Often pediatricians question why they should use the Medicare resource-based relative value scale (RBRVS) methodology in fee schedule development. This methodology incorporates sound business principals by addressing the costs incurred in delivering the services; eg, practice expense, as well as malpractice expense and physician work. In addition, many Medicaid and commercial insurance carriers have abandoned the old “usual and customary” or “customary, prevailing, and reasonable” methodologies of developing fee schedules. Furthermore, many groups evaluate physician performance using the physician work component of the relative value units (RVUs). Therefore, it is imperative that pediatricians understand the basis of RBRVS. A more detailed description of the development of the practice expense component of RVUs follows.

The RVUs assigned to any Current Procedural Terminology (CPT) procedure code reflect 3 elements of the fee schedule payment amounts: physician work, practice expense, and malpractice expense. The total RVU is calculated as follows: physician work is...

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