The Resource-Based Relative Value Scale (RBRVS) system, introduced by Medicare in 1992, revolutionized physician reimbursement by establishing a standardized method for valuing medical services. Under this system, every CPT code is assigned three distinct types of Relative Value Units (RVUs) that together determine total compensation.
The Three Types of RVUs
1. Work RVU (wRVU)
Work RVU measures the physician's time, skill, effort, and stress involved in providing a medical service. This component accounts for approximately 50% of the total RVU value and is the primary metric used in productivity-based compensation models. Work RVUs consider pre-service work, intra-service work, and post-service work. For example, a routine office visit (99213) has a work RVU of 1.30, while a complex surgical procedure like total knee arthroplasty (27447) carries 19.60 work RVUs, reflecting the significantly greater physician effort required.
2. Practice Expense RVU (PE RVU)
Practice Expense RVU covers the overhead costs associated with running a medical practice. This includes staff salaries, medical supplies, equipment, and office rent. PE RVUs account for approximately 45% of total RVU value and have two components: facility and non-facility. The non-facility PE RVU is higher because it includes costs that the physician's practice must bear, while the facility PE RVU is lower since hospitals absorb those overhead costs. A procedure performed in an outpatient clinic receives different PE RVUs than the same procedure in a hospital setting.
Deep Dive: Facility vs. Non-Facility
Non-Facility (Office): Higher PE RVU because the physician pays for the building, lights,
and nurse.
Facility (Hospital): Lower PE RVU because the hospital covers these costs.
Example (CPT 17000): In the office, you might get ~0.6 PE RVUs. In the hospital, only ~0.01 PE
RVUs.
Note: Work RVUs (wRVUs) generally stay the same regardless of location.
3. Malpractice RVU (MP RVU)
Malpractice RVU represents professional liability insurance costs. This is the smallest component, accounting for approximately 5% of total RVU value. Malpractice RVUs vary significantly by specialty and procedure risk. High-risk procedures and specialties like obstetrics and neurosurgery have higher malpractice RVUs, while lower-risk services like preventive care have minimal malpractice components.
Total RVU Formula
The total RVU for any service equals the sum of all three components: Total RVU = Work RVU + Practice Expense RVU + Malpractice RVU. This total is then adjusted by the Geographic Practice Cost Index (GPCI) for your location and multiplied by the Medicare Conversion Factor to determine the actual dollar reimbursement. Understanding these components helps physicians accurately track productivity and negotiate fair compensation.
RVU Component Breakdown
| RVU Type | What It Covers | Typical % of Total | Used in Compensation? |
|---|---|---|---|
| Work RVU | Physician time, skill, effort, and stress | ~50% | Yes - Primary metric |
| Practice Expense RVU | Staff, supplies, equipment, rent | ~45% | Sometimes |
| Malpractice RVU | Professional liability insurance | ~5% | Rarely |
Real-World Example: Office Visit vs. Surgery
Office Visit (99213)
- Work RVU: 1.30
- Practice Expense RVU: 1.13 (non-facility)
- Malpractice RVU: 0.10
- Total RVU: 2.53
Total Knee Arthroplasty (27447)
- Work RVU: 19.60
- Practice Expense RVU: 13.42 (facility)
- Malpractice RVU: 1.88
- Total RVU: 34.90
Note: These values are approximate and may vary by year and location. Always verify current RVU values with CMS.
Why Understanding RVU Types Matters
For Employed Physicians
Most compensation models focus exclusively on work RVUs because they reflect your personal productivity. Understanding this helps you negotiate fair rates per wRVU.
For Practice Owners
Total RVUs matter because they determine Medicare reimbursement. The practice expense component is particularly important for understanding overhead costs and profitability.
For Contract Negotiations
Knowing which RVU components are included in your compensation formula helps you evaluate offers and identify potential discrepancies in payment calculations.
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Frequently Asked Questions
What are the three types of RVUs?
The three types of RVUs are Work RVU (physician time and effort), Practice Expense RVU (overhead costs), and Malpractice RVU (professional liability insurance costs). Together, these components determine total physician reimbursement under Medicare.
Which type of RVU is used for physician compensation?
Most productivity-based compensation models use Work RVUs (wRVUs) because they specifically measure physician effort and productivity. Practice Expense and Malpractice RVUs are sometimes included in compensation formulas, but work RVUs are by far the most common metric.
Do all CPT codes have all three types of RVUs?
Yes, every CPT code has values assigned for all three RVU components. However, the relative proportions vary significantly based on the service. Cognitive services have higher work RVU proportions, while procedure-intensive services have higher practice expense components.
How often do RVU values change?
The Centers for Medicare & Medicaid Services (CMS) updates RVU values annually as part of the Medicare Physician Fee Schedule. Values can change based on new procedures, revised time estimates, or shifts in practice costs.
Related Resources
What Are RVUs?
Introduction to Relative Value Units and their role in healthcare.
How to Calculate RVUs
Step-by-step guide to calculating total RVUs and reimbursement.
Understanding Work RVUs
Complete guide to work RVUs and productivity tracking.
RVU Compensation Models
Different compensation structures based on RVU production.