By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
Health Works CollectiveHealth Works CollectiveHealth Works Collective
  • Health
    • Mental Health
  • Policy and Law
    • Global Healthcare
    • Medical Ethics
  • Medical Innovations
  • News
  • Wellness
  • Tech
Search
© 2023 HealthWorks Collective. All Rights Reserved.
Reading: Understanding RVUs | Medicare Reimbursement
Share
Notification Show More
Font ResizerAa
Health Works CollectiveHealth Works Collective
Font ResizerAa
Search
Follow US
  • About
  • Contact
  • Privacy
© 2023 HealthWorks Collective. All Rights Reserved.
Health Works Collective > Business > Finance > Understanding RVUs | Medicare Reimbursement
BusinessFinanceHospital AdministrationPolicy & LawPublic Health

Understanding RVUs | Medicare Reimbursement

Linda Ringquist
Linda Ringquist
Share
5 Min Read
Relative Value Unit (RVU)
SHARE

Relative Value Unit (RVU)Summary: Do you understand Relative Value Units (RVUs) as they relate to Medicare reimbursement? Is your physician compensation model based upon RVUs or a derivative thereof?

Contents
  • What is an RVU?
  • How are RVUs calculated?
  • Recommendations for RVU-Based Compensation

Relative Value Unit (RVU)Summary: Do you understand Relative Value Units (RVUs) as they relate to Medicare reimbursement? Is your physician compensation model based upon RVUs or a derivative thereof?

What is an RVU?

RVU stands for Relative Value Unit and is currently used by Medicare to determine the amount of reimbursement to providers. RVUs are basically a way of standardizing and comparing service volumes across all continuums. Traditionally reimbursement has predominately been based upon volume. The more services you provided, the more you earned. While this has served as a standard for many years, volume isn’t the end-all, be-all. Other factors such as acuity and skills required to perform the service have risen to the forefront. The key concept of RVUs is “relative value”. In theory, a physician who performs 3 complex surgeries would have a higher RVU than a primary care physician who sees 3 patients for wellness visits. In this example, the surgeon would receive more reimbursement.

How are RVUs calculated?

There are 3 components or separate calculations required to calculate RVUs – RVU, GPCI, and a Conversion Factor:

More Read

TIME Magazine Features Focused Ultrasound as One of This Year’s 50 Best Inventions
Doc Punished For Treating Patients Via Skype: What to Make of It?
What the Ebola Outbreak Shows Us About Modern Health Technology
Death Is Women’s Work
Getting Doctors in Your Doors

Relative Value Units (RVUs)

  • Physician work RVU (work RVU) – this is the combination of time and acuity for each service based upon individual CPT codes.
  • Practice Expense RVU (PE) – these are the expenses that go into running the practice aside from the physician time. They include things such as rent, equipment, supplies, and staff other than physicians.
  • Malpractice RVU (MP)– these are costs associated with professional liability expenses.

Geographic Practice Cost Indices (GPCI)

GPCI is used to differentiate reimbursement based upon geography. For example, the GPCI could be higher for a metropolitan city than it would for a rural area. The GPCI is calculated for each of the RVU calculations above (physician work, practice expense, and malpractice).

Conversion Factor

This component converts the RVU to a dollar unit or the amount of reimbursement.

RVUs are additionally calculated differently depending upon whether the service is facility or non-facility based. Facilities can include settings such as inpatient, outpatient, and emergency rooms. Non-facilities are generally free-standing physician practices.

According to CMS, the 2014 RVU calculations are as follows:

Payment = [(Work RVU * Work GPCI) + (PE RVU * PE GPCI) + (MP RVU * MP GPCI)] * CF

Recommendations for RVU-Based Compensation

According to Merrit Hawkins, following are recommendations for RVU-Based Compensation:

  • The KISS Principle – Keep it Simple Stupid.  Physician compensation formulas can be very complex. One of the best ways to achieve physician buy-in is with a formula that is simple, straight forward and easy to understand. In general, calculate the dollar amount associated with each Work RVU. Set a threshold or minimum for each physician to attain. Base bonuses on RVUs above the threshold.
  • Remain current with changes in RVUs and CPT Codes.  RVUs are generally tied to CPT codes, so staying current with these changes and revising RVU calculation methods accordingly will create a fluid and dynamic RVU methodology. Additionally, the formulas to calculate RVUs are updated on the CMS site at least annually.
  • Align physician goals with hospital goals. Aligning goals between the hospital and the physician will create an atmosphere of synergy, loyalty, and ultimately profitability.
  • Include quality incentives as well. The ACA and other healthcare legislation are focused on quality outcomes. These should be included when considering physician compensation models.
  • Keep the physician shortage in mind. The physician shortage is expanding rapidly due to many factors surrounding healthcare and the ability to remain profitable. Achieving buy-in for physician compensation from the beginning is critical. You can’t afford to have your physicians leave in droves due to their compensation package or the inability to understand it.
TAGGED:RVUs
Share This Article
Facebook Copy Link Print
Share

Stay Connected

1.5kFollowersLike
4.5kFollowersFollow
2.8kFollowersPin
136kSubscribersSubscribe

Latest News

uv protection in winter
Winter Sun Safety: Why UV Protection Matters Year-Round
Health
October 29, 2025
Nurse Scheduling Software
Evaluating 7 Best Nurse Scheduling Software
Nursing Technology
October 28, 2025
contamination
Batch Failures And The Hidden Costs Of Contamination
Health Infographics
October 21, 2025
Medication Management For Seniors
Simplifying Medication Management For Seniors
Infographics Senior Care
October 21, 2025

You Might also Like

patient communities
BusinessDiagnosticseHealthHealth ReformHome HealthHospital AdministrationMedical DevicesMedical EducationMedical InnovationsMedical RecordsMobile HealthNewsPolicy & LawPublic HealthSocial MediaTechnologyWellness

Top Digital Health Innovations That Will Transform Healthcare

September 24, 2013
transparency in healthcare
BusinessHospital AdministrationMedical Education

What Does Transparency in Healthcare Mean to You?

August 3, 2014

A Vision For Health Care In America

October 2, 2012
FDA mobile medical app
eHealthMobile HealthPolicy & Law

FDA Issues Final Guidance on Mobile Medical Apps

September 29, 2013
Subscribe
Subscribe to our newsletter to get our newest articles instantly!
Follow US
© 2008-2025 HealthWorks Collective. All Rights Reserved.
  • About
  • Contact
  • Privacy
Welcome Back!

Sign in to your account

Username or Email Address
Password

Lost your password?