RBRVS Overview

Medicare and Medicaid, along with many other commercial third-party payers, use the Medicare Fee Schedule (MFS) system, based on the resource-based relative value scale (RBRVS) to determine the payment amount for various procedures performed by doctors.

Understanding the basics of how the RBRVS works is key to managing your clinical revenue stream, practice profitability, and compensation model.

What is RBRVS?

The resource-based relative value scale was first introduced by Medicare in 1992. It was enacted in part to try to reduce Medicare’s expenditures for physician services, and to decrease the variation in physician payments across different procedures, specialties, and geographic locations.

The RBRVS makes use of relative value units (RVUs). RVUs are essentially a weighted value assigned to each current procedural terminology (CPT^®) code. Each year, a committee gets together to make any adjustments to RVUs in accordance to changes in the CPT^® codes.

How Are Procedure Fees Calculated?

The RBRVS calculates fees based on three criteria:

1. Physician work (54%)
2. Practice expense (41%)
3. Malpractice expense (5%)

In other words, the formula attempts to assign a value for each CPT^® code based on how resources are utilized for a particular procedure – the consumption of a doctor’s time and effort to perform the work, the expenses consumed to do the particular procedure, and probability of malpractice exposure brought on by performing the procedure.

The value for each criterion listed above is expressed in RVUs. Each RVU is summed together and then multiplied by the Geographic Practice Cost Index (GPCI) factor. This helps account for the cost of doing business in different parts of the country.

Finally, the product is multiplied once more by the national conversion factor (CF) to give you the final dollar amount.

The entire formula looks like this:

[(RVUw x GPCIw) + (RVUpe x GPCIpe) + (RVUmp x GPCImp)] x CF = Medicare Allowable Fee

where RVU_w, RVU_pe, and RVU_m are the RVUs for physician work, practice expense, and malpractice expense, respectively.

Example

To demonstrate how these fees are calculated, let’s look at an example of what Medicare’s fee for an established patient office visit, CPT^® code 99213, in the greater Chicago area compared to Mississippi.

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The RVUs for each area is the same, but notice that the GPCI values for Chicago are higher. You would be right to assume that this is because practicing medicine in Chicago is more expensive than Mississippi.

In this example, the Medicare Fee in Chicago would is $55.37 for providing the level 3 established patient office visit for a Medicare beneficiary, while in Mississippi the fee for the same procedure would be $47.38.

Conclusion

Doctors don’t need to be coding and billing experts, but they do need to know how to document the procedures provided. And, in today’s rapidly changing healthcare environment, it’s important to understand the basics of how the third-party payers determine their payments to the physicians, such as the Medicare RBRVS fee schedule.

Medicare may represent a substantial portion of your patient mix, which subsequently affects your revenue stream. And even if you don’t, many third-party payers use variations of the RBRVS to determine their payment rates.

Understanding how reimbursement fees are calculated is helpful for working with your administrative staff and practice management team for determining budget estimates, compensation structure, and ongoing business strategy.