Determining cost of service

Written by Reed Tinsley | June 22, 2009

Use this effective shortcut to determine cost of service:

  1. First, using a spreadsheet program, for your most recent fiscal year, list all the procedure codes that you bill along with the associated relative value units (RVUs) from the Center for Medicare and Medicaid Services.
  2. Then, multiply each RVU by the volume of each procedure code billed. You can obtain the RVU schedule online from www.cms.gov. This gives you total RVUs for each code. Total that number, and you have the total number of RVUs your practice produces during a fiscal year.
  3. Finally, divide that number into your total operational expenses to derive an average cost per RVU.

About the Author

Reed Tinsley CPA

This article is written by Reed Tinsley, a Houston, TX-based CPA with over 30 years of experience advising physicians and medical practices across Texas and the United States. Reed holds certifications as a Certified Valuation Analyst (CVA), Certified Healthcare Business Consultant (CHBC), and Certified Financial Planner (CFP), specializing exclusively in the healthcare sector. He is a published author, nationally recognized speaker, and trusted advisor to physicians on accounting & tax, practice management, and financial planning. Schedule a Free Consultation.

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