Change in Methodology Between the Resource-Based and Charge-Based MP RVUs

KPMG LLP  has contracted with HCFA to develop resource based malpractice relative value units ("RVU") subject to guidelines specified by HCFA in the initial request for proposal. These guidelines have been augmented by ongoing discussions with HCFA, including their review of an earlier preliminary draft report. This final report reflects the changes to that document, both in approach and presentation, requested by HCFA. The objective in developing a resource-based malpractice RVU ("RBMRVU") is to allocate actual malpractice insurance premium costs to specific procedures. The methodologies that have been selected to calculate the RBMRVUs allocate the malpractice costs of each physician specialty across the procedures that the specialty performs, according to the frequency the specialty performs it. In other words, each procedure is assigned a RBMRVU in proportion to the average costs of all the physician specialties that perform the procedure. The previous methodology was based on the product of "base allowed charges and service specific malpractice expense percentages. The new resource based methodology for malpractice costs effectively ends the resource based relative value scale's ("RBRVS") dependence on charge based data. In lieu of allocating malpractice cost compensation across allowed charges, we have supplied two alternative allocation methods. One method allocates RVUs by averaging the malpractice costs of the specialties that perform the procedure. The other allocates the malpractice RVUs by using the averages developed in the first method multiplied by the procedure's work RVUs, accounting for the procedure specific "Risk of Service" ("ROS"). Certain adjustments to the methodology have been applied based on specific knowledge of malpractice insurer rating practices. For example, obstetrical procedures and spinal surgeries have been increased. Obstetrical procedures have been increased to a level appropriate for Obstetricians rather than the lower costs of a broader OB/GYN grouping. Spinal surgeries have been increased because it is not uncommon for Orthopedic Surgeons to be charged a higher premium if they perform these procedures. Since malpractice insurers typically rate physicians that perform surgeries higher than physicians that focus on evaluation and maintenance, we have applied a different set of expense allowances for surgical procedures than we have for non-surgical procedures. In spite of these changes to the calculation of malpractice RVUs, the new resource based methodology has a few similarities with the previous methodology. Specifically,

Much of the statutory formula used to calculate the percentage of total charges has been maintained in the resource-based formula. Service specific malpractice expense RVUs are still based on a weighted average of the malpractice expense of the specialties performing the service. (But note the previously mentioned exceptions).
The new RBMRVUs are calculated so that the same level of aggregate malpractice RVUs will be generated as were under the previous methodology.
Codes, which had malpractice RVUs under the previous methodology, but which have no Work RVUs have been left unchanged in the ROS adjusted methodology. The majority of these codes have a technical modifier.