of researchers, which included statisticians, physicians, economists and measurement specialists, to develop the RBRVS.

c. 2013 Manage My Practice 4 December 1985 The Harvard National RBRVS Study is initiated. RBRVS stands for: Resource-Based Relative Value Scale

c. 2013 Manage My Practice 5 September 1988 Harvard submits Phase I of the RBRVS Final Report to the Health Care Financing Administration (HCFA) now called CMS (Centers for Medicare and Medicaid Services.) December 1989 President George Bush signs the Omnibus Budget Reconciliation Act of 1989, enacting a physician payment schedule based on an RBRVS.

c. 2013 Manage My Practice 6 November 1991 Initial Meeting of the AMA/Specialty Society RVS Update Committee (RUC) takes place: RUC Charter documents are created; RUC is approved for the formation of the Research Subcommittee, RUC Advisory Committee, and Health Care Professionals Advisory Committee. January 1992 The Medicare RBRVS is implemented.

c. 2013 Manage My Practice 7 The relative value for each medical service provided by a physician is composed of three distinct parts: A physician work component that measures the time, skill, and intensity associated with the service provided - this component accounts for 54.5% of a service's relative value. Digging Down Into the Relative Value Unit (RVU) 1

c. 2013 Manage My Practice 8 Digging Down Into the Relative Value Unit (RVU) 2 A practice-related expense component that measures average practice expenses such as office rents and employee wages and that varies on a code-by-code basis depending on whether the service is performed in a facility or non-facility setting - this accounts for 42.3% of a service's relative value.

c. 2013 Manage My Practice 9 Digging Down Into the Relative Value Unit (RVU) A malpractice expense component that reflects average malpractice insurance cost - this accounts for 3.2% of a service's relative value 3

c. 2013 Manage My Practice 10 Physician services are reported using the Current Procedural Terminology (CPT) coding system. Each CPT code has the three components and each component has an RVU. The sum is the total RVU for that CPT code. CPT codes, descriptions and other data are copyright 2012 American Medical Association. All rights reserved. CPT is a registered trademark of the American Medical Association (AMA). Digging Down Into the Relative Value Unit (RVU)

c. 2013 Manage My Practice 11 Adding the three portions together equals the Total RVU. Work RVU wRVU +Practice Expense RVU + PE RVU +Malpractice Expense RVU + ME RVU Total RVU Total RVU Digging Down Into the Relative Value Unit (RVU)

c. 2013 Manage My Practice 12 Digging Down Into the Relative Value Unit (RVU) For example: 99213 = Established patient office visit, level 3 wRVU = .97 PE RVU = 1.10 ME RVU = .07 TOTAL RVU = 2.14

c. 2013 Manage My Practice 13 Digging Down Into the Relative Value Unit (RVU) Q: How do RVUs translate into the physician payment? A: The Total RVU is multiplied by a conversion factor. Medicare has one conversion factor and other payers use different conversion factors. For example, 99213 is 2.14 Total RVUs x 2013 Medicare conversion factor of $34.0320 = Medicare payment of ~$72.83. Note that this payment will vary slightly based on locality.

c. 2013 Manage My Practice 14 A History of the Medicare Conversion Factor 1992 $31.00 1993 $31.96 1994 $33.71 1995 $36.38 1996 $35.41 1997 $35.76 1998 $36.68 1999 $34.73 2000 $36.61 2001 $38.25 2002 $36.19 2003 $36.78 2004 $37.33 2005 $37.89 2006 $37.89 2007 $37.897 2008 $38.087 2009 $36.06 2010 $36.87 $33.97 $34.03 2013 $34.0320

A Recap of Payments to Physicians Through the Years: 1980s....Usual & Customary 1990s RBRVS Intermittently..Capitation 2000s Concierge 2013.. Pay for Performance Value-based Payments Direct Pay Models Tomorrow.?????? c. 2013 Manage My Practice 15

Questions? Please contact: Mary Pat Whaley, FACMPE, CPC Practice Management Consultant Manage My Practice, LLC (919) 370-0504 marypat@managemypractice.com c. 2013 Manage My Practice 16