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Tip of the week: Use RVUs to analyze your capitated revenue, improve collections in practices with mixed reimbursement

Managed Care Weekly Advisor, March 28, 2007

Relative value units (RVU) analysis is a terrific tool to establish and evaluate fee schedules, determine practice costs, examine reimbursement from payers, and assess staffing levels and salary and incentive programs. For providers with mixed reimbursement streams, RVUs facilitate apples-to-apples comparisons of capitation and discounted fee-for-service. Try these tips to ensure accuracy:

  1. Base reimbursement on current procedural terminology (CPT), not averages. The first step is to create a chart of all CPT codes, then look at the contract and know the year on which a payer's fee schedule is based as well as the renewal date.

  2. Ensure payers reimburse according to contract by measuring RVUs, receipts. With these data in hand, it's easy to determine how much the practice actually collects by payer and calculate an average contract rate for all services across all payers. It's important to look at the reasons why collections are falling short of this contract rate.

  3. Use RVUs to assess physician productivity. Results of these analyses can serve as starting points to examine each physician's salary, determine how many RVUs he or she must generate to support that salary, and consider whether and how to structure incentive payments in proportion to productivity levels.

  4. Obtain better contracts with RVU analysis. To identify specific savings opportunities, a practice should compare the number of clinical and support full-time equivalents (FTEs) and their costs as well as the administrative operations support FTEs and their costs. These analyses can reveal whether a practice is using more clinical or administrative support staff than its peers or is paying them at a higher rate. Additionally, analyze payment patterns for high-volume services that don't seem to be reimbursed according to contract.

  5. Apply the same methodology to capitation. If a capitation contract significantly underperforms those of all other payers, a practice could use its RVU analysis as the basis to renegotiate PMPM rates or even carve out certain high-volume services and pay them on an FFS basis to bring the contract to a sustainable level of reimbursement. Without using RVUs to assess a capitated contract's performance, practices can only look at the number of covered lives and the monthly cap rate to arrive at a flat per-member-per-month rate-a simplistic calculation that overlooks a great deal of valuable information.