How are doctors reimbursed?
The Resource-Based Relative Value Scale (RBRVS) is a method used to determine how much money Medicare and health plans must pay medical providers. Medicare, under the Reagan administration, began in 1985 the development of a new, fair and more transparent fee schedule. This led to a large study, conducted jointly by researchers at Harvard University and the American Medical Association, to estimate the relative amounts of “work” that physicians contribute to the services they provide. The definition of “physician’s work” took into account the physician’s time, mental effort, judgment, technical ability, physical effort, and psychological stress.
The results of the Harvard-AMA study, published in 1988, laid the foundation for what is now known as the Resource-Based Relative Value Scale (RBRVS).
Medicare implemented the RBRVS payment system on January 1, 1992.
How doctor fees are determined
The RBRVS breaks down the total cost of providing a particular medical service into 3 components expressed in units of relative value, commonly known as RVU:
- RVU Doctor’s Job (wRVU) ~ [accounts for 52% of the cost] – Costs include the relative time, effort and skill of each service.
- VUR Physician Practice Expenses (peRVU) ~ [accounts for 44% of the cost] – Costs associated with maintaining a practice, such as rent, equipment, supplies, and non-medical labor.
- Medical Malpractice Expenses RVU (mRVU) ~ [accounts for 4% of the cost] – Medical professional liability insurance accounts.
Each of the three cost components is adjusted by geographic region that takes into account variations in market areas in the cost of living. So a procedure performed in Los Angeles is worth more than a procedure performed in Dallas.
The sum of these geographically adjusted RVUs for a particular service then constitutes the total RVU for that service.
Finally, to convert this schedule to a dollar rate schedule, the total RVU for a given service is multiplied by a “conversion factor” – a dollar amount per RVU applied to all services in the relative value schedule. .
The formula for calculating the amount of the physician fee schedule payment is as follows:
Out of Facility Price Amount =
[(Work RVU x Work GPCI) + (PE RVU x PE GPCI) + (MP RVU x MP GPCI)] x Conversion factor (CF)
The conversion factor for CY 2011 was $ 33.9764 (CF in 2012 is $ 34.0376).
For example, the amount approved in 2011 for CPT 99213 for Los Angeles, CA is calculated as:
Out of Facility Price Amount =
[(0.97 x 1.039) + (0.99 x 1.220) + (0.07 x 0.722)] x 33.9764
1.00783 + 1.2078 + 0.05054 = 2.26617 x 33.9764 = $ 77.00
The pros and cons of VUR
Benefits of using RVU:
- Useful tool to compare the relative difficulty associated with different procedures.
- Ability to compare data
- Associate the physician’s work with his or her relative time, effort, and skill needed
- Takes into account cost of living variations – higher standard of living equals higher VUR
Criticisms of RVUs:
- Payment is based on effort and does not include adjustments for results, quality of service, severity, or demand. This system leads to overuse.
- One effect attributed to the current RBRVS system is to incentivize specialists at the expense of primary care physicians (PCPs); Because specialized services require more effort and specialized training, they are paid at a higher rate. This leads to fewer people choosing to stay in the primary care field.
- The Committee for Updating the Relative Value Scale of the Society of Specialties (RUC) is largely privately run. RUC is reserved, with meetings closed to the public and uninvited observers.
- The data is effectively protected by WADA copyright, but its use is required by law.
- Although the RBRVS system is mandated by the Centers for Medicare & Medicaid Services (CMS) and the data appears in the Federal Register, the American Medical Association (AMA) maintains that their CPT copyright allows them to charge a license fee. to anyone who wants to associate RVU values with CPT codes. The AMA receives approximately $ 70 million annually from these fees, making them reluctant to allow free distribution of tools and data that could help doctors calculate their fees accurately and fairly.
Committees with influence
The following is a brief explanation of how codes are developed and priced for medical services. Our current payment system is based on procedural codes developed by a 17-member committee known as CPT editorial panel. The AMA nominates 11 of the 17 members of the group, while the remaining seats are nominated by the Blue Cross and Blue Shield Association, the Health Insurance Association of America, CMS and the American Hospital Association. The CPT Committee issues new codes twice a year.
Another committee, the Committee for Updating the Scale of Relative Value of the Society of Specialties (RUC), meets 3 times a year to establish new values, determines the Relative Value Units (RVU) for each new code and revalues all the existing codes at least once every 5 years. The RUC has 29 members, 23 of which are appointed by the main national medical societies. The remaining six positions are held by the President (appointed by WADA) and a representative from the following areas:
- AMA;
- Editorial panel of the CPT;
- American Osteopathic Association;
- Health Professions Advisory Committee; and
- Internship Expense Review Committee.
Anyone who attends their meetings must sign a confidentiality agreement.
The influence of this secret panel is enormous. CMS, which oversees Medicare, generally follows at least 90% of its recommendations in determining how much to pay doctors for their work. Medicare spends more than $ 60 billion a year on doctors and other professionals. Additionally, many private insurers and Medicaid programs also use the federal system to create their own rate schedules.