How Does the Resource-Based Relative Value Scale (RBRVS) Work?
Leaders in healthcare settings often have a lot to manage: resources, staff development, scheduling, billing, and more. The billing process, in particular, can be extremely complex and might leave you with questions about how the resource-based relative value scale (RBRVS) is used to calculate insurance payments.
While facility managers don’t need to be experts in healthcare billing procedures, it’s important to know how to document services accurately and determine how much you can expect to be compensated. In this article, we’ll provide an introduction to resource-based relative value, explain how it works, and show you how to navigate a physician fee schedule to accurately predict the reimbursement payments your facility will receive.
What Is the Resource-Based Relative Value Scale?
The RBRVS is a system used in the U.S. to calculate the amount of money that insurers will pay healthcare providers for their services. It was developed by the Centers for Medicare and Medicaid Services (CMS) and is also used by other, privately owned insurance companies. This system is used to calculate payment for services in a variety of settings:
- Physician’s offices
- Acute care hospitals
- Ambulatory care centers
- Skilled nursing facilities
- Long-term care centers
The idea behind resource-based relative value is that the price of a medical service should be based on the resources required to provide it. Also, the total cost of a service can and should vary depending on geographic area, medical specialty, and the type of care.
How Does the RBRVS System Work?
In this system, each component of the medical service is assigned a relative value unit (RVU) — a variable amount that reflects the resources required to perform the service. RVUs are based on a physician’s time and skills, the facility’s costs for equipment and staff, and the cost of liability insurance.
If you’re wondering about the difference between RBRVS vs. RVU, it’s simple — RVUs are the basic components that are plugged into the resource-based relative value formula. The American Medical Association (AMA) explains that RVUs are divided into the following three categories:
| RVU Categories | Explanation |
|---|---|
| Physician Work | This amount reflects the time spent, technical skill, physical and mental effort, and stress associated with the physician’s actions. The work component accounts for an average of 51% of the total amount. |
| Practice Expense | This RVU is based on the costs associated with providing the medical service, such as the equipment and supplies, the cost of rent and utilities for the facility, and the salaries of supporting staff members. Practice expenses usually account for approximately 45% of the total RVU amount. |
| Professional Liability Insurance (PLI) | This amount is related to the cost of malpractice insurance associated with a particular type of medical specialty. PLI typically accounts for about 4% of the final RVU. |
Once RVUs are identified, they’re entered into a standard formula, which adjusts for geographic location and multiplies by a conversion factor set by the CMS each year. The conversion factor is a monetary amount — often between $30–40 — and determines what an insurer will pay the healthcare facility for each RVU. Below, you’ll find a basic equation for calculating resource-based relative value:
(Work RVU + Practice Expense RVU + Liability Insurance RVU) x Conversion Factor = Payment
Example
We’ll share a simplified example to illustrate how the RBRVS formula works. Let’s say a medical service has the following RVUs after adjusting for geographic location:
- Physician Work RVU = 5
- Practice Expense RVU = 4.5
- Liability Insurance RVU = 0.5
- Total RVU = 10
The total RVU in this scenario comes to 10, which is then multiplied by the conversion factor. If the annual conversion factor is $35, the medical facility would receive $350 from the payer for that particular service.
It’s important to note that RVUs don’t usually come out to a whole number. In this scenario, these dollar figures were simplified for explanation purposes. Refer to the American Medical Association for an in-depth breakdown of the RBRVS formula based on current rates.
What Is the RBRVS Fee Schedule?
To determine RVUs for services, facilities and payers refer to the Physician Fee Schedule (PFS) — a comprehensive list of services and their associated values. In the fee schedule, you’ll find the type of service, its designated CPT code, and corresponding RVUs.
For example, after a physician performs a routine physical, the facility might send billing information to Medicare, including the physician’s NPI number and the associated CPT code for the physical. Medicare then uses the fee schedule to look up the CPT code, find the relevant RVUs, enter them into a RBRVS calculator, and determine payment.
It can be helpful for facilities and residences to have an idea of the payment amounts they’ll receive from Medicare and Medicaid for certain services. You can use this RBRVS fee schedule lookup to calculate payments ahead of time. Keep in mind that while Medicare pays 100% of the PFS rate for supervising physicians, they pay just 85% of that rate when it’s billed by nurse practitioners (NPs) and physician assistants (PAs), who are providing increasing care to nursing homes.
It’s also important to note that the fee schedule is regularly updated to include new services based on feedback about patients’ needs. Updates include increased coverage for telehealth, behavioral health, chronic pain management, and more.
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