Use of the Resource-Based Relative Value Scale for Private Insurers

Abstract

Medicare's resource-based relative value scale (RBRVS) was implemented 1 January 1992 for physician payment using a conversion factor of $31 for each relative value unit (RVU). We calculated a conversion factor of $42.24 for The Travelers Insurance Company's group health plan business using the RBRVS methodology and the calendar year 1990 Travelers Large Case Norms Extract of active employees. This DataWatch describes two important applications of the relative value scale for private insurers: for pricing and for analyzing claims expenditures. L egislation passed by Congress in 1989 (the Omnibus Budget Reconciliation Act of 1989) mandated the resource-based relative value scale (RBRVS) for reforming physician payment under Medicare. Congress had noted the inequities and inflationary consequences of reimbursing physicians based on "reasonable and customary" charges. The RBRVS methodology was developed by William Hsiao and colleagues at Harvard University. 1 Hsiao's research led to a numerical value or "weight" for more than 7,500 Current Procedural Terminology (CPT-4) codes that reflects the complexity, time, training, and resources used to perform a procedure or provide a service.The goal of this study is to describe how the RBRVS could be used by private insurers for pricing and for studying variations in claims expenses. All pricing applications rely on a conversion factor to convert relative values into dollars. Hence, a conversion factor was calculated for The Travelers Insurance Company's group health plan business that is "benefitneutral" (that is, it does not increase or decrease the amount the insurer covers for all claims), based on the calendar year 1990 Travelers Large Case Norms Extract of active employees.We also show how the RBRVS can be the basis for claims analyses. We demonstrate how "variance analyses" that are based on the RBRVS explain variations in total charges based on differences in price (average amount of covered charges per relative value unit [RVU]), volume (average number of RVUs per enrollee), and intensity (average number of RVUs per service).

Using relative value units to measure faculty clinical productivity

“…Increasingly, private insurers also are using RVUs. 11 This study has shown that the RVU system can be used to assess the clinical productivity of teaching faculty in an academic health science center. We demonstrated that faculty physicians were significantly more productive when supervising resident physicians than when engaged in independent delivery of patient care with no teaching responsibilities.…”

Financial Compensation For Hepatologists in Different Practice Settings

“…The survey assumes that the salary and RVU data submitted is relatively accurate. Hepatologists completing the survey have nothing to gain by over‐inflating their salaries, and the web‐based format allows individuals to be more honest . Therefore, it was reassuring to see that the RVU per encounter was in line with what would be expected from a nonprocedural specialty, and suggests that the data are relatively accurate…”

“…The system was implemented in 1989. It contains over 7,000 distinct services that physicians can perform for patient care and has been adopted by all private insurance carriers . The primary codes used by hepatologists and gastroenterologists are for office‐based out‐patient care, hospitalized in‐patient care, and endoscopic procedures.…”

“…However, responses in web‐based surveys are reportedly more accurate, because respondents are less concerned about providing socially unacceptable answers, thus providing more honest responses. Additionally, web‐based responses contain fewer random and systematic errors than other types of survey responses . A three‐wave emailing across 6 weeks, approximately 14 days apart, was used to increase the survey response rate.…”

“…Additionally, web-based responses contain fewer random and systematic errors than other types of survey responses. (15) A three-wave emailing across 6 weeks, approximately 14 days apart, was used to increase the survey response rate. A reminder was sent to respondents who had started but not yet completed the survey and to those who had not yet started the survey.…”