Strengthen your understanding of the RBRVS with our in-depth guide. We’ll cover what exactly the RBRVS is, why it was developed, what relative unit value is, how the system works, and how to determine the RBRVS fee schedule.
What Does the RBRVS Abbreviation Stand For?
RBRVS stands for resource-based relative value scale; it is the Medicare payment system that determines physician payment based on scaling resource values. This type of scaling allows for the consideration of the cost of resources necessary to provide a service. The cost of resources varies widely, influenced by technology, geographic location (i.e., rural, suburban, urban), specialty, and clinical practice.
Why Was the RBRVS Developed?
The development of this payment system is directly linked to the implications of Medicare price controls and payments of physician services in the 1970s and 1980s. In the 70s and 80s, the customary, prevailing, and reasonable (CPR) system that was used by Medicare gained fierce physician opposition as it implemented price controls to reduce program costs. These controls effectively prevented the increase (and decrease) of physician compensation for services despite significant changes in innovative clinical practice, demographics, and technology.
In the mid-1980s, proposals for a new system were submitted. Among them, a method of utilizing a relative value scale (RVS) emerged as a favorite—although faction desires differed on whether to opt for a resource-based or charge-based RVS. In a charge-based RVS, the average charge for a service provides a ranking system. In a resource-based RVS, service rankings are determined according to the service’s resource cost.
Ultimately, it was decided that a resource-based RVS had better potential to account for the fluctuations in the costs of resources over time and across specialties and geographic locations. The Centers for Medicare & Medicaid Services (CMS) funded an in-depth study conducted by Harvard from 1985 to 1991. In 1992, implementation of the RBRVS payment system began and was finalized in 1996.
While the system was created for Medicare, its applications spread over to other insurance companies. It is now widely used across specialties and healthcare facility settings.
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What Is an RVU?
Relative value units (RVUs) are units of measurement that seek to fairly and effectively measure and monitor physician and provider productivity. However, they are not monetary amounts.
What Are the Components of the Resource-Based Relative Value Scale?
The RBRVS system relies on a formula calculation of relative value units for each service (except anesthesia services which have their particular fee schedule system). Physician services are assigned and identified by their own five-digit codes which go by the acronym for current procedural terminology: CPT. According to the American Medical Association (AMA), “payments are determined by the resource costs needed to provide them, with each service divided into three components:
- Physician work
- Practice expense
- Professional liability insurance (PLI)
Payments are calculated by multiplying the combined costs of a service times a conversion factor (a monetary amount determined by CMS) and adjusting for geographical differences in resource costs.”
More about the Components
The physician work component accounts for 50.866 percent, the practice expense (PE) component for 44.839 percent, and professional liability insurance for 4.295 percent. Two of the three components are umbrella categories made up of multiple factors.
Physician work takes into consideration the following:
- The amount of time it takes to provide the service
- The physical effort and technical skill that is required to perform the service
- The weight of the mental stress in regards to the risk to the patient
- The level of discernment exercised to perform the service
The relative values of the physician work component are rigorously updated on an annual basis.
The practice expense component accounts for the resource costs for direct and indirect expenses including the following:
- Medical supplies
- Medical equipment
- Labor (clinical and nonclinical physician support staff)
- Overhead (including rent, water, electricity, internet)
Moreover, the CMS also delineates that practice expenses may vary based on facility type. As such, there are two separate RVU values in this component: either non-facility or facility. Facility RVUs apply to services administered in skilled nursing facilities, hospitals, and outpatient surgery centers. Non-facility RVUs apply to services administered in the patient’s home, a physician’s practice, or any other non-hospital setting.
Finally, the professional liability insurance component takes into account the cost of malpractice (MP) insurance variations among different specialties. This component may be identified as PLI or MP.
Do the Math for the RBRVS Fee Schedule
Adding together the RVUs of all three components for a service (i.e., work RVUs + PE RVUs + PLI RVUs) will provide you with your total RVUs for that specific service. But wait: There’s more math to be done.
The RVUs are subject to a geographic practice cost index (GPCI) adjustment, which is bound to the corresponding Medicare locality. In broad terms, the GPCI considers the geographical variations in cost of living, operating costs, labor costs, and PLI. Find your locality here.
To adjust the numbers appropriately for your geographic location, your Medicare locality provides three corresponding GPCI categories: work GPCI, PE GPCI, and malpractice GPCI. The formula for your adjusted RVUs is as follows:
- (Physician work RVUs x work GPCI) + (practice expense RVUs x PE GPCI) + (professional liability insurance RVUs x MP GPCI) = total adjusted RVUs
Remember, RVUs themselves are not monetary amounts. A conversation factor (CF) must be applied, as follows:
- Total adjusted RVUs x CF = $ (physician compensation amount)
The CF is updated annually by CMS: The current value for the 2023 calendar year is $33.89.
What about the Industry Trend toward Value-Based Care?
The RBRVS is a fee-for-service payment system, but the healthcare industry seems to be moving toward value-based care. One of the loudest criticisms of our current healthcare system is that the payment-for-service structure encourages healthcare providers—consciously or unconsciously—to see more patients and perform more services, creating a financial incentive for quantity over quality. On the other hand, the idea of value-based care proposes to tie compensation to results to prioritize quality. So how can a fee-for-service payment system function within a value-based care structure?
While the payment system and value-based care models seemingly have opposing incentives, they find common ground in a few ways. Namely, they both seek to reduce overall medical care costs and both look to measure value. Arguably, one of the best traits of the RBRVS is its ability to accept changes and updates. The three RVU components are annually updated by the CMS as are the CPT codes and the CF. It is therefore reasonable to believe that the RBRVS could be adapted in some way to account for quality and/or results. Could that mean another RVU component or index adjustment added to the formula?
We All Want Better Patient Outcomes
Whether your facility is shifting towards value-based care or not, we know that patient engagement and, therefore, safe staffing ratios remain crucial links to better patient outcomes. Nurses typically spend more time with patients than physicians, which emphasizes the impact their level of care can have. Facilities of all types across the country are grappling with staffing challenges, but by leveraging technology, you can speed up the hiring process and maintain optimal nurse-to-patient ratios.
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