What are Relative Value Units (RVUs)?

RVUs are the basic component of the Resource-Based Relative Value Scale (RBRVS), which is a methodology used by the Centers for Medicare & Medicaid Services (CMS) and private payers to determine physician payment.

RVUs, or relative value units, do not directly define physician compensation in dollar amounts. Rather, RVUs define the value of a service or procedure relative to all services and procedures. This measure of value is based on the extent of physician work, clinical and nonclinical resources, and expertise required to deliver the healthcare service to patients. RVUs ultimately determine physician compensation when the conversion factor (CF), dollars per RVU, is applied to the total RVU.

Under the RBRVS, physician payment for services are determined by:

1. Total RVUs

2. Geographic Practice Cost Indices (GPCIs)

3. Conversion Factor (CF)

Note: Some CPT^® codes consider additional factors, defined by CMS as professional or technical component (TC) fees.

What is the role of RVUs in a physician fee schedule?

The use of RVUs to valuate medical services reformed healthcare payment systems. Originally created as the principle unit of the RBRVS for CMS, RVUs became the foundation of the Medicare Physician Fee Schedule (MPFS), as well as the basis of most commercial fee schedules.

Prior to the implementation of the RBRVS in 1992, physicians set charge rates for the medical care they provided to patients. Price uniformity came by way of Medicare’s Customary, Prevailing, and Reasonable (CPR) charge system (similar to the Usual, Customary, and Reasonable (UCR) system used by private health insurers).

In the CPR system, Medicare defined customary charges as the median of physician’s charges for a given service and initially set the prevailing charge at the 90th percentile of the customary charges of all same-specialty physicians in a region. Medicare defined the reasonable charge as the lowest of payments received for a customary charge, or the prevailing charge, in the Medicare payment area.

Problems with CPR/UCR

Charges for the same service under the CPR system led to considerable variance in physician compensation. Individual Medicare carriers with unique policies magnified compensation disparity, with some carriers paying all providers one prevailing charge for a service, while others paid each specialty physician a different prevailing rate for that service.

Also, nothing within CPR regulations prevented physicians from raising their fees. To control Medicare costs, CMS reduced the prevailing charge from the 90th to the 75th percentile. This development, though, which linked increases in prevailing charges to increases in the Medicare economic index (MEl), left payments impervious to changes in clinical practice and technology.

To illustrate the resulting problem, CPR critics cite cataract surgery, which is among the oldest procedures in medical history, as well as one of the most common. Despite the evolution of surgical techniques that had reduced operating time, physician payments in 1985 remained in the ballpark of $6,000—and consumed 4% of Medicare’s budget—long after the cost of cataract surgery had been halved.

In addition to compensation for procedures remaining high after their costs decreased, compensation for office visits failed to keep pace with economic trends and lagged after increases in the complexity and cost to diagnose and manage patients.

Similarly, physician payments plateaued across geographic areas. Although innovations in technology and clinical practice made its way to rural areas, compensation for rural physicians overlooked advancements and held to the prevailing charges of the ‘70s.

Enter the RBRVS

In 1992, Medicare revolutionized the way it paid for physician services. Instead of basing payments on physician charges, the federal government, with help from the American Medical Association (AMA), established a standardized physician fee schedule based on relative value units.

Now in place for 28 years, the RBRVS schema is not without its critics. Among concerns, some industry experts say that compensating physicians based on effort rather than outcome could drive the overuse of high-RVU procedures. Criticism aside, though, the RBRVS proved to be a giant leap towards supporting a fair and equitable basis for physician compensation.

Understanding RVUs

Not all physician services represented by a Current Procedural Terminology (CPT)^® code or Healthcare Common Procedure Coding System (HCPCS) Level II code are created equal. Some services require a considerable investment of physician time and effort, clinical staff, and specialized equipment. Other services require inappreciable time and resources.

To implement a fee schedule built on the principle that payments for medical procedures and services should reflect the costs of providing them, CMS adopted the RBRVS, which calculates fees for each service and procedure based on a single measure—the relative value unit. Using code descriptors as vignettes, medical codes were assessed and assigned RVUs that ranked the resources used to provide the services on a common scale.

In other words, the RVUs assigned to a procedure or service compares its value relative to other procedures or services. A service with 6 total RVUs means the resources consumed in delivering that service are 6 times greater than those consumed by a procedure with 1 RVU.

For example, CPT^® code 69209 Remove impacted ear wax unilateral is assigned 0.47 total RVUs. But cleaning out a mastoid cavity is more extensive and involves more resources, which is why Medicare assigns CPT^® code 69220 Clean out mastoid cavity 2.40 total RVUs. By comparison, 69150 Extensive ear canal surgery correlates to 31.26 total RVUs.

Types of RVUs

To accurately capture the consumption of time, effort, and money involved in providing a service to patients, the RBRVS model utilizes three specific components, or types of RVUs, that, when totaled, determine payment. These RVU types measure the following:

• Work RVUs account for the provider’s work when performing a procedure or service. Variables factored into this value include technical skills, physical effort, mental effort and judgement, stress related to patient risk, and the amount of time required to perform the service or procedure. Work RVUs account for 50.866% of the total RVU for a code.

• Practice expense (PE) RVUs reflect the cost of clinical and nonclinical labor and expenses of the practice. These include medical supplies, office supplies, clinical and administrative staff, and pro rata costs of building space, utilities, medical equipment, and office equipment. Practice expense RVUs account for 44.839% of the total RVU for a given service.

• Malpractice (MP) RVUs reflect the cost of professional liability insurance based on an estimate of the relative risk associated with each CPT^® code. Malpractice RVUs account for 4.295% of a service’s total RVUs.

With recommendations from the AMA’s Specialty Society Relative Value Scale Update Committee (RUC), CMS updates physician work, practice expense, and professional liability insurance relative values annually to address changes in medicine, technology, and economy. Each year, RUC also examines new, revised, and potentially misvalued codes to determine a relative value by comparing the physician work to existing codes. Statutory mandate requires CMS to review all components of the RBRVS every 5 years at a minimum.

Note: While Medicare has specific payer systems and rules, most non-Medicare payers, including private health plans, use the RBRVS as the basis for determining payments.

Non-Facility & Facility RVUs

Because the expense of providing a service may differ depending on where the service is performed, place of service (POS) factors into reimbursement. Of the nearly 50 official places of service, each with a unique POS code, CMS makes a distinction and organizes all places of service into 2 categories:

• Non-facility usually refers to the physician’s office (POS code 11).

• Facility can refer to an inpatient hospital (POS code 21), ambulatory surgery center (POS code 24), or skilled nursing facility (POS code 31).

Regardless of POS, work and MP RVUs for a CPT^® or HCPCS Level II code remain unchanged. POS comes into play and impacts reimbursement when CMS and other payers determine that practice expenses for a service or procedure are less when delivered at a facility (compared to a non-facility).

When a physician provides certain services in a facility, the facility—rather than the physician practice—covers overhead costs (i.e., clinical personnel, equipment, supplies). In these instances, CMS and commercial payers assign 2 different PE RVUs to the CPT^® or HCPCS Level II code—a non-facility PE RVU and a facility PE RVU. Physician reimbursement, then, depends on the POS code, which tells payers where the service was performed.

For example, CPT^® code 36217 Selective catheter placement, arterial system; initial third order or more selective thoracic or brachiocephalic branch, within a vascular family is assigned 6.29 work RVUs and 1.29 MP RVUs. These values remain the same whether the procedure is performed in a non-facility or facility.

PE RVUs for this code, though, vary depending on the place of service. Medicare’s 2021 National Physician Fee Schedule Relative Value File lists 50.48 PE RVUs when CPT^® 36217 is performed in a non-facility. When this procedure is performed in a facility, PE RVUs drop to 1.96 because overhead costs are not incurred by the physician.

To calculate the total RVUs for a CPT^® or HCPCS Level II code, add the work RVUs, MP RVUs, and either the facility or non-facility PE RVUs (as applicable to your POS).

You can find POS details in the Medicare Claims Processing Manual 100-04, Chapter 26, Section 10.5.

Geographic Practice Cost Indices

Physicians in Anchorage pay twice as much for non-clinical staff as physicians in Oklahoma City. A kilowatt hour of electricity costs 3 times more in Hawaii than in Louisiana. Office space in San Francisco is 5 times higher than in Albuquerque.

With the goal of achieving fair and equitable physician compensation, CMS incorporates a geographic practice cost index (GPCI) into the RBRVS to neutralize regional economies.

For every Medicare-defined payment area, 3 distinct GPCI adjustments (work GPCI, PE GPCI, MP GPCI) are applied to the 3 types of RVUs used to calculate payment. These adjustments are updated every 3 years by CMS and account for differences in the cost of furnishing physician services across regions of the U.S.

The degree of fee variance among the 111 Medicare localities can be inferred from the following sample of GPCI adjustments:

When the corresponding GPCI adjustments of a locality are applied to the 3 RVUs types, total RVUs for a procedure can vary significantly.

For example, Medicare assigns 22.10 total RVUs for both facility and non-facility sites to CPT^® code 24341 Repair, tendon or muscle, upper arm or elbow, each tendon or muscle, primary or secondary (excludes rotator cuff). After GPCI adjustments, though, the total RVUs for 24341 performed in Georgia (excluding Atlanta) fall below the national average by 1.73 RVUs and are instead reimbursed for 20.372 total RVUs.

To determine the GPCI-adjusted total RVUs for a procedure or service in your area, apply the formula:
(work RVUs x work GPCI) + (PE RVUs x PE GPCI) + (MP RVUs x MP GPCI)

Expanding on the above example, the final RVUs for 24341 when provided in an East St. Louis physician’s office are:
(9.49 work RVUs x 0.986 work GPCI) + (10.71 PE RVUs x 0.942 PE GPCI) + (1.9 MP RVUs x 1.661 MP GPCI) = 22.600 total RVUs

Total RVUs for the same procedure performed at a Long Island hospital are:
(9.49 work RVUs x 1.046 work GPCI) + (10.71 PE RVUs x 1.223 PE GPCI) + (1.9 MP RVUs x 2.702 MP GPCI) = 28.158 total RVUs

MPFS Conversion Factor

An RVU must be multiplied by a dollar conversion factor (CF) to become a payment schedule. Medicare calculates an annual CF based on the previous year’s CF and adjusts to maintain budget neutrality. The MPFS CF trends incrementally upward each year, barring a major rescaling of RVUs.

Conversion Factor (CF)

In simplest terms, the conversion factor converts the value expressed in RVUs to dollars. It represents a constant monetary amount, meaning the annual CF is universally applied to all services and procedures for a given payment year (aside from anesthesia services, for which CMS applies a separate fee schedule methodology and CF.)

In the previous section, we calculated the GPCI-adjusted total RVUs for CPT^® code 24341 Repair arm tendon/muscle when performed in different locations. Georgia’s total RVUs of 20.372, when multiplied by the CF, translates to $660.25 in reimbursement. The same procedure in Long Island receives $912.61 based on 28.158 RVUs.

Medicare Physician Fee Schedule Payment Rates Formula

Here’s the complete formula used to determine physician compensation:
[(work RVU x work GPCI) + (PE RVU x PE GPCI) + (MP RVU x MP GPCI)] x CF = final payment

Again, the sum of the 3 geographically weighted RVU types multiplied by the Medicare CF determines the Medicare payment.

In the table below, you’ll see 4 calculations for 1 service based on 2 payment regions and 2 PE RVUs. While CMS assigns a national average of 28.18 RVUs (or $913.31 in reimbursement) to CPT^® 52317 Litholapaxy: crushing or fragmentation of calculus by any means in bladder and removal of fragments; simple or small (less than 2.5 cm), the actual fee schedule varies for each location and place of service.

The Manhattan physician receives almost $700 more when performing the procedure in the office (non-facility) versus the hospital (facility). All factors entering this fee calculation remain the same, except for the PE RVUs.

In both the facility and the non-facility, the Manhattan physician’s reimbursement exceeds the Beaumont physician’s reimbursement. The determinants in these calculations are the 3 GPCI adjustment factors.

While total RVUs differ in each instance, it’s important to realize that payments are resource based and relatively valued to achieve equitable physician compensation. Though it seems almost paradoxical, a fair and equitable fee schedule requires different physician payments to ensure physicians are paid the “same”.

Global Surgical Packages

Medicare allocates a number of post-operative days to a procedure, based on the procedure’s severity, by assigning its medical code to one of 3 global surgical packages:

• 0-Day Post-operative Period: Endoscopies and Some Minor Procedures, Codes with “000” in the MPFS

  • No pre-operative period

  • No post-operative days

  • Visit on day of procedure is generally not payable as a separate service.
    

• 10-Day Post-operative Period: Other Minor Procedures, Codes with “010” in the MPFS

  • No pre-operative period

  • Visit on day of the procedure is generally not payable as a separate service.

  • Total global period is 11 days. Count the day of the surgery and the 10 days immediately following the day of the surgery.

• 90-Day Post-operative Period: Major Procedures, Codes with “090” in the MPFS

  • One day pre-operative included

  • Day of the procedure is generally not payable as a separate service.

  • Total global period is 92 days. Count 1 day before the day of the surgery, the day of surgery, and the 90 days immediately following the day of surgery.

For billing and reimbursement purposes, all necessary services routinely furnished before, during, and after a procedure by a surgeon or members of the surgeon’s group and specialty are included in the global surgical package. The procedure code is assigned one total RVU value and receives a single payment encompassing all care associated with the procedure during the global period.

Global Package RVU Distribution

But sometimes a physician will perform only part of the global package. When reporting partial services, the total RVUs for most procedures are divided into pre-operative, intra-operative, and post-operative care.

For example, 24150 Radical resection of tumor, shaft or distal humerus is valued at 45.62 RVUs. Pre-operative care is valued at 10% or 4.56 RVUs. Intra-operative care is valued at 69% or 31.48 RVUs, and post-operative care at 21% or 9.58 RVUs.

A physician who provides only the intra-operative service will be reimbursed for 31.48 RVUs, or $1,020.26 (versus $1,477.89 for 45.62 total RVUs, had the physician provided the complete global package) for CPT^® code 24150.

The 2021 National Physician Fee Schedule Relative Value File includes the percentages for each components of the global package.

• The pre-operative portion of the global surgical package includes a history and physical examination and obtaining consents. Report the CPT^® code with modifier 56.

• The intra-operative portion of the global surgical package includes routine post-operative services provided in the hospital. Report the CPT^® code with modifier 54.

• The post-operative portion of the global surgical package includes routine post-operative services provided during an office visit after hospital discharge. Report the CPT^® code with modifier 55.

RVUs and multiple procedures

When a provider performs multiple procedures during the same surgical session, payment may be adjusted for some services. Most CPT^® code books and code lookup tools will alert you when payment adjustments apply.

Generally, a payment adjustment means that the procedure with the highest number of RVUs is reimbursed at 100%, with additional same-session procedures reimbursed at 50%. Some payment adjustments, though, involve procedure-specific rules.

If a procedure coincides with an endoscopic procedure with the same base code, the value of the base code is subtracted from the value of the second code reported. For example, codes 58562 Hysteroscopy remove myoma and 58561 Hysteroscopy remove leiomyomata both have 58555 Hysteroscopy diagnostic as their base code. If 58561 and 58562 are performed in a facility during the same surgical session, the RVUs determining reimbursement are calculated as:

• Endoscopy 1: Reimbursement for code 58561 is based its full value of 10.72 RVUs.

• Endoscopy 2: Reimbursement for code 58562 is based on its full value of 6.64 RVUs minus 4.51 RVUs for its base code 58555 (2.13 total RVUs).

• Endoscopy 1 & 2: Total reimbursement for both procedures performed in the same session is paid according to 12.85 RVUs (10.72 RVUs for code 58561 + 2.13 RVUs for base code 58555).

But if the 2 endoscopy codes aren’t in the same code family (e.g., a laparoscopic procedure and a hysteroscopic procedure), endoscopic rules don’t apply, and reimbursement is paid in full for both services.

Another payment adjustment pertains to imaging rules. When an imaging procedure is performed on the same day as another imaging procedure in the same family (i.e., two ultrasounds), the higher valued imaging procedure is reimbursed at 100% for both the professional and technical components. The second imaging procedure is reimbursed 100% for the professional component and 75% for the technical component.

For example, CPT^® code 76857 Ultrasound exam, pelvic limited is specified as an “88” code when performed with other ultrasound procedures. Therefore, if 76857 and 76830 Ultrasound, transvaginal are performed during the same office visit, the reimbursement is determined by:

• Ultrasound 1: Reimbursement for code 76857 is based on its full value of 0.74 RVUs for the technical component and 0.70 for the professional component (1.44 total RVUs).

• Ultrasound 2: Reimbursement for code 76830 is based on the full value of its professional component of 0.98 RVUs and 75% of its technical component of 2.76 RVUs. [0.98 + 0.75(2.76) = 3.05 total RVUs].

• Ultrasound 1 & 2: The total reimbursement when both ultrasounds are performed on the same day is based on 4.49 RVUs (1.44 RVUs for code 76857 + 3.05 RVUs for code 76830).
  

The last payment rule applies to procedures performed bilaterally. Many codes are considered both unilateral and bilateral, meaning that RVUs assigned to the medical code remain the same whether the service is performed on 1 side or 2. But some CPT^® codes (such as 27447 Total knee arthroplasty) are considered unilateral. When a unilateral procedure is performed bilaterally, RVUs increase according to the rules of its bilateral indicator.

Last Reviewed on June 21, 2022