Where does the money come from in Radiology? An Application of Relative Value Units (RVUs)

A Special Thank You to: Dr. David M. Yousem, M. D. , M. B. A A Special Thank You to: Dr. David M. Yousem, M.D., M.B.A.
Professor, Department of Radiology
Vice Chairman of Program Development
Director of Neuroradiology
Johns Hopkins Hospital for allowing the use of his material/content in this presentation Dr. Yousem’s online lecture series can be viewed at: http://webcast.jhu.edu/mediasite/Catalog/pages/catalog.aspx?catalogId=7e18b7d5-9c63-487e-aaf1-77a86f83b011 Dr. Yousem’s project was funded through an RSNA Educational Grant

Relative Value Units and the RBRVS – A Brief Review RVUs are assigned to specific CPT codes The total radiology bill has two components Technical Fee Paid to the facility (owner/operator of the equipment) Professional Fee Physician Work, Practice Expense, and Malpractice Expense RVUs do not translate directly into money Modified by geographic and budgetary multipliers Money Paid = (RVU x GPCI) x Conversion Factor

Medicare – There are (usually) two bills for every study Medicare Part A Submitted by the “facility” performing the study Technical component Medicare Part B Submitted by the interpreting physician Professional component Patient pays 20% of both bills, Medicare covers 80% of both The patient may have supplemental insurance to cover their 20% Global Reimbursement For the freestanding entity that may bill for both the technical and professional components of the CMS Physician Fee Schedule under Medicare Part B

Follow the Money Over the next few slides we will create a simplified example of the reimbursement process Certain assumptions will be made to facilitate understanding the numbers on a fundamental level As always, reality is much more complicated To start, we will try to answer the following question: How many studies do I have to read each day to make $300,000 in a year?

Follow the Money – Assumptions Net payment per RVU of $30 This allows for incomplete collections in a mixed payer population Calculated across all departments within a practice Goal personal income of $300,000 Benefits amount to 25% of salary Malpractice costs are $25,000 (high end of the scale) Cash allowance of $10,000 (meetings and travel) Practice Expenses of 35% Based on survey data from the ACR and median reported expenses per FTE radiologist

Follow the Money – Assumptions continued Work Days 250 workable weekdays a year 50 days for vacation and/or meetings 5 weekends of coverage Total of 220 work days CMS Physician Fee Schedule RVU files for 2010 Geographic Practice Cost Index (2010) GPCI (physician work) in North Carolina is 1.0 Conversion Factor (2010) $36.0846

Follow the Money – The Challenge Our hypothetical radiologist must produce $515,000 in a year This covers his salary, group benefits, and expenses Stated another way $2,341 a day

Follow the Money – The Details Using the CMS formula for reimbursement $ = RVUprofessional x GPCI x CF We break it down into parts In our case, the payment per RVU reflects the GPCI and CF modifiers $510,000 = Payment per RVU x RVUtotal RVUtotal = Sum of {RVUstudy x Number of each type of study} To break it down further into the workload required in a single day $510,000 / 220 days = $2,341/day Number of studies = $2,341 / (RVUstudy x Payment per RVU)

Follow the Money – The Details The previously described equations are calculated to show how many of one specific study (e.g. Chest Radiographs) must be read in a single day to meet the goal income Calculating a mix of studies is simple, but less illustrative

Follow the Money – The Work Using only the professional component of reimbursement, these are the numbers of each type of study you would have to read in a single day to produce $2,341 of income for your practice Specifically, if you are a neuroradiologist, and only read noncontrast Head CTs, you would have to interpret, and be reimbursed, for 68 exams to meet your goal Exam RVU (prof) Number / Day CXR (2 view) 0.3 260 CT Head wo 1.14 68 CT A w/wo 1.89 41 MR Head w/wo 3.18 25 MR Knee wo 1.86 42 Xray Hand 0.24 325 US Abd Complete 1.09 72 NM HIDA 1.11 70

Follow the Money – Own the Equipment The aforementioned examples are for reimbursements with only the professional component The technical component of reimbursement reflects 85% of the global bill compared to the professional component’s 15% Here are the numbers again when receiving the global reimbursement (e.g. if all imaging was performed at your outpatient imaging center) Exam RVU (prof) # / Day RVU (global) CXR (2 view) 260 103 CT Head wo 68 22 CT A w/wo 41 10 MR Head w/wo 25 6 MR Knee wo 42 9 Xray Hand 325 96 US Abd Complete 72 NM HIDA 70

Conclusions Study volume is important to produce revenue So are your payer mix and contracts Medicare vs. Medicaid vs. Private Insurance Efficiency in Billing and Collections is essential to actually receiving the revenue you have “earned” Accounts Receivable is an critical asset (see Accounting) Owning the equipment is crucial This is the basis of turf wars between radiology and some other clinical subspecialties ACR has ongoing legislative efforts at closing Stark law loopholes

The Big Picture Managing a practice with multiple radiologists exponentially increases the complexity of generating and measuring income Referral Base influences the RVU calculations and billing Inpatient vs. Outpatient and Medicare vs. Private Insurance Hospital vs. Imaging center vs. Physician Office Productivity Measurement and other Metrics As well, there are many facets to both Accounting and Expenses Capital Purchases Marketing Technology Medicolegal and Legislative Issues