I’m launching a much-needed community for coders and CDI professionals! Help me name it! More at the bottom!

Your Machine Could Be Ruining Your Coffee Without You Knowing..

Scale buildup is the hidden enemy of great coffee, causing bitter flavor and machine problems.

But ACTIVE makes cleaning easy. Our tablets deeply descale to restore heating and flavor in all Coffee Makers including Keurig, Nespresso and Ninja!

Enjoy delicious coffee you deserve!

I was talking to an administrator the other day and it was clear they didn’t understand RVU’s. If they don’t understand it, likely many don’t.

And if you pay attention on social media, you’ll see a lot of doctors fussing about how their market value is not linked to their pay. What does all of that mean?

Let’s dig in.

First, how are doctors paid?

Well, most of them are employed so they’re typically paid a combination of a base salary plus bonuses based on productivity or quality metrics.

But, let’s ignore that for now.

Do they set their own prices based on supply & demand, competition, and market pressures like many other services? Ya know, like the appliance guy that wanted to charge me $1200 to fix my stove (that I did myself after some YouTubing), and the plumber that’s charging my neighbor $400/foot to replace some pipes (for a cool $40,000).

If you’re a private physician that doesn’t accept insurance (like direct to primary care docs), then maybe.

For the rest of us?

No.

For those who accept insurance and take care of medicare/medicaid patients, they are told how much they have to charge for every individual service they provide by large organizations - namely the AMA, CMS, and commercial insurances. They have no control over their prices. The only way they can make more money is by seeing more patients, doing more procedures, etc.

Volume.
Not ideal.

But how is that determined?

In the 1990s, CMS adopted “resourced based” relative value units (RVU) in an attempt to standardize (and control) costs. Each RVU is made up of three factors:

wRVU = Work RVU. Essentially the work a physician performs. When people talk about “RVU’s” they’re often talking about wRVU’s.

PE RVU = Practice Expense RVU. The cost of doing business, overhead, etc.

MP RVU = Malpractice RVU. The cost of malpractice insurance, liability, etc.

All of these are impacted by location with a GPCI (Geographic Practice Cost Indices) multiplier.

This is the not-so-pretty formula straight from CMS:

But wait a second Dr. Oubre, you didn’t mention that “Conversion Factor” thingy? What’s that?

Oooooooh baby.

We’ll get to that later. #cliffhanger.

But first, who sets the RVU’s?

RVU’s, RUC and the AMA

The AMA is the American Medical Association, of course, and they run this thing called the “Relative Value Scale Update Committee” or “RUC.” That committee is a group who determines how many RVU’s each service is assigned.

From a new outpatient office visit to removing a brain tumor, each has its own associated RVU.

But every new outpatient office visit isn’t made equal. Some take longer or require more mental work because a patient is complex. Shouldn’t you get paid more for those?

Yes!

But one doctor might describe a visit as a “super duper complicated patient” but another physician might describe that same patient as “very complex.” How do you standardize that? Well that’s why we have:

CPT Codes!

CPT codes are, again, set by the AMA. They are alphanumerical codes that standardize the reporting of physician services. Let’s look at office visits and Lap Chole’s. On the left is the CPT code. On the right is the wRVU amount.

And cholecystectomies:

(BTW, these all come from CMS here where you can download the zip file, and in that zip file is a file named PPRRVU24_JAN.)

But if some office visits are worth more than others, can’t doctors always just claim they did those, call it a day, and make more money? Nope, they must prove they actually performed those services through…wait for it…documentation! (You knew I was going to say that eventually, right?)

Anyway.

So if you’re following along, the AMA (not a government agency) determines the CPT codes AND the RVU’s for pretty much everything physicians do… So, there’s this little dance between CMS and the AMA. AMA presents these to CMS and CMS decides if it will accept them or not. The AMA enjoys this partnership and doesn’t want to upset CMS. Most of the time, CMS accepts them but sometimes they disagree (as I discussed in a previous newsletter regarding split/shared visits)

But how is all of this converted into actual dollars? That’s where that pesky little conversion factor comes in…

Conversion factor

CMS sets its conversion factor. That is, a number that is multiplied by the RVU’s to get a dollar amount. Commercial insurances may use this same conversion factor or use their own.

The CMS conversion factor for 2024? $33.2875

If that seems low to you, almost all physicians would agree with you.

So let’s go back to our office visits and cholecystectomies:

Yes, your surgeon that after years of training and experience cut you open, dissected through a bunch of vital arteries, veins, and nerves, and removed one of your organs using a camera, some pliers, and a scalpel on the ends of some long rods all through a few amazingly small 1.5 cm incisions got paid… about $350. (Far less than the $1200 appliance repair man that I was able to do myself after watching YouTube)

Inflation up. Conversion factor down.

The conversion factor in 1998? $36.6873

Yes.
26 years ago.
It was higher.

With inflation, FLAT would be a pay cut. But it’s actually gone DOWN, a trend that CMS is projecting it will continue next year with a 2.8% reduction to $32.36.

If it kept up with inflation since 1998, it would have been $68.58 in 2023 (according to this inflation calculator).

You can see a history of the conversion factors with a summary of explanations for each conversion factor reduction here. The reasoning lately? Budget neutrality.

Discussions about RVU almost always lead to the disparity between specialists and primary care physicians. I won’t do that here, but you can check out Preston Alexander’s newsletter or Dr. Eric Bricker’s video on it.

A physician’s true value?

80% of physicians are now employed, many by large hospital systems. That’s good right? The employer takes on all the risk. Physicians can just “show up to work.”

Well, the problem lies in that the value of a physician is becoming increasing unlinked from RVU’s with their impacts on hospital billing and money brought into the health system (further complicated by complex value-based payer models and Accountable Care Organizations). That could be a newsletter issue by itself, but I’ll stay focused on this RVU stuff.

Let’s look at an internist. Ballpark numbers, they might bring in $200,000 in RVU’s. Again, that internist will do the same work next year as this year, but that number will be lower as the CF is decreasing. So, if the hospital is paying them $300,000, then the hospital is “subsidizing” their income with $100,000.

So sweet of the hospital, right?

No.

That is a percentage of the value the physician brought in. According to a 2016 survey by Merritt Hawkins, an internal medicine physician brings in $1.8 MILLION to a hospital (and that survey is 8 years old).

Am I saying internists should be paid $1.8 million? Of course not, that money goes to paying for buildings, utilities, phlebotomists, medicines, IV tubing, the EMR, an IT department, nurses, etc. But to suggest that hospitals are “subsidizing” physician incomes is dishonest at best, and manipulative at worst.

THIS is why I preach that physicians MUST understand their impact on hospital billing and understand how to optimize it so they can understand their true value and better negotiate their pay. RVU’s are NOT the way to determine a physician’s value.

The average is $1.56 million, by the way, with Dr. Eric Bricker having done the math and showing that family medicine physicians have a pretty darn good ROI.

So to summarize:

The AMA sets the CPT code for every service.
The AMA sets the RVU value for each CPT code.
CMS sets the conversion factor multiplier to determine a dollar amount.
CMS is continually decreasing that conversion factor each year.
Employed physicians must understand their value to their employers outside of RVU’s.

Launching YOUR community

Help me out! I’m creating an online community for Coding and CDI professionals so we can share knowledge with each other. What should I name it? I’m thinking “CDI Village” as “It takes a village” to know all the knowledge that’s constantly changing. Let me know your thoughts by responding directly back to this email! Thanks!

That’s all for now. Don’t hesitate to ask questions as they help inspire future issues!

Cheers,

Robert

Thanks to Laura Samson, RN BSN CCDS, and my wife Kara (for grammar - yes I need that) for editing this newsletter!

When you’re ready, there are two ways I can help you:

Check out The Practical Guide to Attending Documentation.

• CME approved for 3.5 hours! Use your CME funds!

• Bill confidently (and reduce downgrades) and know what’s ACTUALLY needed for billing.

• Spend less time writing notes

• Use notes to PREVENT getting sued

Check out The Resident Guide to Clinical Documentation. The course that helps you:

• Impress your attendings and improve your evaluations.

• Prepare for real-world productivity pressures

• Gain the confidence to write shorter yet more effective notes.

If you were forwarded this newsletter and would like to subscribe: