Evidence based insights into physician compensation, RVUs, contracts, investing, leadership, and the economics of healthcare.
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What Is This About?
In the previous newsletter, we discussed how RVUs are created and how they influence physician compensation. But now we arrive at an important question. How much money is an RVU worth? And if RVUs are standardized across the country, why can two physicians performing the exact same service earn very different amounts of money?
Why Should Medical Professionals Care?
To answer that question, we first need to understand something that surprises many physicians. Not all RVUs are created equal. In fact, there are three different types of RVUs.
The first type is the Work RVU (wRVU). This represents the physician's work. It reflects factors such as the time, skill, training, effort, and clinical judgment required to provide a service.
The second type is the Practice Expense RVU. This reflects the operational costs required to deliver care. Things such as office rent, medical equipment, instruments, supplies, electricity, staff salaries, and other overhead expenses. In other words, this portion helps pay for the facility where healthcare is delivered.
The third type is the Malpractice RVU. As the name suggests, this portion reflects the cost of professional liability insurance. Whoever pays the malpractice premiums ultimately receives this portion.
For the purposes of this series, we are primarily focusing on Work RVUs because they are the component most directly related to physician compensation. Now let's discuss the next piece of the puzzle.
As of 2026, the value assigned by CMS to one RVU is approximately $33.40. This number is called the Conversion Factor. The Conversion Factor is established and adjusted by CMS, with authority granted by Congress, and it is updated periodically. The Conversion Factor is what transforms RVUs into dollars.
Let's go back to an example I mentioned earlier. In my specialty, a D&C hysteroscopy is reported using CPT code 58558. That procedure currently carries approximately 4.07 RVUs. If we multiply those 4.07 RVUs by the current Conversion Factor of $33.40, we get approximately $135.94. Simple enough, right? Not quite. Because there is another factor that affects reimbursement. It's called the Geographic Practice Cost Index, or GPCI.
The United States is a large and economically diverse country. The cost of living in New York City is very different from the cost of living in rural North Dakota. The cost of office rent is different. Staff salaries are different. Malpractice premiums are different. Virtually every expense associated with running a medical practice varies depending on location.
CMS recognized this reality and created the Geographic Practice Cost Index to adjust payments based on regional economic differences. The concept is straightforward. The RVU value is multiplied by the Conversion Factor and then adjusted by the GPCI or geographical index assigned to that location. Each state has its own GPCI value. In some states, different metropolitan areas may even have different GPCI values. For example, Austin and Dallas have different geographic adjustments despite being in the same state. As of recent CMS data, some of the highest geographic adjustments are found in Alaska, where the geographical index can approach 1.5. Meanwhile, areas such as Austin, Texas, have values closer to 1.02.
Let's return to our D&C hysteroscopy example. If I perform a D&C hysteroscopy in Alaska, where the geographic adjustment is 1.5, the reimbursement would increase from $135.94 to approximately $203.91. That's simply $135.94 multiplied by 1.5.
If I perform the exact same procedure in Austin, Texas, where the geographic adjustment is 1.02, the reimbursement would be approximately $138.66. That's a difference of more than $65 for the exact same procedure. Same CPT code. Same RVUs. Same physician work. Different payment.
And the difference is driven primarily by geography and cost of living adjustments. When you consider that procedures such as D&C hysteroscopy are performed frequently throughout a physician's career, those differences can become substantial.
Now, let's make things just a little more complicated. Remember when I said there are three different types of RVUs? Work RVUs, Practice Expense RVUs, and Malpractice RVUs.
Well, there are also separate GPCI adjustments for each of those three categories. In other words, there isn't just one Geographical Index. There are three. A Work GPCI. A Practice Expense GPCI. And a Malpractice GPCI. Each region receives its own adjustment values for each category. Although we tend to focus on work RVUs, it's important to understand that all three geographic adjustments play a role in determining overall reimbursement.
If you're curious about the GPCI values in your area, the American Medical Association maintains publicly available resources that list geographic adjustments throughout the United States.
But now let's take a step back. We've learned that RVUs are adjusted by geography. We've learned that different regions receive different reimbursement for the exact same service.
But is geography the only reason physicians earn different amounts of money?
Not even close. In the next newsletter, we'll discuss why two physicians practicing in the same city, performing the same procedures, and generating the same RVUs can still earn dramatically different incomes.
The Bottom Line
RVUs are divided into three types that account for the different components of practice reimbursement.
Key Takeaways
✓ There are three components of an RVU: Work RVUs, Practice Expense RVUs, and Malpractice RVUs.
✓ Each component is adjusted using a geographic index. This means that, depending on the part of the country where you practice, each RVU component is multiplied by a factor that reflects regional differences in physician work, practice expenses, and malpractice costs.
✓ These geographic adjustments are one reason two physicians with similar experience can perform the same procedure in different parts of the country and generate different reimbursement.
“Where you live and where you work matter more than you know”.
MD&D Quote of the Day
What’s Next?
Next: Why Some Specialties are Paid More Than Others?
Not all specialties were created equal.
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Bruno Casanova, MD
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Medicine, Dollars & Decisions
Life and Business in Medicine.