Relative value units (RVUs) represent one of the most important healthcare acronyms for medical billers and coders. But what is RVU compensation, and more importantly, what is a good RVU rate, and how does RVU compensation work?
Physicians and medical administrators need to understand RVUs so that they can navigate compensation structures effectively. With that in mind, here’s an exploration of the components of RVUs, including how they vary across specialties and the good and bad of RVU-based compensation models.
A relative value unit is a standardized measure used to quantify what a medical procedure or service is worth. RVU rates are governed by federal rules. The Centers for Medicare & Medicaid Services (CMS) created RVUs as part of its resource-based relative value scale (RBRVS), which determines reimbursement rates for physicians.
So how does RVU compensation work, exactly? Revenue cycle management (RCM) personnel will sum up the three main types of RVUs associated with a particular service to determine compensation. They will then multiply this total by a conversion factor, which is a dollar amount set by the CMS that’s adjusted annually.
For example, suppose that a procedure has a total RVU of 5, and the current conversion factor is $33.06. The compensation would be as follows:
5 RVUs x $33.06 = $165.30
The CMS applies geographic practice cost indices (GPCIs) to account for regional variations in price. Each RVU component will be adjusted by its respective GPCI, which ensures that compensation reflects local economic conditions.
In RVU-based compensation models, physicians are reimbursed based on the total RVUs they generate over a specific period. This approach incentivizes productivity, as higher RVU generation can lead to increased earnings. However, it’s essential to balance productivity with quality of care to avoid overemphasis on volume.
There are three types of relative value units, and they collectively determine the overall value of a medical service. Those three types are as follows:
Work RVUs (wRVUs) account for the physician’s time, effort, technical skill, and judgment required to perform a service. For example, complex procedures like coronary artery bypass surgery have higher wRVUs than routine services like standard office visits.
These reflect the costs associated with providing a service, including expenses for medical supplies, equipment, and staff salaries. Procedures that require specialized equipment or facilities typically have higher practice expense RVUs.
Malpractice RVUs cover the liability insurance costs related to a service. Services with higher associated risks, such as surgical procedures, generally have higher malpractice RVUs.
So what is a good RVU rate? There aren’t any firm thresholds for defining a good relative value unit rate. Instead, a good RVU rate is one that accurately reflects the complexity, time, and resources required for medical services, ensuring fair compensation for healthcare providers.
The total relative value unit for a service is the sum of these three components. A complex surgical procedure may have a total RVU that reflects high values in all three categories. In contrast, a simple offer consultation may have lower values across the board.
RVU benchmarks vary significantly across medical specialties due to differences in the complexity and nature of services provided. Surgical specialties often have higher average annual wRVUs than primary care specialties. For example, orthopedic surgeons may generate higher wRVUs annually than family medicine providers.
Here’s a closer look at wRVUs and compensation by specialty:
In 2023, primary care providers logged approximately 5,200 work relative value units. Work RVUs are the primary drivers of revenue for healthcare providers.
With that in mind, it’s not surprising that primary care providers (PCPs) had lower median compensation in 2023 than both surgical and non-surgical specialists. PCPs received a median compensation of about $310,000.
Surgical specialists recorded 8,000 wRVUs in 2023 on average. They logged more work RVUs than any other provider class, outpacing the next closest specialty (non-surgical specialists) by nearly 2,000 work RVUs. Surgical specialists were the highest earners, with a median compensation of approximately $550,000 in 2023.
Non-surgical specialists logged a median of about 6,000 work RVUs in 2023. They earned approximately $425,000 in compensation.
APPs, which include nurse practitioners and physician’s assistants, recorded about 2,500 wRVUs in 2023 on average. Work RVUs were lowest for them because these roles have fewer educational and certification requirements and provide a limited scope of care. Those limitations resulted in the lowest earnings at around $130,000.
The relative value unit compensation model is far from perfect. However, there are some advantages to consider.
The benefits of RVU-based salaries include:
However, it’s also important to consider the drawbacks of relative value unit-based compensation models.
The shortcomings of RVU-based compensation include:
RVU bonuses are a particularly important component of this compensation model. Physicians can earn higher reimbursement rates if they rank among the most productive providers. While these bonuses encourage physicians to be more productive, they can also lead to rushed care and provider burnout.
Compensation models based on relative value units are becoming increasingly common. If you want to maximize revenue under the RVU model while maintaining high standards of patient care, you need a robust revenue cycle management solution. Enter Rivet Health, a leader in RCM optimization.
Schedule a demo of Rivet Health to learn how our dynamic platform can help you navigate RVUs and regain control of your revenue cycle. We also invite you to explore our healthcare revenue cycle management solutions and payer contract management software.
