Do you really understand how you’re paid? As nurse practitioners, many of us are paid based on productivity, essentially the revenue we bring in to our practice. Such compensation structures are based on the RVU, or relative value unit. Those of us paid on productivity compensation models have a basic understanding of how this system works. At the most basic level, Medicare and other payers reimburse medical providers for the services they provide based on a given numerical value assigned to each service type.
RVU’s give a way to standardize production between providers and establish a way for healthcare providers to be reimbursed by Medicare in a manner reflecting the complexity of the service provided to the patient. The RVU structure is by no means perfect, but gives a way to track trends and productivity within a complex medical system.
I’ve talked before about the logistics of RVU reimbursement and how you can expect your reimbursement as a nurse practitioner to be calculated. Today, let’s take a look at how this system was created and why.
Prior to the implementation of the RVU system, physicians billed Medicare by what is referred to as the “usual, customary, and reasonable” (UCR) charge. More or less, this charge was whatever doctors decided to bill for their services. Medicare’s reimbursement rates for services billed under this system were determined based on a weighted average of what physicians in the same community billed for the same service. Physicians billing under the UCR system were reimbursed at much higher rates for performing procedures and surgeries than for other types of patient care.
The 1950’s saw a boom in medical advancement and a subsequent increase in the cost of providing medical care. This was followed in the 1960’s with the passage of Medicare and Medicaid. The coupling of these events accelerated the rising cost of healthcare catching the attention of congress. Lawmakers included the UCR as part of the Social Security Act of 1965 in an attempt to help curb such costs.
As the cost of healthcare continued to increase, congress sought to implement a new system that would decrease Medicare’s long-term spending growth rate and divide payments to physicians more equitably. Disparity between reimbursement rates for procedures and other forms of patient care fueled the demand for change.
The RVU fee schedule came into play with the passing of the Omnibus Budget Reconciliation Act of 1989 (OBRA). The act eliminated Medicare’s “reasonable charge” method of physician reimbursement transitioning to the relative value scale. The RVU fee schedule assigned value to each service provided by physicians as designated by CPT code. The schedule also accounted for geographic differences in costs incurred by practices by incorporating a geographic conversion factor.
Since it’s implementation, the RVU system has undergone several adjustments and changes but it remains a prominent consideration in healthcare delivery today. Understanding the roots of the system helps nurse practitioners evaluate how and how much they are reimbursed for the services they provide.
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