What the three RVU components measure

Every billing code that's priced using RVUs is assigned three separate relative value components, which together represent the total resources involved in furnishing that service:

  • Work RVU — the physician's time, skill, effort, and judgment required to perform the service
  • Practice Expense RVU — the overhead cost of delivering the service, including staff, equipment, and supplies, which can differ depending on whether the service was performed in a facility or non-facility setting
  • Malpractice RVU — the relative malpractice insurance cost associated with the service

These three components are added together to produce a total RVU value for the code. That total is a relative measure, not a dollar figure on its own; it only becomes a payment amount once it's adjusted for geography and multiplied by a conversion factor.

Geographic adjustment

Because the cost of delivering care varies by location, RVU-based fee schedules typically apply a geographic adjustment, often based on the same Geographic Practice Cost Index (GPCI) structure Medicare uses, before the conversion factor is applied. This means the same billing code can have a different allowed amount in two different regions of the same state, even under an identical fee schedule and conversion factor, because the underlying RVU has already been adjusted for local cost differences.

How RVUs become a dollar amount

The core formula used across most RVU-based fee schedules is:

Allowed Amount = Total (Geographically Adjusted) RVU × Conversion Factor

The conversion factor is the variable that actually turns a relative value into a dollar figure, and it's set independently by each state, meaning two states can use identical RVU tables but produce very different reimbursement amounts because their conversion factors differ.

Where states diverge from Medicare's RVU model

Most states that use RVU-based professional fee schedules start from the Medicare Physician Fee Schedule's RVU tables, but they don't always adopt Medicare's values as-is. States may freeze RVU values from a specific past year, apply their own weighting between the work, practice expense, and malpractice components, or exclude certain adjustments Medicare applies. Correctly pricing a bill requires knowing which version of the RVU tables, and which state-specific adjustments, applied on the date of service, not simply which RVU value is currently published by CMS.

How BillSentry applies RVUs

BillSentry automatically identifies the applicable workers' compensation reimbursement methodology and calculates the allowed amount at the bill-line level, including selecting the correct RVU table version, geographic adjustment, and conversion factor for the state and date of service in question.

Every calculation is documented as a RuleTrace™, showing the exact RVU components, geographic adjustment, and conversion factor used, so the resulting allowed amount is fully traceable back to its source data.