Most people know that doctors in the United States take home a hefty paycheck, but have you ever wondered how exactly they make their money or why some doctors make more than others? The answer is Relative Value Units, or RVUs. But what are RVUs and how are they calculated?
In this guide, we’ll break down RVUs, including the different types of RVUs, examples of how they are calculated, and the pros and cons of the RVU system.
What Are RVUs?
RVUs, or Relative Value Units, are used by medicare and insurance companies to determine how much a physician should be paid for their services based on time spent with the patient. Although there are many benefits and drawbacks to this model of medical pay, which we will explore later in this article, it’s important to note that almost everyone encounters RVUs.
There are three different types of RVUs.
1 | Work RVUs
First is Work RVUs, or wRVUs, which represent the relative amount of “physician work” required to perform a particular service or procedure. If you found that extremely vague, well, it’s supposed to be.
Since this is the bread and butter of how a physician is paid, it’s purposely vague so that it can include everything from a 20 minute office visit with a new patient to a major operation, such as inserting a deep brain stimulator.
A plethora of factors determine how much physician work is required for each service and procedure, including how long it takes for the doctor to perform the service, how much effort and technical skill it requires, and how much stress is involved.
2 | Practice Expense RVUs
The second type of RVU is practice expense RVUs. These are designed to cover the cost of running a clinic or hospital, dealing with expenses like rent, utilities, medical supplies, equipment, and support staff salaries. Without these RVUs, most clinics could not afford to keep the lights on.
3 | Malpractice RVUs
The third and last type of RVU is malpractice RVUs. This accounts for the relative cost of malpractice insurance associated with providing a specific service.
For example, inserting a deep brain stimulator is much more risky than a 20 minute appointment with a new patient. Because a neurosurgeon is taking on more risk than a family medicine physician, their malpractice RVUs are higher.
When you combine work RVUs, practice expense RVUs, and malpractice RVUs, you get total RVUs.
The Creation and Update of RVUs
So who uses RVUs? Medicare!
Because of the current setup of the American healthcare system, what Medicare decides to do is what many commercial insurance companies will follow. Although the US healthcare system is anything but simple, healthcare payments run more smoothly because everyone uses RVUs.
So who determines all of this? The Relative Value Scale Update Committee (RUC) determines RVUs. Technically, the RUC is a private committee that gives recommendations to Medicare—recommendations that are almost always accepted in their entirety.
AMA leads this committee, which includes representatives from every medical specialty. The committee looks at survey data from each specialty to see how long it takes doctors to perform a certain CPT code. Then, the committee votes to determine whether the RVUs for each CPT are fair or need to be adjusted.
How Are RVUs Calculated?
Now that we have a basic understanding of RVUs, we can calculate how much Medicare pays for a particular service. We will do two calculations: one for a routine primary care visit and one for intensive surgery.
However, before we can do the math, we must discuss medical codes and reimbursem*nt rates.
Medical Codes & Reimbursem*nt Rates
If you’ve ever seen a medical bill, you might have noticed a string of random numbers attached to each service. Each code is attached to a different number of RVUs based on how much work it takes to perform the service (work RVU), how much it costs the facility to offer that service (practice expense RVU), and how much liability the physician takes on to perform that service (malpractice RVU).
Reimbursem*nt rates are simpler. These are the dollar value for each billed RVU, meaning how each RVU is converted into money. At the time of this article, Medicare has set the RVU to dollar conversion rate at $33.2875 per RVU. Insurance companies have their own conversion rates, often in the range of $45 to $75 per RVU.
Routine Primary Care Visit
The first example is an “established patient office visit that lasts between 20 minutes to 29 minutes.” The medical code for this is 99213.
The Centers for Medicare and Medicaid Services (CMS) determined this code receives 1.30 work RVUs, 0.56 practice expense RVUs (called Fully Implemented Facility PE RVU on CMS), and 0.1 malpractice RVUs (called MP RVU).
Adding these together gives a total of 1.96 RVUs. With a reimbursem*nt rate of $33.2875, the physician should expect $65.24 every time they enter a 99213 code.
Many encounters often involve multiple services being provided. For example, the doctor could check your ear for an ear infection (medical code 99203), consult the patient on smoking cessation (99406), and perform a mental health assessment (90791) all in one visit. This means for a 20 to 29 minute appointment, the physician will likely make more than $65.24 for their services.
Intensive Surgery
The second example is the resection of an apical lung tumor. The medical code for this is 32503.
CMS determined this code receives 31.74 work RVUs, 13.42 practice expense RVUs (Fully Implemented Facility PE RVU on CMS), and 7.84 malpractice RVUs (MP RVU).
This results in a total of 53 RVUs or $1,764.23 for performing the surgery needed to remove a particular type of lung tumor.
This means if you are a primary care physician and you spend one hour with a patient, you might earn 3.5 RVUs. If you are a surgeon performing an operation that lasts an hour, you could earn 10 RVUs. Therefore, the surgeon would be paid an additional 6.5 RVUs (or $216.36) for one hour of work.
However, not all physicians pocket the entire 100% of the RVU they make. If the physician is in private practice, they keep everything, but they also need to pay for a number of expenses involved in running the practice.
If they work at a hospital, the hospital keeps the RVUs, and pays the doctor a predetermined salary. This salary is often created based on the average RVUs they generate per month. Minimums need to be hit, and often, if a physician goes above their set monthly goals, bonuses are added to their pay. Legal bonuses are often noted as “other reportable compensation.”
If you have a medical bill lying around and want to see how much the physician was paid for the service you received, go to the US government Search the Physician Fee Schedule website. For the MAC option, you can select “specific MAC” and search for your region to get a more accurate number. The website will give you the number of each type of RVU associated with the service you received.
The Pros and Cons of an RVU System
So, what are the benefits and drawbacks of using this system?
Benefits of an RVU System
The main benefits are standardization, transparency, and incentivizing efficiency.
Since both Medicare and insurance companies use RVUs to determine how much to reimburse, the entire process becomes smoother. If the government and commercial insurance companies were using completely different tools to determine how much physicians should be paid to take care of their patients, things would get messy fast.
Regarding transparency, the number of RVUs associated with each medical code is public information; anyone can search it. This helps ensure physicians are fairly compensated for their work and that patients understand how the hospital or clinic created their medical bill.
Lastly, because RVUs are the main method of payment for physicians, many physicians optimize their practices to generate as many RVUs as possible, meaning they will try to see as many patients as they can.
Some might argue that incentivizing efficiency is a negative, but that gets into a hot button topic within the medical community surrounding “volume based care” versus “value based care.”
Drawbacks of an RVU System
There are three main cons to RVUs: Variability of reimbursem*nt rates, complexity, and misalignment.
If you have ever worked as a scribe or medical assistant, you might have heard physicians complaining about reducing reimbursem*nt rates. Because RVUs are converted to dollars, if the conversation rate is low, doctors will make less money for the same amount of work. This year-to-year variability can make it difficult for hospitals and clinics to make long-term plans as they might not have the same cash flow the following year.
Complexity is a serious problem for the RVU system. Unless you take the time to learn how it all works, you might feel that the amount of money a doctor charges for their services is completely arbitrary. However, reading this article means you have a better understanding of this system than the vast majority of people.
The last and most serious drawback to the RVU system is the potential for lower quality of care for patients. Critics of this healthcare model often argue that fee-for-service care unethically incentivizes physicians to focus on quantity over quality.
Since the RVU system prioritizes the number of patients a physician sees, the number of services provided, and the complexity of those services, it can undermine the quality of patient care.
Fraud can and frequently does occur, as there is a financial motive to perform as many tests and procedures as possible, even if those tests are not medically necessary. This has undeniably negative consequences for patient care, hospital resources, and taxpayer dollars.
Based on the calculations above, you can see how procedure-based specialties often generate more RVUs, even if the physicians spend the same amount of time with their patients. The current RVU system heavily incentivizes medical students to enter higher RVU-generating fields, as they will likely make more money throughout their careers.
Choosing the Best Path for You
RVUs determine both how much patients are paying for the medical services they receive and how much physicians are compensated for their work. While the current system does encourage medical students to pursue specialties that generate a higher RVU, it’s essential to note that a lack of passion and enthusiasm for your work means you’re very likely to experience unhappiness, depression, and burnout. At the end of the day, no amount of money is worth that.
Burnout is a huge concern for medical students as well as practicing physicians, so the most important thing is picking the specialty that will give you the most personal satisfaction instead of the one that will maximize your income.
If you’re a medical student (or proactive premed) trying to choose a specialty or subspecialty, check out our So You What to Be… series, which provides insight into what it’s like to pursue different specialties. We have dozens of articles and corresponding YouTube videos. If you don’t see a specialty you’re interested in, leave a comment below to make a request.
