RVU: Physician Compensation Based on Productivity

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Physician compensation is usually a combination of salary and volume-based incentives. Over the past few years, volume-based incentives have been primarily based on Relative Value Units. Relative Value Units, or RVUs, are used to calculate physician compensation based on how much work is required to treat a patient. Volume-based incentives used to consist of the number of patients a physician treats or the amount of revenue generated from the patients a physician treats.

Compensation Based on Volume of Work

RVUs have become increasingly popular because they consist of the volume of work a physician expends to treat patients. For instance, a surgical procedure requires a higher level of time, skill, and intensity compared to a simple well-patient visit. This means that the surgical procedure would yield a higher RVU and a higher incentive. An incentive based on the number of patients a physician treats would pay the same incentive whether the physician performs a surgical procedure or a well-patient visit. 

Physicians that are paid incentives based on the amount of revenue generated run into similar problems.  What happens when the patient is self-pay or the patient is underinsured? With the RVU method, the physician will get paid regardless of the financial or insurance status of the patient.

There are many factors involved in determining or calculating RVUs.Physicians may experience that different facilities may offer a different RVU rate even though it may be the same specialty.

The method of determining additional compensation may also vary. Some facilities may set an RVU threshold that providers must achieve prior to receiving any payout.

While RVU’s have been quite popular especially from a recruitment standpoint, it is a strong possibility that within a few years it will be eventually replaced with a pay-for-performance system.

  Many healthcare trends forecast that the future of healthcare will no longer be based on quantity or productivity; instead, it will be based on quality. Patient satisfaction, safety, and quality of care are beginning to influence the way health care providers are being paid.

Calculating RVUs

  • Determine the RVU for each service provided.  For instance, CPT code 99210 might equal to 1 RVU and 99211 might equal to 1.5 RVUs.
  • Determine the compensation for each RVU.  For instance, if the compensation for 1 RVU equals $30.00 then the incentive for 99210 would be $30.00 [1 (RVU) x $30.00 (rate)] and the incentive for 99211 would be $45.00 [1.5 (RVU) x $30.00 (rate)].
  • Determine the threshold for receiving an incentive, if using the salary plus RVU compensation model.  For instance, if the threshold for receiving an incentive is 300 RVUs per month, then the physician would receive an incentive for every RVU over 300.   If a physician has 350 RVUs for the month then the physician would receive an incentive of $1500.00 (50 RVUs x $30.00). If the physician is on a straight commission pay scale, then the compensation for 350 RVUs for the month would be $10,500.00. 

The rate for each RVU is just an example.

  In order to determine the compensation paid for each RVU, each medical office must factor in several elements by answering considering the following:

  1. How much skill, expertise, and effort does a physician need to adequately treat a patient for each CPT?
  2. What does the fee schedule look like? And how much does the medical office expect to receive in reimbursement for each CPT code? 
  3. Will you use a percent of the expected revenue to determine the RVU rate?
  4. What is a competitive compensation for physicians receiving compensation based on productivity?

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