You probably already know that Medicare payments are based on relative value units (RVUs) assigned to each CPT®/HCPCS code. But, the 2012 National Physician Fee Schedule Relative Value File contains no fewer than 10 columns listing various RVUs. This may leave you wondering: Exactly which of those RVU figures does CMS use to determine payments?
RVU Totals Are the Sum of Three Parts
Payment rates for an individual services are based on the sum of three separate RVU categories.
1. Work RVUs “reflect the relative levels of time and intensity associated with furnishing a... service and account for approximately 50 percent of the total payment associated with a service,” according to CMS’s Medicare Physician Fee Schedule Payment System Fact Sheet. These RVUs are specifically to pay for physician effort. All work RVUs must be reviewed (and may be changed) at least once every five years.
2. Practice expense RVUs reflect the cost of nonphysician labor, and expenses for building space, equipment, and office supplies.
3. Malpractice RVUs are meant to cover the cost of malpractice insurance for each procedure/service. These typically account for the smallest overall contribution to the total RVU value of a given procedure/service. Malpractice RVUs must be reviewed (and may be changed) at least once every five years.
PE RVUs Depend on Place of Service
Work RVUs and malpractice (MP) RVUs for a particular code are consistent across all places of service. For example, the work RVUs for 10021 Fine needle aspiration; without imaging guidance are 1.27, regardless if the service is provided in the physician office, an inpatient hospital, or any other health care setting. Similarly, the MP RVUs are 0.22 regardless of the place of service.
Note: All RVUs in this article are based on the most recent 2012 National Physician Fee Schedule Relative Value File, which can be found on the CMS website.
Because the expense of providing a service may differ depending on where the service is provided (facility vs. non-facility), practice expense (PE) RVUs also may change depending on where the service is provided. To account for this, the Fee Schedule lists separate columns to describe “facility” and “non-facility” PE RVUs.
The Fee Schedule also provides separate columns listing “transitional” PE RVUs and “fully implemented” RVUs. As the CMS Fact Sheet explains, “For CY 2011, indirect cost data that are used in the calculation of PE RVUs for most specialties were updated using the American Medical Association’s Physician Practice Information Survey (PPIS) data. The PPIS is a multispecialty, nationally representative indirect PE survey of both physicians and non-physician practitioners. Its use is being transitioned over a four-year period beginning in CY 2010.”
In other words, the “transitional” RVUs reflect the current PE payment; while the “fully implemented” RVUs reflect what the PE RVUs will be the end of the transition period (2014). The PE RVUs will be adjusted over each of the next three years until they reach the fully implemented amounts.
Returning to our example code 11021, in the facility setting the current (transitioned) RVUs are 0.64; in the non-facility setting (e.g., physician office), the current RVUs are 2.7. In 2014, these values will increase to 0.64 RVUs and 2.77 RVUs, respectively.
Sum the Parts for RVU Totals
To find the current total RVUs for a particular code, you would add together the work RVUs, malpractice RVUs, and the transitioned PE RVUs appropriate to your site of service (facility or non-facility). The Fee Schedule lists these values for you (as well as the 2014 projected totals, including the fully implemented PE RVUs).
The difference in the total RVUs for the facility and non-facility settings is a function of the different PE RVUs assigned for each setting. If you’re billing 10021 in the physician’s office, the total RVUs on which you will be reimbursed are 4.19 (1.27 work RVUs + 0.22 malpractice RVUs + 2.7 transitioned non-facility PE RVUs). In the facility setting, the total RVUs are 2.07 (1.27 work RVUs + 0.22 malpractice RVUs + 0.58 transitioned facility PE RVUs)
GPCI Account for Regional Cost Differences
The Physician Fee Schedule is a national fee schedule, but the cost of livingand of practicing medicine and providing medical servicesvaries from one location to another. To account for these differences, CMS applies separate Geographic Practice Cost Indices (GPCI) to each of the three relative values (work, MP, and PE) used to calculate payment. CMS is required to update the GPCIs every three years, and to phase in changes over two years.
The easiest way to find GPCIs for your location is by using the Physician Fee Schedule Search tool. The tool allows you to search by code, locality (e.g, Baltimore, Los Angeles, Topeka, etc.), and type of information (e.g., RVUs, pricing information, or GPCIs).
For example, if you’re in Atlanta and want to find the GPCIs for your area, you can select “GPCI” from the “type of information” pull down menu and “Atlanta, GA” from the “locality” pull down menu. The results will show you that the “work GPCI” for Atlanta is 1.006, the “PE GPCI” is also 1.006, and the “MP GPCI” is 0.890. The average GPCI value is 1; therefore, we know that work RVUs and physician expense RVUs are paid slightly higher than average in Atlanta, while malpractice RVUs are paid at a lower than average rate.
Apply the Formula to Determine Final RVUs
To determine the true, total RVUs for a procedure or service in your area, you would apply the following formula:
(work RVUs x work GPCI) + (PE RVUs x PE GPCI) + (MP RVUs x MP GPCI)
To ensure accuracy, you must be sure to select the transitioned PE RVUs for your place of service (facility or non-facility).
For example, if you want to determine the final RVUs for 10021 when provided in a physician office in Altanta, you would apply the formula as follows:
(1.27 work RVUs x 1.006 work GPCI) + (2.7 transitioned non-facility PE RVUs x 1.006 PE GPCI) + (0.22 MP RVUs x 0.890 MP GPCI) = 4.18962 RVUs
In the facility setting, the total would be found by applying the same formula, but using the facility PE RVUs:
(1.27 work RVUs x 1.006 work GPCI) + (0.58 transitioned non-facility PE RVUs x 1.006 PE GPCI) + (0.22 MP RVUs x 0.890 MP GPCI) = 2.0569 RVUs
To demonstrate how locality affects the GPCI amounts (and thus the overall RVU total), let’s consider one more example, using a Seattle physician’s office as our location. Note how the GPCIs (found on the CMS lookup tool) differ:
(1.27 work RVUs x 1.020 work GPCI) + (2.7 transitioned non-facility PE RVUs x 1.098 PE GPCI) + (0.22 MP RVUs x 0.785 MP GPCI) = 4.4327 RVUs
RVUs x Conversion Factor Gives You a Dollar Amount
To calculate payment, you must multiply the place-of-service- and locality-specific RVU total by a dollar Conversion Factor (CF).
The CF is updated annually according to a formula specified by statute. The Physician Fee Schedule Payment System Fact Sheet explains, “The formula specifies that the update for a year is equal to the Medicare Economic Index (MEI) adjusted up or down depending on how actual expenditures compare to a target rate called the Sustainable Growth Rate (SGR).” On several occasions (including for 2012), Congress has acted to revise the CF when application of the formula would have resulted in drastic reductions to the CF. Although the CF may change annually, it is the same for all places of service and localities.
From our examples above, we already know the specific RVU totals for 10021 in the facility and non-facility settings in Atlanta, as well as a non-facility setting in Seattle. To arrive at a current payment amount, we simply multiply these totals by the CF:
* Atlanta, Facility: 2.0569 RVUs x 34.0376 CF = $70.01
* Atlanta, non-facility: 4.18962 RVUs x 33.9764 CF = $142.60
* Seattle, non-facility: 4.4327 RVUs x 33.9764 CF = $150.88
For those of you who love math, here’s the entire formula to arrive at these figures:
[(Work RVU x Work GPCI) + (PE RVU x PE GPCI) + (MP RVU x MP GPCI)] x CF = Final Payment
Those of us who are less enamored of math can skip all the computation and simply use the Physician Fee Schedule Search tool to find payment information. If we select “pricing information” from the “type of information” pull down menu, select “Atlanta” as our locality, and specify code 10021, the lookup tool will tell us the non-facility and facility price for the codeand they are, as we calculated, $70.01and $142.60, respectively.
With a few clicks, we can just as easily determine that an ERCP (43260 Endoscopic retrograde cholangiopancreatography (ERCP); diagnostic, with or without collection of specimen(s) by brushing or washing (separate procedure)) in a Miami facility will pay approximately $422, or that radiological S&I of abdominal aortography (75625) in Houston pays $216.
Now, the next time you wonder about Medicare payments, you’ll know not only where to find them, but also how those payments were calculated and exactly what all those RVU columns in the Physician Fee Schedule mean.
Tags: Practice Management