Where does the money come from in Radiology?

1. Where does the money come from in Radiology? An Application of Relative Value Units (RVUs)

2. A Special Thank You to: Dr. David M. Yousem, M.D., M.B.A.
Professor, Department of Radiology
Vice Chairman of Program Development
Director of Neuroradiology
Johns Hopkins Hospitalfor allowing the use of his material/content in this presentationDr. Yousem’s online lecture series can be viewed at:http://webcast.jhu.edu/mediasite/Catalog/pages/catalog.aspx?catalogId=7e18b7d5-9c63-487e-aaf1-77a86f83b011Dr. Yousem’s project was funded through an RSNA Educational Grant

3. Relative Value Units and the RBRVS – A Brief Review • RVUs are assigned to specific CPT codes • The total radiology bill has two components • Technical Fee • Paid to the facility (owner/operator of the equipment) • Professional Fee • Physician Work, Practice Expense, and Malpractice Expense • RVUs do not translate directly into money • Modified by geographic and budgetary multipliers • Money Paid = (RVU x GPCI) x Conversion Factor

4. Medicare – There are (usually) two bills for every study • Medicare Part A • Submitted by the “facility” performing the study • Technical component • Medicare Part B • Submitted by the interpreting physician • Professional component • Patient pays 20% of both bills, Medicare covers 80% of both • The patient may have supplemental insurance to cover their 20% • Global Reimbursement • For the freestanding entity that may bill for both the technical and professional components of the CMS Physician Fee Schedule under Medicare Part B

5. Follow the Money • Over the next few slides we will create a simplified example of the reimbursement process • Certain assumptions will be made to facilitate understanding the numbers on a fundamental level • As always, reality is much more complicated • To start, we will try to answer the following question: • How many studies do I have to read each day to make $300,000 in a year?

6. Follow the Money – Assumptions • Net payment per RVU of $30 • This allows for incomplete collections in a mixed payer population • Calculated across all departments within a practice • Goal personal income of $300,000 • Benefits amount to 25% of salary • Malpractice costs are $25,000 (high end of the scale) • Cash allowance of $10,000 (meetings and travel) • Practice Expenses of 35% • Based on survey data from the ACR and median reported expenses per FTE radiologist

7. Follow the Money – Assumptions continued • Work Days • 250 workable weekdays a year • 50 days for vacation and/or meetings • 5 weekends of coverage • Total of 220 work days • CMS Physician Fee Schedule RVU files for 2010 • Geographic Practice Cost Index (2010) • GPCI (physician work) in North Carolina is 1.0 • Conversion Factor (2010) • $36.0846

8. Follow the Money – The Challenge • Our hypothetical radiologist must produce $515,000 in a year • This covers his salary, group benefits, and expenses • Stated another way • $2,341 a day

9. Follow the Money – The Details • Using the CMS formula for reimbursement $ = RVUprofessional x GPCI x CF • We break it down into parts • In our case, the payment per RVU reflects the GPCI and CF modifiers $510,000 = Payment per RVU x RVUtotal RVUtotal = Sum of {RVUstudy x Number of each type of study} • To break it down further into the workload required in a single day $510,000 / 220 days = $2,341/day Number of studies = $2,341 / (RVUstudy x Payment per RVU)

10. Follow the Money – The Details • The previously described equations are calculated to show how many of one specific study (e.g. Chest Radiographs) must be read in a single day to meet the goal income • Calculating a mix of studies is simple, but less illustrative

11. Follow the Money – The Work • Using only the professional component of reimbursement, these are the numbers of each type of study you would have to read in a single day to produce $2,341 of income for your practice • Specifically, if you are a neuroradiologist, and only read noncontrast Head CTs, you would have to interpret, and be reimbursed, for 68 exams to meet your goal

12. Follow the Money – Own the Equipment • The aforementioned examples are for reimbursements with only the professional component • The technical component of reimbursement reflects 85% of the global bill compared to the professional component’s 15% • Here are the numbers again when receiving the global reimbursement (e.g. if all imaging was performed at your outpatient imaging center)

13. Conclusions • Study volume is important to produce revenue • So are your payer mix and contracts • Medicare vs. Medicaid vs. Private Insurance • Efficiency in Billing and Collections is essential to actually receiving the revenue you have “earned” • Accounts Receivable is an critical asset (see Accounting) • Owning the equipment is crucial • This is the basis of turf wars between radiology and some other clinical subspecialties • ACR has ongoing legislative efforts at closing Stark law loopholes

14. The Big Picture • Managing a practice with multiple radiologists exponentially increases the complexity of generating and measuring income • Referral Base influences the RVU calculations and billing • Inpatient vs. Outpatient and Medicare vs. Private Insurance • Hospital vs. Imaging center vs. Physician Office • Productivity Measurement and other Metrics • As well, there are many facets to both Accounting and Expenses • Capital Purchases • Marketing • Technology • Medicolegal and Legislative Issues