RVUs translate into payments for doctors

We went over the basic categories that a doctor can be paid in the previous post (see How are doctors paid). If you decide to accept health insurance payments, understand that your reimbursements are usually based on relative value units (RVUs).

Each procedure or level of medical service a doctor provides is assigned a code for documentation (CPT). An RVU is then assigned to each CPT code. Reimbursement for each service is thus derived from a formula that is based from the RVU and the region in the country that you practice in:

Payment = GPCI(A + B + C)

A = physician work value

B = practice expense value

C = malpractice expense

GPCI = geographical practice cost index

The physician work value is a number derived from the difficulty and training required to perform a certain service. For instance, a cardiac bypass would have a higher value than an appendectomy, which would have a higher value than an in-office consultation for blood pressure management.

The practice expense value is quantifies the office costs needed for a physician to offer a service. For instance, there are costs to running an office (electricity, staffing…etc) to provide blood pressure checks. In contrast, an in-office stent procedure would have a higher practice expense value, since there are costs to maintaining a C-arm, equipment…etc.

The malpractice expense factor varies depending on the risk of malpractice and cost of coverage. Again, a cardiac procedure would have a higher value than an in-office consultation due to higher risks from the service.

The GPCI is a value to adjust for the cost of living that you are practicing medicine. For instance, the cost of living is higher in the Northeast compared to the Southeast, so the GPCI is higher in the Northeast. Note: even though the reimbursement may be higher in a certain region, this does not necessarily translate to equitable reimbursement. For instance, cost of living in Boston is about 35% higher than that of Charleston, SC. Your reimbursement in Boston may only be 15% higher.

Stay tuned for future articles to beef up your financial knowledge and be smart with your money! Questions? Sound out below!

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