How much does it cost? In a medical practice this simple question can have a complex answer. This is a quick introduction to a common method for how professional healthcare services are priced and paid in the United States. Understanding Relative Values helps practices to set proper fees, make sure insurance companies are paying properly, and provide accurate information to to patients.
Since 1992 (a relatively short time) the United States has established a uniform method to describe, track, and pay for professional services using the Resource Based Relative Value Scale (aka RBRVS). This scale includes Relative Value Units (aka RVUs). The goal of RVUs is to provide simplicity to one area of a very complex healthcare system. Once you have become familiar with RVUs they can become extremely useful for many purposes including helping make sure your practice is properly paid. This is an introduction to RVUs and we are admittedly only brushing the service of this topic.
The Resource Based Relative Value Scale (RBVRS) includes a lot of information. The 2016 file includes 30 fields for each procedure code. Don’t worry – most practices only need to use a small amount of the information in the file. For this article we only are referring to the Total Relative Value which is made of the following three components:
Work
- The Work RVU takes into account the time, skill, training, and intensity of providing a given service.
Practice Expense
- The Practice Expense takes into account the overhead cost required to provide the service. This includes rent, equipment, supplies, additional staff, etc. This component has two values based on where the services are provided. If provided in a Non-Facility the value is greater since the provider is responsible for the overhead. If provided in a Facility setting the value is lower since the provider is not responsible for the overhead.
Malpractice Expense
- Some services have greater risk. In order to perform the procedure the provider must have the proper professional liability coverage. The higher risk the procedure the higher the cost of liability insurance.
These are the three components included in an RVU. There are other elements that can be added to these values to increase or decrease payment.
Why care about Relative Values?
What is paid for Medical Services is rarely related to what is charged. For simplicity let’s assume two patients receive identical services charged at $200 with a Relative Value of 2. Each patient has insurance coverage from differing companies and each is responsible for 20% of the contracted rate.
- The coverage for Patient 1 will pay the doctor at the rate of $75 per Relative Value Unit (RVU) and the patient is responsible for 20% of the contracted rate. This means the contracted rate is $150 ($75 X 2) and the insurance company will pay $120 leaving $30 as the patient’s responsibility.
- The coverage for Patient 2 will pay the doctor at the rate of $36 per Relative Value Unit (RVU) and the patient is also responsible for 20%. This means the contracted rate is $72 ($36 X 2) and their insurance company will pay $57.60 leaving $14.40 as the patient’s responsibility.
Even though the payment amounts are drastically different ($150 vs $72) both patients received the same services and both were correctly paid. Being familiar with how to properly use Relative Values in a Medical Practice is extremely useful and helps assure services are correctly paid. There are many other items that can properly increase or decrease payment. We assist the practices we serve to make sure their fees are appropriate and insurance companies are correctly processing claims. We even have a few different tools to assist front office staff to provide accurate estimates to patients at the time of service. Contact us today if you would like assistance in setting your fee schedule or would like to learn more about our services.
Here are some links to access Relative Value files and also pricing files common for medical practices in Oregon. (These links are always in motion – If you find that a link is not working correctly please notify info@mmsspro.com and we will make the update.)
Centers for Medicare and Medicaid – Fee For Service Relative Value Files
Medicare Average Sales Price – Information for Drug Pricing
Medicare Physician Fee Schedule for Oregon
