Glossary · Reimbursement

RVU and RBRVS: how Medicare prices a service

Medicare doesn't price services by charge — it prices them by relative value. The RBRVS formula is how a code becomes a dollar amount.

The Resource-Based Relative Value Scale (RBRVS) sets Medicare physician payment using Relative Value Units (RVUs). Payment is the sum of three RVU components, adjusted for geography and multiplied by a fixed conversion factor.

The three RVU components

  • Work RVU — the physician's time, skill, and effort.
  • Practice Expense RVU — the overhead of providing the service (staff, space, supplies).
  • Malpractice RVU — the cost of professional liability for the service.

The formula

Payment = (Work RVU + Practice Expense RVU + Malpractice RVU) × the geographic adjustment (GPCI) × the conversion factor. Each piece is public, which is why the Medicare allowed amount for a code is fully derivable — and checkable.

Frequently asked

What is an RVU?
A Relative Value Unit is a measure of the relative resources a service requires, in three parts (work, practice expense, malpractice), used to set Medicare payment.
Why does the same code pay differently by location?
Because the RVUs are adjusted by the geographic GPCI for the locality before the conversion factor is applied.

Primary sources: CMS — Medicare Physician Fee Schedule. General information, not legal or medical advice — confirm against the governing rule for the plan type.

Related guides

GPCIFee scheduleMedicare fee schedule

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