Health Insurance and CPT Codes: Using the sample relative value units and GPCIs

Question

Health Insurance and CPT Codes:

Using the sample relative value units and GPCIs shown on page 129 and a conversion factor of $24.6712, calculate the expected charge for the following services:

A. CPT 33500 in Manhattan, NY

B. CPT 99203 in San Francisco, CA

C. CPT 33503 in Galveston, TX

Sample RVUs Work Practice CPT/HCPCS Description 33500 33502 33503 99203 99204 Malpractice Expense RVU 4.07 1.96 4.07 0.05 0.06 RVU Expense RVU Repair heart vessel fistula Coronary artery correction Coronary artery graft OV new detailed OV new comprehensive 25.55 21.04 21.78 1.34 2.00 30.51 15.35 26 0.64 0.96 Sample GPCIs Practice Malpractice Locality San Francisco, CA Manhattan, NY Columbus, Ohio Galveston, TX Work GPCI 1.067 1.093 0.990 0.988 Expense GPCI 1.299 1.353 0.939 0.970 Expense GPCI 0.667 1.654 1.074 1.386

Explanation / Answer

ANSWER:

The Total-RVU (tRVU) consists of three components: 1) The Work RVU (wRVU) which consists of the relative number of units involved in the work performed by the physician or provider. The work-RVU is related to the direct expenses associated with what the physician receives for payment in salary and direct benefits. 2) The Practice Expense RVU (peRVU) which represents the cost to operate the medical practice and is related to the general overhead expenses of the practice. There are two types of practice expense-RVUs: facility (hospital) and non-facility (office). The non-facility rate is usually higher than the facility rate since it includes overhead expenses. This difference is sometimes referred to as the “Site of Service” differential. Not all CPT codes have a Site of Service differential. This differentiation is generally used by government payers. 3) The Malpractice RVU (mRVU) which estimates the relative risk of each CPT code. This is related to the cost of malpractice insurance for the physician and the practice. Some codes have additional components, which the CMS defines as “Professional Fees” (Modifier 26) or “Technical/Equipment Component” (TC). These two components combined equal the “Global” RVU for that particular code. However, since practice cost and malpractice risk varies by geographic locations, CMS also implemented a geographic practice cost index (GPCI) in 1992. This index is updated every three years.

Thus, the Total-RVU formula for any CPT code is:

Total-RVU = (wRVU x wGPCI) + (peRVU x peGPCI) + (mRVU x mGPCI)

while the payment formula is:

Payment = (Total RVU) x (CF for the year in question)

Using the above formula:

1) CPT(33500)-TOTAL RUV =69.6 AND PYMENT is 69.6*24.67 (CF) = $1717.

2) CPT (33502)- TOTAL RUV = 46.984 and payment is 46.984*24.67= $1159

3)CPT (33503) TOTL RUV = 52.33 ND PYMENT IS 52.33*24.67=$1290.98

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