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Learn The Lingo

Learn the Lingo: Key Terms for Navigating the Value Based Care World

With the shift toward value-based payment models, pharmacists are seizing new opportunities to improve patient care in medical homes, accountable care organizations, and other innovative care models. This resource includes acronyms and terminology commonly used when practicing in or discussing innovative practice models. Each term includes a short description and references so you can further your practice in a value based care world. This is the first of multiple volumes that will be published by the Medical Home/ACO SIG.

Shruthi Gowda
/ Categories: Learn the Lingo

Relative Value Units (RVUs)

Relative Value Units (RVUs)

Definition: In 1992, Medicare updated its payment system with the aid of the American Medical Association (AMA) to establish a standardized physician fee schedule based upon relative value units (RVUs).1 RVUs define the value of a health care service relative to all other health care services based upon the extent of the provider’s work, practice resources (both clinical and nonclinical), malpractice insurance, and expertise needed to deliver the service to patients.2 RVUs are the basis of the Resource-Based Relative Value Scale used by the Centers for Medicare and Medicaid Services (CMS) to determine health care providers’ payment.1

The three components of a total RVU (tRVU) include

  • Provider work RVUs (wRVUs): These account for work done by a provider to deliver a specific procedure or service to a patient. Factors included in a wRVU determination include technical skills, physical/mental effort, judgment, stress related to patient risk, and the amount of time required to perform the service or procedure.1,2
  • Practice expense (PE) RVUs: These account for the cost of the practice’s clinical and nonclinical labor as well as expenses when providing the service or procedure. These include medical/office supplies, clinical and administrative staff, medical/office equipment, costs of building space, and utilities.1,2
  • Malpractice (MP) RVUs: These account for the cost of professional liability insurance based on the estimate of the relative risk associated with each service or procedure.1,2

How it relates to ACO/PCMH: RVUs provide a standardization method for tracking the total workload of a practice and play a role in payment for services. CMS determines the number of tRVUs that are assigned to each billing code for a service or procedure. Annually, CMS determines and sets the rate for a conversion factor used to translate the number of tRVUs assigned to a billing code into a payment rate for that service or procedure.3

wRVUs can also be used to track an individual provider’s work output, as RVUs include not only patient volume, but the complexity of the patient care being provided. As health care providers transition to a value-based model, the combination of wRVUs and performance on clinical metrics can be utilized to determine provider compensation.1

RVUs can be used to track pharmacists’ work contributions within a practice regardless of whether there is a source of payment for their services. Increasingly, states are passing legislation allowing for pharmacists to receive reimbursement from state Medicaid programs or commercial health plans.1 This recognition of pharmacists as billing providers can accelerate the use of the RVU system and wRVUs to track pharmacists’ workload and to compare their work output to that of other pharmacists and providers.1

Involved organizations/oversight: The AMA Current Procedural Terminology Relative Value Scale Update Committee (RUC) oversees the RVU system and performs valuation processes for various services. The RUC surveys providers on the resources required to deliver services and procedures to patients and makes recommendations to CMS. CMS considers these recommendations to determine the number of RVUs assigned to each billing code.

Resources

  1. Pharmacy Health Information Technology Collaborative. Relative value units (RVUs): A primer on why they are important to pharmacists. Washington, DC: Pharmacy Health Information Technology Collaborative. Available at: https://pharmacyhit.org/wp-content/uploads/FINAL-PHIT-WG1-RVU.pdf. Accessed March 10, 2023.
  2. AAPC. What are relative value units (RVUs)? Salt Lake City: AAPC. Available at: https://www.aapc.com/practice-management/rvus.aspx. Accessed March 10, 2023.
  3. American Medical Association. 2023 RVS update process. Chicago: American Medical Association. Available at: https://www.ama-assn.org/system/files/ruc-update-booklet.pdf. Accessed March 10, 2023.

Contributing authors

Katelyn Currier, PharmD
PGY-2 Ambulatory Care Pharmacy Resident
University of Colorado

Kimberly Hilton, PharmD Candidate 2023
University of Colorado
Skaggs School of Pharmacy and Pharmaceutical Sciences

Ashley Daffron, PharmD, BCACP
Assistant Professor
University of Colorado Skaggs School of Pharmacy and Pharmaceutical Sciences

Last Updated 3/12/2023

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