Insurance company contracts can use separate payment formulas that are nearly impossible to compare. But there is a way to figure out who is paying what: a total relative value unit analysis.
Totaling how much money has been paid by an insurer and dividing that number by the relative value units performed not only gives physician practices a better idea of what they’re being paid, it also provides information they need to possibly secure better payments in their next deal, according to practice management consultants.
“You need to have your own data when you negotiate; otherwise you’re just begging,” said Marcia Brauchler, MPH, president of Physicians’ Ally, a medical practice consultancy based in Littleton, Colo.
RVUs are more commonly used to measure physician productivity. But using them to compare insurers is considered key because they are the only way to assess contracts that usually state a payment based on a percentage of Medicare, but use different base years or conversion factors depending on the plan. One contract may say it pays 200% of 2010’s rates, while another may pay 175% of 2011’s payments. Some insurers use proprietary formulas, making it more difficult for practices to know which contracts are good for the practice and which ones need to be brought back to the bargaining table.
“It can be hard to figure out what they’re paying unless you go through this exercise,” said Jeffrey B. Milburn, a principal with MGMA Health Care Consulting Group. “But it’s not that difficult. You want to know who is doing the best for you and what they are paying per unit of work. And if you find out your largest payer is paying fairly low per RVU, you may want to say to them, ‘We appreciate your business, but this is the appropriate rate for the market.’ ”
Analysis of codes
The data may take time to process but can be handled by most spreadsheet software programs. The first step is to identify the 20 to 30 most frequently billed CPT codes as the focus of the analysis. The total RVU number — combining the work, practice expense and malpractice amounts — for each of these codes should be determined by accessing the American Medical Association’s coding website or other databases. The information also may be gleaned from some practice management systems.
The second step is to identify the payers doing the most business with the practice. Smaller payers may not be worth the time the process takes.
When the most common codes and the most frequent payers have been identified, the next step is to tally the amount of money paid by an insurer for a particular CPT code over a one-month period. The total should be divided by the sum of RVUs performed by a physician when carrying out a particular service. Services that have not been fully adjudicated should be excluded from the analysis, but denied services should be part of the equation. Including denials is important because they can lower the average and indicate problems with the payer.
The resulting numbers should be compared with each other and with benchmarks available from practice consultants. According to InfoDive run by Trellis Healthcare in Littleton, Colo., the benchmark collection per RVU for all payers across the country is $41.98, but this can vary from $30.28 for Medicaid to $45.55 for the average commercial payer. The number will vary based on locale.
“You need to figure out what percentage above or below Medicare an insurer is really paying you and benchmark it over time,” said Cass Schaedig, president of Trellis, who presented the subject at the 2012 annual meeting of the medical practice management association, MGMA-ACMPE.
Although the information can be a part of contract negotiations, practice management consultants say it may play a role in deciding whether to continue working with a particular insurer. Experts suggest considering these numbers along with factors such as the hassle involved in dealing with a particular company.
The analysis also can be used in capitation situations. The payments should be divided by the number of RVUs provided during a set period to determine the amount of money received per unit. Practices should allocate their own RVU numbers for services that have not been assigned one.
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