RVUs made simple, or at least understandable

Administrator tells how he does it

Been avoiding delving into the resource-based relative value unit scale (RBRVS)? That’s probably not a good idea, says Steve Dickson, practice administrator for Village Surgical Associates in Fayetteville, NC.

With Medicare’s RBRVS becoming the standard for determining provider reimbursement by both government and commercial payers, "it’s imperative everyone from physicians to office managers develop a better understanding of how this system works and integrate it into their operations," he insists.

Dickson has developed a system for creating an in-house relative value unit (RVU) database he says is so easy to use that it only requires about 25 hours of a clerk’s time, a personal computer, and a standard spreadsheet software to implement. "If I hired an outside consultant to produce a similar database for our group, it would cost about $10,000," estimates Dickson.

He now uses the system to price individual procedures, establish fee schedules, evaluate and negotiate outside contracts, and help determine physician bonuses. During one of his first projects, he found about 10% of the fee schedules for his group’s most common procedures were priced too low. "I found we had priced some procedures as much as 70% to 80% below their actual cost," he recalls.

"I do not claim this system is perfect," he admits, "but, it does give you a realistic rough cut of that it costs a practice to perform various procedures. You also get a set of baseline RVUs that can be used for any number of purposes, ranging from pricing fee schedules to evaluating noncapitated discounted fee for service, percentage of Medicare, or single conversion factor-based proposals — as well as capitated contracts."

The basic steps in creating the RVU database are:

1. Gather data. Assemble a list of all the procedures by CPT code the practice performed over the past fiscal year, plus total practice expenses during the same period.

2. Update RVUs. Each December, the U.S. Department of Health and Human Services publishes an RBRVS update that is available on disk for about $20. This disk includes all CPTs, their associated RVUs, the geographical adjustment factors, and the Federal Register discussion of the Medicare changes for that federal fiscal year. The CPTs and RVUs are in spreadsheet format on the disk, making it easy to download onto a computer.

3. Load data. Once the RVU spreadsheet is loaded onto your computer:

A. Either type in or automatically download from your information system onto Column 1 of the spreadsheet all the CPT codes performed over the past fiscal year.

B. Enter the description of those procedures into Column 2.

C. Enter your current fee into Column 3.

D. Enter the RVU for each CPT code in Column 4.

E. Enter the volume per CPT — number of times providers administered this service over the past year — in Column 5.

F. Multiply the volume (Column 5) by the RVU (Column 4) to get the total RVUs for each procedure (Column 6).

G. Add the RVUs by procedure to get total practice RVUs (Column 6).

H. Determine the cost of providing all the services performed over the past year.

I. Divide expenses by total RVUs to obtain a conversion factor/cost per RVU. Enter this number in Column 7.

J. Multiply the conversion factor/cost per RVU by the RVU associated with each CPT to determine the cost per procedure. Enter the result in Column 8.

To determine your break-even fee, divide the cost per procedure by the practice’s average collection percentage — minus Medicare and Medicaid payments. Now determine how much profit you want to tack onto each procedure and add that to your break-even cost.