The RVU System & Tiered RVUs – The Financial Blueprint Seminar (RVU Compensation Explained)

The RVU System & Tiered RVUs – The Financial Blueprint Seminar (RVU Compensation Explained)

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(upbeat music) Now longly awaited, the RVU system. RVU is of course are Relative Value Units and this is what is used
to pay for your services. The dollar amount set
for the conversion factor is established by Congress
and it changes every year. Everything you do to your patient will have a certain value attached to it. You do an EKG, it’s got an RVU. When you do a little pulse ox, it has an IVU, it has an RVU. You do brain surgery, it’s got an RVU. Every office visit has
an RVU attached to it. So however many RVUs you do, multiplied by your conversion factor equals how much you get paid. Now this Medicare
conversion factor right here is a bit of a misnomer because
this is what Medicare pays, this is the Medicare rate,
and it’s set in stone for a particular geographic
index or locale rather, and it happens to be $36 for 2018. It was 35.98 for 2017 so it changes but not by much, very very small, very small increments of change. So again as employed physician, you will be paid a sum that’s called work RVU. Now what is work RVU? What is regular RVU? I know it’s confusing but
let’s break it down for you. One RVU, a regular RVU,
one relative value unit consists of three components. Number one, work RVU, number two, practice expense RVU, and number three, malpractice RVU. What are these things? Well, work RVU actually stands for whatever you do to the patient. It’s your clinical
knowledge, your expertise, and your treatment, right? Now the practice expense is how much it costs to
take care of the patient, and it’s adjusted for
any particular region using this handy dandy
multiplier, this one, GPCI, which stands for Geographic
Pricing Cost Index. And the last component
of RVU is malpractice. Well, we all have to pay malpractice. It’s a relatively small component. Most of the employed physicians get their malpractice
paid by your organization, and it’s factored into your RVUs. So to summarize, one RVU equals work RVU times local index, plus practice expense
RVU times local index, plus malpractice times local index. Okay so let’s go through a few examples. So let’s do a 99211 which
is a nurse level visit, none of you should ever bill for it, and we’ll talk about the why tomorrow, it doesn’t matter, it’s just an example. And we got this information from the Medicare lookup site that we showed you before. So work RVUs for 99211 visit is only .18. These are the practice expense RVUs. These are the malpractice expense RVUs. And these are geographical corrections. We plug into the system and we calculate the total RVU which is .4632. Now you never ever have to do this because this is already done for you. But I’m just showing it to
you so that you understand how hospitals separate into
different components one RVU so that you understand where
work RVU comes from, okay. Now let’s do another example. Let’s do here in New York City, RVU for level 99214, which is the most commonly
quoted office visit that most of your patients should
be quoted this probably, and we’ll explain why tomorrow. And again we have all the values here. The work RVU is 1.5. This is the practice
expense, the malpractice, and these are the correction indices. And this is the total number in RVUs for a level four visit. Again all of this is available online. Now look at this. I keep talking about work RVUs. Work RVU is what your
hospital will pay you. So let’s say you see a level four visit, and let’s say you get, I
don’t know, $50 per work RVU, that means you get $75
to see a level four visit if you work for a hospital. If you’re an independent physician, you’ll get full compensation, the full 3.4 work, 3.4 regular RVUs because you still have to
pay for your practice expense and you still have to
pay your malpractice. And then the payment which I said is the conversion factor
times the actual RVU. So this is how we calculate what the actual payment is for a level four visit. This is just a repetition of what we did on the other slide. This is the same RVU number
for a level four visit, we multiplied by a conversion factor, and this is the number for New York City which is a non-facility
compensation for 99214 code for a level four visit for Medicare. Now let me show you where this
number is available online. And I just did it again for
you so that you understand where things are coming from. But just for your own enjoyment, and as you can see right here, so this is what Medicare really gives you, this is what they use for New York City for a level four visit. I just showed you how
it’s being calculated. Again you don’t need
to know how to do that, but it’s always good to know
where things are coming from. Now so the most important thing here is of course the conversion factor when you work for a hospital because that’s what they’re
going to pay you, right? This is the amount you’re going to
get paid per RVU of service. So every payer will have their own, right? Because it depends on
your particular hospital’s insurance rate with a
particular insurance company. And because your hospital
will take Medicare, it will take Medicaid probably, it will take other insurance, they try to come up with a certain number that makes sense, that already takes into account practice expense, malpractice expense, and they try to give a fair number. The conversion factors are
very highly guarded secrets. You’re not going to know what
your institution’s factor is until you sign a contract. Again this is just lack of transparency. They don’t have to do this. I think it’s good for you to know. It’s good for you to know what your competitor’s
conversion factor is, so you know how much you’re worth, but this is how it is for now. So you can’t fight about it that much, you just need to work with it. For employed physician, of course the payment will be conversion factor times work RVU. For independent doctor, it’s just conversion factor times the RVU, but independent doctors really don’t look at RVU system because they just get direct reimbursement from insurance companies
and from Medicare. Now this is where things
start getting a little dicey. So let’s look again at a level 99214 visit for a patient in New York City, and we’re going to look
at an employed doctor, we’re going to look at an
independent doctor right here. And we have four different patients. Patient number one, plain Medicare. Patient number two, PPO, I’m assuming 200% the Medicare rate, it’s much much higher. I’m being nice. There’s one uninsured patient from whom we collect zero. And there’s a cash-paying patient for which I used the average between the Medicare rate and the insurance rate. So this is how much your
institution will collect, 123, 247, zero, and 185. And this is how much
the doctor will collect. It’s constant for the physician. So in a way physician is protected. Physician is protected from poor payers, from Medicare payers, but also a physician does not get to enjoy high reimbursement rates because their RVU conversion
factor is set in stone. So your typical physician for level four in this situation will receive $75. And I’m just assuming $50 conversion rate. This is nationwide average. I’m sure it’s going to be
higher in New York City area because of the cost of living, but I don’t know what the number is so I don’t wanna make assumptions. Now for independent doctor, this is straight, straight values from Medicare, from PPO I’m assuming 130 Medicare rate reimbursement. I’m being very generous here. This is really good if you can achieve it. And $140 cash rate which again I averaged between the Medicare
and the insurance rate. And I did not do anything for uninsured because most independent doctors will not take an uninsured patient. So as you can see there’s quite a bit of variation in pay, and the important thing to remember is that if you’re independent, you still have to account
for practice expense, you have to pay rent, you
have to pay your staff, you have to pay for your malpractice, so a lot of things that
you’re still on the hook for. Now is there a flaw in the RVU system if you’re employed? Well, there’s a huge flaw, and the problem is that the practice expense
RVU is always constant. So the conversion factor does not change from patient to patient depending upon how many patients you see, this is flat. And let me illustrate why. So let’s talk about two doctors who work in the same hospital. One of them consistently does 30 RVUs, work RVUs a day, the other one does 20. They work the same hours, it’s just that doctor number one is more efficient, nothing wrong with that. Doctor number two maybe takes more time with his or her patients and that’s okay. This is not the point. So I’m going to assume a $50
fixed conversion factor. I believe in your notes it
says 50%, this is wrong. And assume you’re only
seeing Medicare patients just for the sake of this example. So the doctor who does 30 RVUs, it means 20 patients, because, remember, it’s 1.5 work RVU
for a level four visit, and we’re assuming level four visits here. So 20 patients, 30 RVUs. You’re not being paid per patient, you’re being paid per RVUs. So 30 times 50 is $1500 per day for the 30 RVU doctor. How about the 20 RVU doctor? Well, that’s 13 patients, right? 13 times 1.5 is about 20. So that doctor will
collect $1,000 per day. That sounds great, that
sounds fair, right? Well, if you see more patients, you do more RVUs, you get paid more. This is how it should be, right? Well, let’s look at something else. So your organization doesn’t really care
about RVUs or work RVUs. Your organization, your hospital, will get paid per patient because that’s what you bill for. So for the first doctor, remember, 20 patients, and we just saw and we just showed you that it was $123 per patient
for a Medicare patient. 20 times 123 equals 2474. For the second doctor this is the amount. Well, this is what the hospital collects. But you still have a contract with them so they pay you based on your RVUs, everything is fair, seems fair so far. Alright let’s keep looking. So the doctor with the 30 RVUs, he got paid $1500, but the hospital took 2754, so where is the rest? So this doctor paid 984. Now the doctor physically didn’t pay $984, it’s the $984 he or she did not receive in compensation. Okay that’s fine. What about the second one? The one who worked less, he got paid 1,000, the hospital got paid 1600, and that person only
paid $600 in expenses. So what I’m telling you here
is that if you work more, you have to pay for more. That doesn’t make any sense. But this is how hospitals make money. This is the biggest problem
with the flat RVU system is that it does not account
for your practice overhead because the practice
overhead remains constant. Well, it doesn’t. If you see more patients in the same amount of time, use the same staff, use the same electricity, use the same room, you don’t need more nurses, you don’t need more MAs, so this number should be lower, but no, it’s higher. So you are actually
paying more to work more. So why should you do that? You shouldn’t, you really shouldn’t. And what you should demand for and ask for if you’re going to be employed, you need to ask for a tiered RVU system. And the way it’s structured, it can be structured any way you like or any way your hospital proposed as long as it’s not flat. Basically what I’m proposing here is that what you need
to tell your hospital is listen, over a certain number
of work RVUs, let’s say 20, let’s say after you do 20 work RVUs, your conversion factor
should go up, right? ‘Cause you’re seeing more patients in the same amount of time, that means you’re more efficient, you gotta be paid for for that. You can’t let the hospital
take in all the profit and kinda rip you off here, so this is very very important. Now what if your group does
not have a tiered RVU system? Well, if it doesn’t,
you should ask for it. There are a few systems
that I’ve talked to that they do have that in place, and they bring the difference quite close to the difference between 20 or 30 RVUs, it actually goes down by a little bit, and that would be more fair. But under this flat system, vast majority of hospital in the country, that’s how they’re paying, and this is extremely
unfair to the doctor, and this is something that
you have to understand. And doctors are being taken advantage of every single day because of this. And it’s okay to be aware, right? And just don’t fall victim
to these statements. Well, the hospital will tell you, well, this is how it is, this is how we do things. The hospital will tell you, well, there’s so many other costs you never know about. And if they tell you this, you just ask them, okay, what are they? Show me. They’ll tell you, well, you’re the doctor, just stick to treating patients, we’ll take care of the rest. No, don’t accept that. Don’t be insulted by that. Don’t let them insult you. And finally they’re going to tell you, well, we’re losing money. Well, no, they’re not. If the hospital tells
you they’re losing money, you can look at their CEO compensation and you’ll see that they are not. (upbeat music)

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