Know your costs with a few points and clicks
Follow these steps to implement costing system
To illustrate exactly how a practice can use the RVU database approach to identify costs by CPT code, practice administrator Steve Dickson of Village Surgical Associates in Fayetteville, NC, has given Physician’s Payment Update readers a sample worksheet to use as a guide. The chart on p. 181 identifies a method for determining practice costs based on the Medicare RVU system.
Before you can implement this system in your practice, you must meet the following criteria:
• All office managers or administrators have access to a PC and spreadsheet (such as Excel or Lotus 1-2-3) and are familiar with spreadsheet applications.
• Your current information system captures the following data:
patient volume by CPT code;
CPT code descriptions.
It is preferable that this information can be downloaded from your medical management system into a spreadsheet.
• You have access to the Medicare RVUs. You can order the CPTs/RVUs on disk from the U.S. Department of Health and Human Services by calling (202) 512-1530. The cost is $20. The disk is updated annually around January.
Once you’ve verified that you have this information, you’re ready to start work on filling in the RVU database spreadsheet. Reference the attached spreadsheet and complete the following steps:
1. Either download from your medical system or enter manually into column 1 of your spreadsheet all procedures performed over a one-year period.
2. Enter the procedure description in column 2 (optional).
3. Enter your current fee schedule in column 3 (optional).
4. Enter the RVU for each CPT code in column 4.
5. Enter the volume per CPT (the number of times providers in your practice administered this service in the past year) in column 5.
6. Multiply the volume (column 5) by the RVU (column 4) to get the total RVUs for each procedure (column 6).
7. Add the RVUs by procedure to obtain total practice RVUs (sum at bottom of column 6).
8. Determine your costs for the year. Include all costs your practice incurred in providing services. You must decide whether you want to include physician bonuses and salaries. (Gross expenses minus bonuses = net expenses). Some practices choose not to include bonuses and salaries in their direct costs.
9. Divide the net expenses by the total RVUs to obtain a conversion factor/cost per RVU.
10. Multiply the conversion factor/cost per RVU by the RVU associated with each CPT to determine the cost per procedure. Enter this in column 7.
Once you’ve completed these steps, the fun begins. You may wish to use this spreadsheet to set your fees. To do this, divide your cost per procedure by your average collection percentage for the entire practice minus Medicare and Medicaid payments to obtain your recommended break-even fee structure. From that you can decide how much profit you want to add. This provides you with a quantitative method for developing your fee schedule. Additionally, you will be able to update your schedule on an annual basis.
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