Health Insurance companies have a very calculated way of setting their allowable fees – the amount they will pay a provider, that the provider agrees to when they sign a contract. It isn’t anything personal against the massage profession or any specific profession.
Every CPT code has been assigned something called a relative value unit, or RVU, that determines the cost of a service.
Resource-Based Relative Value Scale (RVRBS)
The resource-based relative value scale (RBRVS) is the physician payment system used by the Centers for Medicare & Medicaid Services (CMS) and most other payers. The RBRVS is based on the principle that payments for physician services should vary with the resource costs for providing those services and is intended to improve and stabilize the payment system while providing physicians an avenue to continuously improve it.
The three relative value units (RVU’s) are:
- Physician work – 50.9% of the formula, include the time it takes to perform the service, the technical skill and physical effort, the required mental effort and judgment and stress due to the potential risk to the patient.
- Practice expense -44.3% The values were based on a formula using average Medicare-approved charges from 1991 (the year before the RBRVS was implemented) and the proportion of each specialty’s revenues attributable to practice expenses.
- Professional liability insurance (PLI)– The PLI component of the RBRVS accounts for an average of 4% of the total relative value for each service. With this implementation and the final transition of the resource-based practice expense relative units on Jan. 1, 2002, all components of the RBRVS are resource-based.
The three RVUs for a given service are each multiplied by a unique geographic practice cost index, referred to as the GPCI adjustment. The GPCI adjustment has been implemented to account for differences in wages and overhead costs across regions of the country. The sum of the three geographically weighted RVU values is then multiplied by the Medicare conversion factor to obtain a final price.
These three RVU factors are then multiplied by a geographical adjustment that creates the compensation level for the service in that exact location. The geographically adjusted RVUs are then multiplied by a conversion factor that converts the RVU into a dollar amount, which determines the price that Medicare or the HMO pays. Using this formula, any entity can calculate the price it’ll reimburse for any given procedure.
Based on the result of this formula, payers determine what is the reasonable and customary fee for each procedure performed in a pre-defined geographical area.
Each of the three components of the Medicare Physician Fee Schedule (PFS)—physician work, practice expense (PE), and malpractice (MP) insurance—is adjusted for differences across geographic areas in the input prices related to each component. When they are combined, these three components are known as the geographic adjustment factor (GAF).1
Relative Value System (RVS)Update Committee (RUC)
Since the introduction of the RBRVS, the AMA has worked with national medical specialty societies to provide recommended updates and changes directly to CMS. The AMA/Specialty Society RVS Update Committee (RUC) provides relative value recommendations to CMS annually. You can read about the whole process in the RVS Update Process from the AMA. (PDF)
The RUC is comprised of a volunteer group of 31 physicians and 300 medical advisors that represent each sector of medicine, including primary care physicians and specialists. The RUC also gets information from 100 specialty societies and health care professional organizations. You can view a list of current professions represented at the RUC and see a list of the actual members on the AMA website. There is also a whole section on the AMA Website on the RUC Committee and how it works etc.
Hmm… No rehab therapists – massage therapists, physical therapists, chiropractors or acupuncturists on the list that I can see.
Cost of Doing Business
Health insurance companies may or may not take this information from the RVBRB data to set their allowable fees. They also use information on your specific cost break down and overhead information. This information has never been supplied to any insurance company in WA State from Massage therapists specifically to my knowledge. In the absence of data from a professional association, they resort to using information that they have in their system – as well as coordination of benefits information used on claims.
The insurance companies are lacking current data on the cost of doing business as a massage therapist.
For more information on how to bill insurance see my book: Massage Insurance Billing Manual on my other site www.massagepracticebuilder.com