Understanding RVU Compensation

Relative Value Unit (RVU) compensation plans are increasingly more common in physician contracts. RVU incentives are a productivity-based compensation model intended to encourage physician productivity by increasing the reimbursement rate for the most productive physicians. While RVU compensation may seem desirable, there are many nuances of RVU incentive payments that need to be considered and understood before agreeing to an RVU reimbursement model.

What Is A Relative Value Unit (RVU)?

RVUs are the basic component of the Resource-Based Relative Value Scale (RBRVS), which is a methodology used by the Centers for Medicare & Medicaid Services (CMS) and private payers to determine physician payment. They were developed to standardize charges for services throughout different service areas, medical specialties, hospital systems, and payors. In general, more complicated procedures and services are worth more RVUs under the CMS Physician Fee Schedule.

Relative Value Units (RVU) don’t directly determine a provider’s level of reimbursement. Rather, RVUs define the value of one service or procedure compared to others. This value is measured by considering the extent of physician work (including both direct patient care and administrative duties), clinical and nonclinical resources used to provide services (such as equipment, supplies, and facilities), and the level of education/training needed for physicians to perform a given task. RVUs are supposed to allow payors to directly compare the fair market value of one service or procedure to another between different medical practices. For example, a procedure valued at 10 RVUs is supposed to involve approximately twice the work and resources involved in a procedure valued at 5 RVUs. Once the RVU value of a procedure or service is determined, the medical providers’ reimbursement rate is determined by multiplying the RVU value by a monetary “conversion factor” to calculate the cash compensation for those medical services.

Types of RVUs

There are three types of RVUs used to calculate payments made to medical providers.

• Work RVUs

Work RVUs (or “wRVUs”) measure the provider’s work when performing a procedure or service. Variables factored into physician work RVUs include technical skills, physical effort, mental effort, level of decisionmaking, patient risk, and time required to perform the service or procedure. Work RVUs total about 50% of RVUs for a given service.

• Practice expense RVUs

Practice expense RVUs measure the overhead cost of labor and expenses in a medical practice. These include medical and office supplies, staff salaries, overhead expenses such as rent, utility bills, medical equipment, and consumables plus other miscellaneous overhead costs. Practice expense RVUs amount to about 45% of the total RVU rate.

• Malpractice RVUs

Malpractice RVUs reimburse for the estimated of professional liability insurance associated with a given CPT code. Malpractice insurance related RVUs are about 5% of the total RVU rate.

It is important to make sure that you are using wRVU values when evaluating compensation models. Keep in mind that WORK RVUs are only 50% of TOTAL RVUs for a given procedure or visit.

Calculating RVU Compensation from the Conversion Factor

To determine how much a provider will be paid for providing a given service, the total RVU value of the service must be multiplied by the Medicare monetary “conversion factor.” CMS changes the amount of its dollar conversion factor payment schedule each year. The annual conversion factor for 2023 is $33.06, a decrease of $1.55 from the 2022 conversion factor of $34.61 and a decrease of $1.84 from the 2021 conversion factor of $34.89.

To calculate the compensation for a Level 4 new outpatient visit with an assigned RVU value of 2.60, you would multiply the RVUs by the conversion factor of $33.09 to see that the visit would generate $86.03. The same visit in 2021 would have generated 90.71. While a decrease of $4.68 may not seem like a big difference, multiplying $4.68 by 10 patients/day x 5 days/week is $234 less each week that you are being paid to evaluate patients with the same complexity.

How Can I Increase My RVUs?

RVU rates can be increased by treating more patients, by performing more procedures, by treating patients with higher medical acuity, and by providing more complex care.

• Treat more patients

If you increase the average number of patients you see per hour from 2 to 3, your RVUs will increase by about 50%.

• Perform more procedures

Just as the number of RVUs increases with the number of patient encounters, RVUs will increase with the number of procedures performed. Adding a few patients to a daily surgical schedule may result in the surgeon receiving substantial RVU increases.

• Treat higher acuity patients

Because more serious medical issues require more technical skills and decisionmaking, higher acuity patients have a larger RVU value than lower acuity patients. However, providers tend to spend more time caring for higher acuity patients, so the number of patients that can be evaluated in a given time period will likely decrease and that decrease in volume may offset the increased RVUs earned by caring for high acuity patients.

• Provide higher complexity of care

CMS places a much higher value on complex care. For example, repair of a simple 2.4 cm leg laceration is valued at 1.30 RVU while repair of a 2.7 cm laceration requiring revision of the edges and debridement is valued at 7.51 RVUs. This difference in RVU values could amount to hundreds of dollars in income for a single procedure. In this example, using the 2021 conversion factor of $34.89, the value of the procedure increases from $45.36 to $262.05. To maximize RVU compensation incentives, it would be helpful to learn which procedures in each of the medical specialties generate the highest wRVU values.

RVU Compensation Advantages

There are several types of physician compensation models. For example, employers may offer a yearly salary guarantee based upon a given number of hours worked per year. Employers may also offer a straight hourly compensation plan where physicians are paid based on the number of hours they work each week or each month. A productivity compensation plan implementing RVUs has several theoretical benefits over other types of reimbursement methodology.

• RVUs may allow a hospital or employer to compare physician performance. Because RVUs are standardized, a physician who earns 25% more RVUs than a colleague will likely be considered 25% more productive.
• Value-based reimbursement theoretically encourages physicians to become more efficient. Physicians seeking compensation increases may be incentivized to see more patients, perform more procedures, or perform additional services.
• A straight hourly compensation has no benefit for physicians who are efficient in patient care. Physicians who see 3.0 patients per hour and who see 1.0 patients per hour are paid the same. RVU-based compensation more is a more equitable model for outliers: Fast and efficient physicians generate more RVUs and are paid more while slower physicians generate fewer RVUs and are paid less.
• In most cases, physicians are compensated based on the RVU values of work performed, not on the reimbursements received by the hospital or employer for that work. In health systems with an unfavorable payor mix or large numbers of uninsured patients, RVUs may help providers secure a more consistent income without worrying about billing and collection activities.
• Physicians paid strictly on productivity are generally able to focus more on productivity and can focus less on administrative issues associated with medical practices such as billing and collections.

RVU Compensation Disadvantages

• Many physician services do not generate RVUs. If a physician spends time performing a service that does not have an associated CPT procedure code, the physician will not be compensated for that separate service. For example, while hospital administrators and employers may demand high patient satisfaction scores, providers will not be reimbursed for interpersonal interactions that improve patient satisfaction. Similarly, postsurgical care often does not have separate procedure codes or wRVU values.
• Many ancillary services do not generate RVUs. Patient outreach, mentoring residents, teaching students, and other academic pursuits become uncompensated activities when using a productivity model. Productivity-based models also do not provide financial incentives for coordination of care.
• RVUs tend to value procedures, overtesting, and overdocumentation rather than valuing quality of care. For example, see this article on how RVUs undervalue cognitive physician visits. Physicians who examine patients and take the time to think about what is causing a patient’s symptoms are paid less than those who simply order a bunch of tests and move on to the next visit.
• Factors beyond a provider’s control may have a significant adverse effect on a provider’s revenue. For example, in emergency departments with large numbers of holding patients or with few patient visits during overnight hours, low patient volumes may have an adverse impact on providers’ ability to generate RVUs. Similarly, a surgeon whose surgical schedule is half-full will be unable to optimize RVU generation. For physicians working on a strict RVU compensation plan, low patient volume amounts to low income levels. Clunky and outdated medical record systems can also have a significant adverse effect on RVU generation.
• When physician compensation is based heavily on RVUs, health system leaders tend to focus heavily upon RVUs and ignore other aspects of care when assessing a physician’s medical practice. It is common for RVU production goals to arbitrarily be increased each year. Seldom are RVU production goals decreased.
• Goodhart’s Law posits that all metrics of scientific evaluation will eventually be abused and therefore once a metric is chosen as an indicator of function, it ceases to be a reliable indicator of that function.
• In keeping with Goodhart’s Law, this study showed that RVUs may not be an accurate measurement of the complexity of physician work. Common surgical RVU values had poor correlation with common measurements of surgical outcomes such as length of stay, operative time, and mortality. The study concluded that “given the increasing emphasis on measuring and tracking surgeon productivity, more objective measures of surgeon work and productivity should be developed.” Although published in 2014, there have been no advances in measuring healthcare provider productivity since that time.

Average Annual RVUs by Specialty

Several compensation survey companies publish data regarding average annual physician RVU generation. I found data from two surveys that are summarized below.

According to an e-mail survey of 92,000 physicians by SullivanCotter and the AMGA published in Becker’s Hospital Review in 2017, and summarized on Statista.com, the average annual RVUs generated by US physicians in 2016 is as follows (note how procedure-heavy specialties are at the top of the list):

1. Anesthesiology – 10,891
2. Ophthalmology – 8,711
3. Gastroenterology – 8,264
4. Orthopedic Surgery – 7,848
5. Urology – 7,649
6. Cardiology – 7,413
7. Dermatology – 7,329
8. Emergency Medicine – 6,906
9. Obstetrics/Gynecology – 6,853
10. General Surgery – 6,736
11. Pulmonology – 5,768
12. Pediatrics – 5,299
13. Family Medicine – 4,908
14. Internal Medicine – 4,891
15. Rheumatology – 4,821
16. Oncology – 4,788
17. Neurology – 4,737
18. Endocrinology – 4,677
19. Psychiatry – 4,079

MGMA RVU Compensation

This 2021 MGMA report lists the following annual RVU generation for hospital-based specialties:

• Primary care physicians – 4280
• General nonsurgical specialty – 5376
• General surgical specialty – 6502
• Neurosurgery ~8000
• Orthopedic surgery ~7800
• Hand surgery ~ 8700
• General surgery ~ 6000
• Cardiology ~ 7000
• Gastroenterology ~ 7000
• Neurology ~ 4200

RVU Values by CPT Code

This 146 page document from the Veteran’s Administration contains the 2020 RVU values for every single CPT code available. Keep in mind that RVU values change every year, so the listed values may not be exact. However, this table will give you a good estimate of approximate values for each procedure or visit.

Emergency Medicine RVU Compensation

Want another frame of reference for emergency medicine? I generated one of the highest RVU levels for our group in 2021. I average 120 hours of clinical time per month. Our hospital admit rate is about 22% overall (higher admit rates generally mean higher acuity visits). During overnight shifts, there are often several hours with low or no patient volumes. My total RVUs for 2021 were 5,046. I averaged 3.97 RVUs per visit.

2022 RVU Values for Emergency Department Visits:

• Level 1 – 0.48
• Level 2 – 0.93
• Level 3 – 1.42
• Level 4 – 2.60
• Level 5 – 3.80
• Critical Care – 4.50
• Critical Care (additional 30 mins) – 2.25
• Code Blue – 4.00 (i.e. CMS values caring for three Level 3 patients with upper respiratory infections more than saving someone’s life [1.42 x 3 > 4.00])

Calculating Average Hourly Compensation based on RVU values

Stop and think about what medical services you provide each day. Write down what you do for a week. Find the RVU values attributable to those services. Then multiply the “conversion factor” being offered by the RVUs you typically generate each day or week to get an approximate compensation value.

For example, if you are an emergency physician, suppose that on average you are able to evaluate and admit one Level 5 patient per hour plus one Level 3 patient per hour. The total RVUs per hour would be 5.22. Multiply that by the 2022 conversion factor rate of $34.61 and your compensation for this RVU model would total approximately $180/hour. If there were fewer patients per hour, your hourly pay would be less. If you were able to perform additional procedures while seeing the same number of patients, your hourly pay would be more.

RVU Compensation Tips

Document charts appropriately

Because provider compensation is based upon both CPT codes and E/M codes, failing to capture the complexity of a service or the severity of a patient visit will adversely affect physician payments.

Define how RVUs will be earned

If working in an environment where multiple providers are involved in performing clinical services to the same patient, apportioning RVUs may be difficult. For example, when surgery is performed on a patient, how will RVUs be divided between the surgeon and the assistant surgeon? In an emergency department setting, how will RVUs be divided between physicians and advanced practice providers who both contribute to the same medical service? If an APP initiates an evaluation on a patient, but the physician is required to intervene and perform a majority of the medical care, how will the physician’s time be valued? It is important to clarify such contingencies during contract negotiations and to include apportionment within the contract.

Keep logs of your clinical activities

Logging all health care services provided is EXTREMELY important. Because RVU compensation is based upon clinical activity, if you are not credited with performing that clinical activity, you won’t be paid for that activity. For example, one of my clients was a surgeon who gave 120 days written notice that he was terminating his hospital contract. After receiving this notice, the hospital alleged that he had only performed 35 surgeries in the prior 5 months. In reality, he averaged more than 35 surgeries per month, plus more than 50 clinic visits per week. Nevertheless, because of allegedly low RVU production, the hospital deducted from his salary a substantial portion of “RVU advances” it had previously paid him. As a result, during some weeks he only took home $700 in salary. Keeping meticulous logs of patients/procedures will help you to address any discrepancies in RVU production.

Audit employer billing documents and collections

Make sure that you are receiving credit for all procedures that you perform and all patients you see. Make regular audit requests to compare your clinical activity logs to the RVUS being credited to you. Also make sure your contract allows you to audit your employer’s books. Simple unbilled services such as EKG interpretations or pulse oximeter interpretations or downcoded charts can add up quickly.

Avoid contracts based solely on productivity

Seek a contract in which the type of compensation is a base guarantee with additional compensation for meeting certain wRVU benchmarks.  In other words, physician contracts that set base salaries as the median compensation under Sullivan Cotter and then add bonus compensation after a certain RVU level will provide more income security than a physician contract setting reimbursement strictly on RVU generation. Consider how strict RVU productivity might be affected if a schedule is only half-full.

Avoid a reimbursement methodology that sets arbitrary RVU goals

Healthcare administrators may use the same productivity formula for all types of surgery without considering that certain types of necessary surgery tend to generate fewer RVUs despite a high productivity level.

Avoid contracts with an unfair RVU-based compensation formula

One contract I recently reviewed stated that a physician would not receive credits for RVUs if “reimburssement is denied,” if the physician failed to “promptly and accurately complete all patient records so that [EMPLOYER] can bill for physician’s services,” or if physician’s coding was deemed “inaccurate.” In addition, the contract stated that all calculations on RVUs are made in the EMPLOYER’s sole discretion and that the EMPLOYER’s receipt of payment for a physician’s work was “inconsequential” as to whether the physician would receive credit for RVUs.

In other words, the employer wanted the physician to be responsible for the employer’s payment denials and wanted the ability to bill and receive payment for RVUs the physician generated before refusing payment to the physician for late charts or “inaccurate” coding. Don’t agree to such shady language.

Estimate your income before signing a contract

If presented with an employment contract involving wRVU compensation, use the above formula to estimate the annual compensation you will receive. Find wRVU values for typical patient visits and procedure codes in your specialty, estimate number of those visits and procedures you would log in an average week, and multiply those values by the conversion factor being offered in your contract. Also consider asking the potential employer for prior years’ RVU numbers to help determine whether your compensation will be competitive.

Be flexible in compensation models

Hospitals whose physician compensation arrangements are based solely upon wRVUs without consideration of base salaries will likely see attrition of their most valued medical staff to facilities with more balanced compensation arrangements.

Want to learn more about medical contracts? See the Medical Contracts section of this site.

Need help figuring out a medical contract offering RVU compensation models? Contact me. I can help.