Physiatry Practice Management Resources

One of the components of the Medicare RVUs is a unit value that identifies the administrative and overhead costs of providing each service. A benchmarking program using practice expense RVUs follows three steps:

• Determining the practice expense RVUs based upon the volume of services provided each month.
• Using the practice expense RVUs to calculate the benchmark work target expense for providing these services.
• Comparing the actual expenses for the month to the benchmark and determining if there is a positive or negative variance.

We will assume that for the month of April 1999, your practice provides the following services:

Office Visit, CPT Code 99213, Volume 200; Office Consult, CPT Code 99244, Volume 10; Lesion Excision, CPT CODE 11401, Volume 3.

The value of the practice expense component of the Medicare RVUs for each procedure is as follows. The practice expense RVUs do not include the physician compensation or the physician work component. This information is taken from the 1999 Medicare RVUs.

Office Visit, CPT Code 99213, Expense RVUs 0.51; Office Consult, CPT Code 99244, Expense RVUs 1.48; Lesion Excision, CPT CODE 11401, Expense RVUs 1.06.

The next step involves applying a conversion factor to the expense RVUs. The conversion factor is a dollar amount that translates the RVUs into a benchmark. Medicare's 1999 conversion factor is $34.73. This is the amount that HCFA has calculated to determine 1999 reimbursement levels. Theoretically, the Medicare conversion factor has some relationship to the resources required to provide a particular service. Your practice may choose a different conversion factor, if you have determined that your expenses are higher or lower than the "average" practice. For convenience we will use the Medicare conversion factor.

The next step is to calculate the volume-related expense for each service provided in April.

CPT Code: 99213, Expense RVUs: 0.51, April # 200, Conversion Factor: $34.73, Benchmark $3542.

CPT Code 99244, Expense RVUs 1.48, April # 10, Conversion Factor $34.73, Benchmark $514.

CPT Code 11401, Expense RVUs 1.06, April # 3, Conversion Factor $34.73, Benchmark $110.

Total Benchmark Expense: $4166.

For April 1999, the benchmark expense amount for this medical practice is $4166. If the actual expenses for the month were below this amount, the practice would be performing favorably in comparison to the benchmark.

Several variations in this methodology are possible. One is to use a conversion factor that is different from the Medicare conversion factor. For example if your practice averaged operating expenses of $15,000 per month and total practice expense RVUs of 500 per month, its conversion factor would be $30 per RVU. This approach sets the benchmark at the historical average for the practice.

The present focus on cost containment and reimbursement cuts will continue. Benchmarking practice expenses can be a useful technique for monitoring and controlling practice expenses in physician practices.

Written by: David H. Glusman, CPA