Understanding the RVU System: How Pediatricians Get Paid and What You Can Do About It
Summary of presentation from Dr. Suzanne Berman at the 2025 PMI Conference
The Relative Value Unit (RVU) system plays a pivotal role in how physicians, including pediatricians, are paid for their services. While the mechanics of this system can seem intricate, understanding its components and how values are assigned can empower both clinicians and practice managers to advocate for better compensation and fairer processes. This article will demystify the basics of the RVU system, unravel its history, explain how values are calculated and used for payment, discuss its implications for primary care and specialty practices, and provide guidance for those hoping to improve how pediatric providers are compensated.
### The Origins and Structure of the RVU System
The RVU system was instituted by the Centers for Medicare & Medicaid Services (CMS) as a replacement for the “usual and customary rates” model, which contributed heavily to medical inflation by tying payments to the charges set by physicians in each locale. To create more fiscal responsibility and fairness, the RVU system bases payments on the estimated cost of providing a medical service. Each service listed under the Current Procedural Terminology (CPT) codes receives a specific RVU value, which represents the resources required, not the societal value or benefits of the service.
### Components and Calculation of RVUs
Each RVU is comprised of three main components: physician work, practice expense, and malpractice costs. Physician work (~50% of the total RVU) reflects the clinician’s time, technical skill, and effort required. Practice expense includes overhead like staffing, supplies, equipment, and administrative costs. Malpractice expense, while much smaller, factors in the professional liability premiums associated with performing the service. Each part has its own calculation method—some based on expert panel surveys, others on time studies and cost data. Importantly, practice expenses differ depending on whether services are performed in facilities (like hospitals) or non-facility (office) settings. Final payment calculations also adjust for geographic cost variations using Geographic Practice Cost Indices (GPCIs), recognizing that operating in New York City, for example, is costlier than in rural Kansas.
### How RVUs Affect Payment and Perceptions of Fairness
After the base RVU for a CPT code is determined, those values are summed, adjusted for geography, and multiplied by a national conversion factor (expressed in dollars per RVU) to establish the actual payment rate. In recent years, the conversion factor has declined—even as practice costs have risen—squeezing physicians’ income. New legislative initiatives are emerging to address these imbalances, such as the Provider Reimbursement Stability Act, which would require periodic updates to cost inputs and limit abrupt changes in the conversion factor. The RVU model is favored for productivity-based pay in medical practices because it better accounts for differences in patient complexity and service intensity, unlike models strictly based on visit numbers or collections.
### Challenges with RVUs and Advocacy Opportunities
Despite striving for fairness, the RVU system is not without flaws. There are concerns about whether specialist or procedure-heavy practices receive disproportionately higher payments compared to cognitive or primary care specialties. There are also systemic issues—such as survey underrepresentation by pediatricians, outdated administrative cost calculations, and commercial insurance payers setting widely varying RVU rates for the same service across specialties. Successful advocacy requires pediatricians to actively participate in RVU and cost surveys and support professional organizations like the AAP in representing pediatric interests at national meetings. Without this involvement, primary care risks losing further ground in relative compensation compared to other specialties.
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### Practical Takeaways
1. **Educate Yourself and Your Staff:** Understand the components of RVUs for your most-used CPT codes and how they impact your reimbursement. Familiarize yourself with practice expense allocations and the role of geographic adjustments.
2. **Participate in Surveys:** When organizations like CMS or the AAP send out surveys about service time, practice costs, or RVU assignments, respond promptly and carefully—pediatric representation is crucial.
3. **Compare Contracts Critically:** When negotiating with commercial payers, scrutinize how your RVU rates compare to those for other specialties and areas; don’t assume fairness or consistency.
4. **Advocate for Updates and Fairness:** Support legislative efforts and professional organization efforts to update cost data, address disparities, and develop policies that recognize the complexity and value of pediatric care.
5. **Engage with Professional Organizations:** Attend relevant meetings, volunteer for committees, or even just share information with your peers—collective action can significantly influence how pediatricians are valued and paid in the national system.
