© 2006, uhc and aamcpage 1 jeff l. good, mba program director, fpsc analytics and quality assurance...

© 2006, UHC and AAMC

Jeff L. Good, MBAProgram Director, FPSC Analytics and Quality AssurancePhone: 630.954.4717E-mail: [email protected]

The RBRVS System: How it can be used to manage the physician practice


Session Outline

• Quick Overview of the UHC-AAMC Faculty Practice Solutions Center (FPSC)

• History and workings of the Resource-Based Relative Value Scale (RBRVS)

• Using Relative Value Units (RVUs) for:•Calculating Medicare payments•Budgeting•Measuring Productivity

• Questions & Answers


The FPSC in Brief

Participating Institutions

• Began as UHC CPT Database in 1995

• FPSC Advisory Group created in 2000

• FPSC created in 2001

• 77 participating institutions nationwide

• 50,000+ participating physicians

• 108 unique subspecialties

• Line-item data collection from billing system

• Hundreds of performance measures


RBRVS Developed to Better Align Physician Payments with Costs

• Prior to RBRVS, physician payments based on fee-for-service methodology, in which physician reimbursement was based on CPR (customary, prevailing, and reasonable) charges

• Alarming growth rate of health care expenditures• Medicare reimbursement for physician services grew at 15% compound

rate between 1975 and 1987• Increased call for an alternate payment methodology was called for as:

• Dissatisfaction with original payment scheme grew• Expenditures for Medicare Part B continued to grow• Price freezes were put into effect on physician services

• 1985-1988 – National RBRVS developed at Harvard University (William Hsiao, Ph.D. and Peter Braun, M.D.)

• 1989 – President George H. W. Bush signed into law the Omnibus Budget Reconciliation Act, switching Medicare to RBRVS payment schedule effective Jan. 1, 1992


RBRVS System Mechanics

• Payments for services are determined by the resource costs to provide them

• Relative Value Units (RVUs) are used to rank the costs• Work RVUs updated annually• Entire system reviewed every 5 years by law

• Relative Value Update Committee’s (RUC) role• Represents specialty societies• Makes recommendations for RVU changes

• Conversion factor (CF) is used to determine payment when multiplied by total RVU; CF updated annually

• Adjustments to the fee schedule:• Geographic adjustment • Budget neutrality adjustment (BNF), if changes in schedule

change outlays in excess of $20 million


The Components of the Total RVU

Total RVU (tRVU)

Practice Expense RVU

(peRVU)

Malpractice RVU (mpRVU)

The work RVU consists of the physician’s (provider’s) time, mental effort, technical skill, judgment, stress, and amortization of the physician’s education.

The work RVU consists of the physician’s (provider’s) time, mental effort, technical skill, judgment, stress, and amortization of the physician’s education.

The malpractice RVU represents the cost of malpractice risk for the procedure.

The malpractice RVU represents the cost of malpractice risk for the procedure.

The practice expense RVU consists of the direct expenses related to supplies, non-MD labor, the pro-rata cost of equipment used, and an amount for indirect expenses. There are 2 types of peRVU:

The practice expense RVU consists of the direct expenses related to supplies, non-MD labor, the pro-rata cost of equipment used, and an amount for indirect expenses. There are 2 types of peRVU:

Work RVU (wRVU)= ++

Facility PE – Use facility value for services provided in a hospital-based setting.

Facility PE – Use facility value for services provided in a hospital-based setting.

Nonfacility PE – Use nonfacility values for non hospital-based settings (i.e., physician office).

Nonfacility PE – Use nonfacility values for non hospital-based settings (i.e., physician office).


Accounting for Geographic Differences in Costs

Geographic Practice Cost Indices (GPCI) Geographic Practice Cost Indices (GPCI)

Practice Expense GPCI

(peGPCI)

Malpractice GPCI

(mpGPCI)

Work GPCI (wGPCI)

• Payments need to be adjusted to account for cost differences from region to region

• Regional cost estimates are developed and used to develop GPCI values

• Separate values are applied to each RVU component:


The Payment Formula GPCI-adj

tRVU

wRVU wGPCI

peRVU peGPCI

mpRVU mpGPCI

GPCI-adj wRVU

GPCI-adj peRVU

GPCI-adj mpRVU

(

(

(

)

)

)

*

*

*

+

=

+

+

+= GPCI-adj

tRVU

CF*

=

GPCI-adj tRVU = Payment

($)


Example Calculations of Medicare Payments

EXAMPLE 1:EXAMPLE 1:On Dec 1, 2006, Dr. Smith provides a level 3 established patient visit (99213) in the University Hospital’s outpatient clinic (facility setting) located in Manhattan.

EXAMPLE 2:EXAMPLE 2:On Dec 1, 2006, Dr. Smith provides a level 3 established patient visit (99213) in the her physician office (nonfacility setting) located in Manhattan.

(wRVU * wGPCI) + (peRVU * peGPCI) + (mpRVU * mpGPCI) = GPCI-adj tRVU * CF = Payment

(0.67 * 1.065) + (0.24 * 1.298) + (0.03 * 1.504) = (1.07) * $37.8975 = $40.56


(0.67 * 1.065) + (0.69 * 1.298) + (0.03 * 1.504) = (1.65) * $37.8975 = $62.53

The difference in this example is the facility versus nonfacility practice expense RVU, which is determined by the site of service.


Using RBRVS for Budgeting

• The RBRVS system can be used in budgeting to:• Model subsequent year’s Medicare payments• Estimate payments for commercial payers, as

many follow RBRVS• Model revenue impact that a change in mix of

services would have on the practice


FPSC Medicare Impact Analyses• FPSC team produces a Medicare Impact Analysis each

year for participants when the subsequent year’s fee schedule is released

• Most recent 12 months data utilized• Assume same volume of services are provided in

subsequent year as current year• All payment modifications are taken into account –

modifiers, GPCI, budget neutrality adjustments• Aggregate analysis models the impact across all 70+

participants by specialty• Individual participant analyses distributed to show the

impact based on that institution’s mix of services (also by specialty)


Significant Changes in 2007’s Fee Schedule

• The RUC proposed and CMS accepted many changes to wRVU values, especially for E&M services

• i.e., 99213 work RVU increasing by 37%• The proposed increase in RVUs increased payments by

more the $20 million – adjustments required to maintain budget neutrality

• BNF will be applied by reducing wRVUs by 10.1% • The BNF reduction to wRVUs ONLY applies during

the calculation of payments• CF will decline by 5.0% as well

NOT SO FAST!!!


Applying the BNF to Calculate Payments for 2007

EXAMPLE 1:EXAMPLE 1:On Dec 1, 2006, Dr. Smith provides a level 3 established patient visit (99213) in the University Hospital’s outpatient clinic (facility setting) located in Manhattan.

EXAMPLE 2:EXAMPLE 2:On Jan 5, 2007, Dr. Smith provides a level 3 established patient visit (99213) in the University Hospital’s outpatient clinic (facility setting) located in Manhattan.


(0.67 * 1.065) + (0.24 * 1.298) + (0.03 * 1.504) = 1.07 * $37.8975 = $40.56

(wRVU * BNF * wGPCI) + (peRVU * peGPCI) + (mpRVU * mpGPCI) = GPCI-adj tRVU * CF = Payment

(0.92 * .8994 * 1.065) + (0.25 * 1.3) + (0.03 * 1.48) = 1.25 * $35.9849 = $44.98

There are a number of changes between the 2 examples. Note the application of the BNF to wRVUs for 2007.


2007 Interim Fee Schedule Analysis Example


Use of RVUs for Measuring Productivity

• Prior to development of RBRVS, many measured productivity by:

• Counting the number of visits• Counting the number of procedures performed

• This methodology did not take into account visit/procedure intensity

• RVUs, specifically wRVUs, give appropriate weighting based on the physician effort for a procedure

Count of Visits

Sum of wRVUs

Physician APhysician A

Physician BPhysician B

500 units of 99212500 units of 99212

400 units of 99213400 units of 99213

225 wRVUs225 wRVUs

368 wRVUs368 wRVUs


Know Your Cost of Practice; Use RVUs in Budgeting

MD-Related MD-Related ExpensesExpenses

wRVUswRVUs

Practice-Related Practice-Related ExpensesExpenses

peRVUspeRVUs

Malpractice Malpractice Insurance Insurance ExpenseExpensempRVUsmpRVUs

+ + =

Total Total ExpensesExpenses

tRVUstRVUs

$37.8975 per tRVU

$40.46 per tRVUYour Cost =Your Cost =

Medicare Payment (non GPCI-adj) = Medicare Payment (non GPCI-adj) =

In this example, your contracts need to

average about 107% of Medicare to

breakeven

In this example, your contracts need to

average about 107% of Medicare to

breakeven


Questions & Answers

Contact Information:

Jeff L. Good, MBAProgram Director, FPSC Analytics and Quality AssuranceUniversity HealthSystem Consortium630/[email protected]

© 2006, uhc and aamcpage 1 jeff l. good, mba program director, fpsc analytics and quality assurance...

Documents

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