Relative value units (RVUs) are a measure of value used in the Medicare reimbursement formula for physician services.[1] RVUs are a part of the resource-based relative value scale (RBRVS).
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Before RVUs were used, Medicare paid for physician services using "usual, customary and reasonable" rate-setting which led to payment variability.[2] The Consolidated Omnibus Budget Reconciliation Act of 1985 enacted a Medicare fee schedule, and as of 2010 about 7,000 distinct physician services were listed.[2] The services are "classified under a nomenclature based on the Current Procedural Terminology to which the American Medical Association holds jealously guarded intellectual property rights".[2] Each service in the fee schedule is scored under the resource-based relative value scale (RBRVS) to determine a payment.[2]
For each service, a payment formula contains three RVUs, one for physician work, one for practice expense, and one for malpractice expense. On average, the proportion of costs for Medicare are 52%, 44% and 4%, respectively.[2] The three RVUs for a given service are each multiplied by a unique geographic practice cost index.[1] The sum of the three geographically weighted RVU values is then multiplied by the Medicare conversion factor to obtain a final price.[1] Historically, a private group of 29 (mostly specialist) physicians—the American Medical Association's Specialty Society Relative Value Scale Update Committee (RUC)—have largely determined Medicare's RVU physician work values.[1]