As I am on the road moving from the east coast to the west, I wanted to review an old topic that we’ve discussed here before. In today’s podcast we cover the topic of RVUs in the context of an interventional pain practice. We talk about the history of RVUs, how they work with reimbursement between medicare and commercial payors, the different components that make up an RVU calculation, and what pain doctors should consider when they think about their own clinical productivity.
What’s up everybody? Welcome to episode 49 of the anesthesia success podcast. I’m your host Justin Harvey. I am very excited to be kicking off a the first than a two part series helping pain management positions, especially this is also true in anesthesiology to a lesser degree understand productivity compensation specifically as it relates to RV use. So today we’re going to do a deep dive on what our views are, how they are determined, how it functions in the context of a practice. And then next week we’re going to talk about using RV use as a mechanism to understand physician compensation. And then we’re gonna look at income benchmarking, negotiating employment agreements, those types of things. There’s been a couple considerations that have been an impetus for this two part series. The first is I’ve been looking at a lot of pain contracts lately. Understanding overuse is essential to being able to understand how much am I going to get paid as a physician, whether or not it’s a directly cited, you know, mechanism in a contract or relative value unit or whether it’s a derivative payment scale that is still based on RV use.
The RV use would be the underlying a chassis. So we’re going to talk about what our views are, hopefully clear up some misconceptions and maybe you learn a little something new. Last week was the episode with dr NORML Abraham. She’s one of these people that really understands medical billing very intimately and what I’ve seen is that person after person after person, many of the physician leaders in the pain management space really do understand the operations and the billing behind pain management. So for physicians who want to get a good deal or even a fair deal when it comes to compensation, when it comes to career questions, understanding the billing, understanding the function of, in this case the RVU is going to be really, really helpful. So I would also say in the show notes for this week anesthesia success.com/ 49 I’m going to have a lot of different resources there that I’m citing today.
Today’s conversation is going to be a little more technical for anybody listening out there. I would encourage you to check out the YouTube video of this discussion. So if you check me out, Justin Harvey, I have a YouTube channel with anesthesia success, you’ll find this content there where there’s going to be some visual AIDS to just guide our discussion, which is going to be a little bit technical, a little bit number heavy at times. So without further ado, let’s dive in. We’re going to talk about RV use relative value units. So here’s where we’re going to go for today’s discussion. The first is we’re going to talk about the history of what our views are. Second, we’re going to talk about the of the RVU calculation to say what are the elements that make up the total amount that a practice can bill for a certain procedure or a certain bit of care for a patient.
And then finally we’re gonna look at some real world calculations of how the RVU calculation works and what number it yields and what percentage of that belongs to the doctor or is due to the physicians labor versus other components. And let me make a disclaimer. At this point, I am not a technical expert in medical billing. I am interested in it and conversant in it because it impacts a lot of my clients. So I work really hard to understand it. I’ve done a lot of research for today’s content, but please, this is no substitute for having a qualified practice consultant or a medical billing consultant answer these questions in greater detail for you to the extent that you need to rely on that level of insight. So the history of the RVU system, our views are maintained by CMS, the RVU system by center for Medicare Medicaid services.
This was founded the current format for the way our views work was started in 1992 as a way to value physician labor and other treatment costs associated with patient care. It was set up in conjunction with the AMA and a Harvard study that created this new system in which our views have a place. So governing the value of the RVU. The relative value unit is this committee called the RUC, which is the relative value scale update committee, relative value scale update committee. This is a a committee of 31 physicians from all different specialties as well as some other rotating physicians that formed this consortium and association where they, every year they hammer out any changes necessary in the RVU system, the way that procedures, the way that treatment is valued, and they assess any changes to the values of a procedure over time. So if a practice gets paid X number of dollars for doing a certain procedure this year based on feedback from the RUC next year, they may be up 10% or down 10% or 30%.
There can be significant changes in the value of procedures over time. And this is actually a very can be very contentious and political and that that sort of goes down a rabbit trail that we’re going to avoid. At the moment. But the way that this works is the RUC creates recommendations that they pass to CMS. CMS will take that under advisement and make any changes to the RVU system and the values therein as it sees fit. And there’s a baseline value right now for an RVU that grows over time, but currently it’s around $37. So for every RVU that a physician earns, it creates this credit with a Medicare that says, you know, Medicare is going to pay you $37 for that based on the service or the procedure that you did for that patient. Now that payment isn’t going to the doctor, that payment is going to the practice and then the practice takes those payments and slices and dices and pays the physician some agreed upon amount.
That’s in most cases, well I should say is in some way derived from the amount of revenue that they produce. So if you saw a patient just for very basic math, if you saw a patient and he did five RV use worth of patient care, Medicare would pay your practice. Assuming this is a Medicare patient, Medicare would pay your practice five times $37 for the value of your time. So in that case it’s five times 37 is 185 bucks that your practice would get for the value of your time for helping that patient. In that instance. Now this is with Medicare, so obviously Medicare is not the only payer out there, but CMS and Medicare, they are the benchmark. They set the bar and then all other payers in most cases are going to be some price in relation to the Medicare pricing.
What we see is that commercial payers actually pay a premium in many cases and there’s a loose relationship between the more interventional. The procedure though, the higher the premium could be between 55 and $70 per RVU is what a commercial payer might pay for that same procedure. So if you’ve ever heard the term payer mix, we want to understand what the payer mix is of a certain practice. We’re talking about what percentage of patients utilizing a practices services are Medicare or Medicaid versus commercial payers or maybe workers’ comp. Each of those payers is going to have its own level of reimbursement based on the benchmark rate of that $37 per RVU. That’s set by Medicare. So I’m talking about RV use in general there. There’s a couple of different types of RVU. So let’s get more specific. The work RVU is the RVU, the relative value unit that’s associated with the physician’s time and expertise that it takes to do a certain procedure or to give patient care in a certain way.
There’s two other types of RV use. The first is practice expense RVU, which is just the overhead expenses of maintaining a practice, paying the person at the front desk keeping the lights on, the utilities, all that stuff. And then there’s a third RVU that is the malpractice RVU. So it’s what is the malpractice liability associated with any specific procedure or specific amount of you know, medical care. And so what happens is for the very complex, very risky procedures, the, the way that these three factors are configured relative to one another is going to be very different. Versus if it’s just an office visit where somebody comes in and you talk to them for 10 minutes and then they leave, there’s very low malpractice risk there. So the way that these terms apply the RVU is by CPT code. So CPT, common procedural terminology, everything that you can do in a you know, in a medical care setting is defined by a CPT code.
If you can’t do a CPT code for a thing that you did for a patient, then you can’t bill for it. So CMS, whenever they’re setting the RVU recipe, what they’re doing is saying for every different CPT code that a physician can provide care. What is the appropriate number of RV use to assign to each CPT code. So I want to look at just a common CPT code used in interventional pain management. So we’ve got the lumbar epidural steroid injection as a sort of a baseline example. There’s three components to this total RVU calculation to figure out how much money is the practice going to get paid for this type of procedure. And these are 2015 numbers. By the way, this is a little bit out of date, but the principle holds. What we see is that the work RVU is equal to 1.5 for RV use.
The practice expense, our view is 0.9 RV use and the malpractice RVU is 0.92 so that equals a total of 2.58 RV use. So again, 2.58 is going to be a number that was derived based on the work that the RUC does and they advise the CMS and CMS says, okay, we think that every time someone receives an epidural steroid injection, it should be worth 2.58 work RVU. And that is the breakdown between the work RVU, the practice expense RVU, and the malpractice RVU. And so if we follow the math, that means 2.58 RV use times $37 equals 95 46. So what that means is that Medicare is willing to pay $95 and 46 cents for a patient to receive this type of care. And so that is the baseline, the benchmark, the, the amount from which all other payers are going to evaluate how much they’re willing to pay for that same procedure.
So if we take a commercial payer, and I just made these numbers up cause it, it’s going to vary based on a number of different factors. But if a commercial payer pays some margin above what Medicare is willing to pay, you can see how big this difference is, where it’s that same 2.58 RVU, but maybe they’re paying $61 per RVU rather than the baseline 37 and that equals 157 bucks. So a practice who’s doing these types of patients with the commercial payer is going to be reimbursed at a higher level than someone who’s doing primarily Medicaid. So one thing to note is that, and I mentioned this before, but I just want to circle back, the higher the amount of complexity, the higher the amount of technical expertise required, the higher the RVU is going to be. So obviously this work RVU 1.54 that means that in order to do his epidural steroid injection, there’s not a ton of expertise required compared to some other more complex procedures that a physician might do.
If they’re doing something more complex that takes a longer time, that takes more specific training, that number could be much higher. So that is the beginning of how this RVU calculation works. Now there’s one more element that I want to introduce a, and it’s called the geographic practice cost index. So each RVU, the work RVU, the practice expense RVU, and the malpractice RVU has its own GPCI coefficient. What this means is that if you’re practicing and you know Manhattan, there’s a different set of variables as far as how much the physician’s labor is worth, how much it’s going to cost you from a practice expense standpoint to be able to maintain care and what the malpractice liability is. If you’re in a part of the country where every third person is an attorney and it’s very, very litigious, the malpractice coefficient for RVU is as much higher.
So this is a baseline example that we talked about before. The lumbar epidural steroid injection, 62 three 11 this is the baseline numbers for if every one of these, the GPCI coefficients equals one. This is the baseline. This changes based on geographical locale and each of these variables is going to change independently. They’re not necessarily all linked. Like in New York, everything is more expensive, but it’s not necessarily the same ratio, more expensive than each of these for each of these different categories. Ironically, the work RVU changes very, very little. So between New York or Dolan, Iowa, or somewhere in the Midwest, the work, our view moves between a pretty narrow band, whereas for practice expense and for malpractice, we can see it move multiples. So it’s a much, there’s a much bigger swing. And specifically, you know, if I go back to that equation, this is what the real equation might look like.
Or, or again, this is going to be still a simplified version, but it’s the work RVU times the work RVU coefficient for the geographic adjustment. And then practice efficient practice expense, RVU times the practice expense, RVU, geographic adjustment, and then the malpractice RVU times the malpractice adjustment equals the total number of RV use. And so what we see, if we go back to our baseline example where if you’re doing this epidural steroid injection at a place where the GPCI is neutral and it’s one all the way across the board, and that’s 2.58 RVU. If you’re doing that same procedure in Manhattan, each of these different equate each of these different RVU amounts are going to be different. So if we’re looking at Manhattan here and we’re comparing that to the original, you know, and again, I made these numbers up. This doesn’t necessarily hold to the 2015 schedule for the GPCI relationship, but the point is the work RV use don’t move that much.
They move a little bit but not a ton. And then the big difference in reimbursement is going to come from practice expense and malpractice. They may be a multiple of what you’re seeing at baseline and so the result is a practice in Manhattan is going to get credit for five and a half. Our views were somewhere and you know central Pennsylvania might only be two and a half our views, so that’s how the our views vary based on geographic locale. Now I’m taking a very simple example for something that’s only a couple of interviews. In reality, the work RV use themselves can go anywhere from essentially zero to 30 40 50 I think the highest is probably in the fifties or sixties depending on the specialty and the type of procedure. If you’re doing a very complicated, very risky type of procedure, the w and I’m talking about the work RVU only, you might have a work RVU component.
That first variable in this three variable equation, two to equal the total RV use. That work variable only could be as high as 35 45 RV use and it’s this work RVU specifically that first variable that is the operative variable. That is going to be the lever from what your compensation is going to be derived. So if you’re looking at contracts, if you’re looking at RVU targets, if you’re considering employment agreements and you have a 7,000 RVU target with a pain practice and you’re going to make $400,000 if you can hit a $7,000 7,000 RVU target, what that means is you need to produce 7,000 work RV use as a physician in order to get compensated at whatever that base level is. You can do that in terms of doing fewer very complex procedures and interactions with a patient or you can do a lot more of the more simple, more straightforward, less risky types of procedures.
You can either do volume or you can do complexity or in the real world it’s going to be a mixture of both. So that’s how the work RVU is calculated. And that’s what it means for you, the physician. So if you’re thinking about what are the ways that I want to grow income and what are the ways that I might be able to take advantage of an employment agreement and the way that it’s structured to be able to allow myself to get paid as much as I reasonably can, and as much as I ought to in the context of an employment agreement, you want to think about how do I grow my work RV use in an obviously in a responsible way that provides appropriate care. But the things you wanna think about are what types of procedures am I and can I do, can I do these more complex procedures?
Am I equipped in terms of clinical training and you know, the experience that I need to do that? If not, is there a way that I can get equipped? Are there workshops I can go to? Can I do a specialized advanced training in some of the more high RVU types of procedures to be able to have that, that type of exposure. Secondly, how efficiently am I working as a physician in order to get my RVU count up? Do I have a, an operationally dialed in clinic or office where I’ve got MAs and I’ve got NPS who are able to queue up patients efficiently and I can be very high impact in the time that I see a patient, there’s no wasted time. I’m able to administer care in a way that is very effective. The patient is happy, the doctor’s happy, and then we can, you know, have our clinic or our office or our ASC functioning like a well oiled machine or are there patients queued up and you’re, you’re getting stuck in interactions where the patient isn’t happy and you’re not happy cause you’re, you know, spending 90 minutes talking with Mrs. Jones who like whatever has some pain in their big toe and you don’t have the the, the operational efficiency that you need in order to generate more work RV use.
And finally, one way that you can think about growing your work RV you count is by thinking about our referral network. Thinking about what are the ways that you have to be able to bring patients in the door? Do you have other physicians who are going to refer you business? Do you have a marketing plan? Do you have a way to get your name out in the community so that you can raise the profile of your practice and of your own care that you provide to your patients and be able to serve more patients? Those are all ways that you can grow that work RVU number. So that’s what our views are. That’s how the work RVU is defined. And that’s the reason that it’s really, really important for a physician. If you’re able to do a lot of RV use, your practice is getting paid a lot and you’re going to be well compensated.
If you’re not able to do a lot of RV use, then no one’s going to be happy and you’re not going to be clicking on all cylinders and your employment might might not last that long. So next week we’re going to talk about how many are you? Should I be doing specifically again in interventional pain? It’s a, it’s a specialty that lends itself more to the RVU calculations, so we’re gonna say we’re going to look at income benchmarking and we’re going to look at understanding fair value. We’re going to look at how that varies by geography and all the types of questions that you want to ask. As you’re looking at contracts, as your negotiating, as you are trying to understand what are the upsides, what are the downsides of a certain employment arrangement? If I’m able to come in and I’m able to make sure I’m practicing efficiently and grow that referral network and I’ve got a lot of patients coming in or I’m able to grow my clinical expertise and do some more advanced types of procedures that are more har high RV use, we’re going to understand what are the impacts of those things in your own personal finances.
So that’s all I’ve got for today. We’d love to hear some feedback on this episode. If you have any, let me know if you have any specific questions I would love to address next week
And as always, thanks for listening to the anesthesia success podcast.