[FPMD: This guest post is provided by Dr. John Jurica of The Vital Physician Executive - a blog dedicated to encouraging emerging physician executives, and helping them to be more successful and effective. We have no financial relationship.]
When negotiating a new employment contract, it is important to understand how productivity is measured. While it is common for compensation to start out as a fixed salary, it will often transition into one partially or wholly based on productivity - which is measured by RVUs.
During the contracting process, worked relative value units (wRVUs) are sure to be discussed, and need to be understood. wRVUs are used to describe and measure physician productivity. They are often used to calculate bonus payments, or even 100% of a physician’s salary.
Before RVUs were developed, Medicare paid for services based on usual and customary fees, which were highly variable and arbitrary. In order to standardize payments, the Health Care Financing Administration (now known as the Centers for Medicare and Medicaid Services) adopted the resource based relative value scale (RBRVS) system.
The RBRVS is used to pay for medical services, including medical care provided in hospitals, clinics and nursing homes. The RBRVS is comprised of three parts: physician work (wRVUs), practice expenses and professional liability costs. Medicare payments are determined by applying a dollar multiplier to the relative value of each encounter (the tRVU).
Understanding Worked RVUs (wRVUs)
The physician work part of the formula (wRVU) is used to compare the productivity of physicians and to create compensation models. The wRVU is based on its components:
- The time needed to deliver a service.
- The relative mental effort and judgment required.
- And the intensity as it relates to the risk to the patient.
The complete list of tRVUs and their components (including the wRVUs) are updated and published annually by CMS (see Physician Fee Schedule – January 2016 Release). To get an idea of the relative weight of various types of services, I am including a small sample of the 2016 wRVUs:
Notice that a typical new patient office visit of moderate complexity (99203) runs 1.42 wRVUs. An established patient office visit at the same level (99213) runs only 0.97 wRVUs. Operative procedures have much higher values.
Putting it all together...
Productivity is tracked by adding up the wRVU value of each patient encounter. Using these weighted values, one can compare the productivity of physicians in the same specialty, or even those across specialties. Here are the typical RVUs generated by specialty:
- Internist or family physician - 4,000-5,000 wRVUs per year.
- General surgeon - 7,000-8,000 wRVUs.
- Interventional cardiologist or neurosurgeon - 10,000 or more.
Initial salaries may not be linked directly to wRVUs. But employers expect that the RVUs being generated will begin to meet or exceed the wRVUs of similarly compensated physicians in the salary surveys within a year or two of being hired. If you are lucky enough to negotiate a salary at the median for your specialty, but two years later you are only producing visits at the 25th percentile, you can reasonably expect a reduction in salary with your next contract.
There are other limitations to the use of wRVUs. For example, if the work does not generate visit codes for the physician (meetings or teaching), it will not be reflected in a productivity calculation.
For those that want to read more about the use of RVUs in employment contracts, I just published a more detailed discussion of RVUs at the Vital Physician Executive. And here is an additional resource from The National Health Policy Forum: The Basics – RVUs.
Guest author John Jurica, MD, MPH, CPE is the mind behind the Vital Physician Executive - a site dedicated to encouraging emerging physician executives, and helping them to be more successful and effective. John may not want to embellish, but that CPE you see behind his name? It stands for "Certified Physician Executive". Check out his biography to learn more.
He can be contacted at email@example.com."