Financial and activity data have historically occupied places of principal importance in medical services business management; the introduction of Relative Value Units (RVUs) in 1992 did not change this, but it did put “another arrow in the quiver”. Standing alone, RVUs represent standardized activity data, but when combined with a conversion factor they become financial data. It has taken a few years, theoretical grounding and some new tools to realize the practical value of RVUs, but I think that time has now arrived. Today, RVUs are not just another arrow in the quiver: they are one of the sharpest arrows and, for some purposes, they are the most effective arrows.
One of the best descriptions of the value of RVUs is that they are analogous to the routine laboratory work that is typically ordered by a primary care physician as a part of any medical check-up visit. Regardless of how well the patient appears, or what the patient says, the physician wants additional (laboratory) information before drawing conclusions, or initiating a treatment plan, lest something serious go undetected. Similarly, RVU analyses can offer views beneath the surface, either confirming or challenging what is represented by conventional measures, or possibly identifying threats or opportunities that have gone undetected.
The following represent four of the major benefits that can be derived from RVU analyses.
- RVUs do not require assumptions concerning homogeneities of payer mix, service mix, collections and practice expense reimbursement across payers and providers. Such assumptions may be relevant, and material, when medical services production is represented by conventional financial metrics, such as Payments, or Adjusted Collections. Payer mix alone, within a uniform multi-provider clinic, can produce a +/- 6% variation between conventional financial metrics and RVU metrics. Unearned compensation increases to some producers are offset by reduced compensation to others. An RVUs assessment of provider effort is at least an examination of the fairness of production compensation; Furthermore, if an RVU assessment fails to find material variance from conventional financial metrics, the accuracy of the use of conventional financial measures is affirmed.
- Work RVUs represent a “safe harbor” per 42 CFR Section 411.352(6)(i)(3)(i) Group Practice Special Rule for Productivity Bonuses and Profit Shares regarding physician compensation and bonus determinations. This Special Rule essentially states that provider compensation and bonus determinations based upon RVUs are considered to operate within a “safe harbor” from federal review. Compliance with the federal Starke regulations is mandatory, and Work RVUs represent a metric that both minimizes regulatory-prohibited effects while maximizing regulatory-permitted provider production. There are alternative methodologies that can deliver compliance, but they are less responsive to provider production differences, require substantial administrative resources, and are challenged by a myriad of evolving, detailed financial adjustments. Even the most rigorous compliance efforts cannot remove an element of concern if facing a federal compliance audit, so the “safe harbor” provided by RVUs is valuable. Therefore, using Work RVUs as the production contribution measure for physician compensation and bonus plan determinations is the most efficient, accurate, and federally-compliant metric.
- RVUs provide a valid, standardized basis for the analysis of medical services production costs. Medical services business decisions are complex, and sometimes are made without good information — largely on the basis of past practices or relevant experience. However, when new and valuable information is developed, the quality of the business decision is improved. One of the most powerful pieces of business information is the clear, unambiguous knowledge of production costs, which can be developed using RVUs. If RVUs and costs are accurately determined, many complex issues suddenly become clear. Knowledge about costs supports greater consensus, focused vision, increased commitments to action, and greater likelihood of intended outcomes.
- RVUs provide a timely, efficient, accurate metric for monitoring the payer margins and trends that affect the organization’s financial future. The complexity and scale of medical services business can mask important changes and trends that can have a huge financial impact before detected due to time lags, departmentalization and reporting practices. RVU metrics offer a nearly real-time opportunity for monitoring these changes and trends, potentially much sooner than the typical lags in financial measures. Identifying emerging problems with fee schedules, or critical payer margins, or production volumes is more likely before these problems gain significant traction, increasing the ability to identify and avoid major financial problems
All told, RVUs offer the best available standardized metrics representing medical service production resources. When appropriately utilized in conjunction with other pertinent data, RVUs contribute to timely, efficient creation of the best available medical services metrics for production, cost and payer margin. When used in conjunction with traditional financial metrics, RVUs can provide useful confirmatory or cautionary feedback, and offer important compliance safeguards when used in the area of physician compensation. Finally, and very importantly, RVU analyses provide clarity to many complex medical business decisions based upon quantifiable business analytics — providing knowledge that engenders consensus, increases confidence and contributes to better business decisions.