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Understanding an RVU Based Contract

Increasingly, contracts for physicians, particularly for those working at hospitals, are at least in part based on a wRVU, or work relative value unit, pay scale. Typically, a hospital contract will have a base salary with a bonus based upon some excess wRVU production, with dollar amounts assigned for each wRVU generated beyond a threshold. Other forms of contracts will pay a flat fee per wRVU generated. Therefore, it is essential to have a grasp of how wRVUs work when negotiating employment contracts.

This is purely for educational purposes and accurate to the best of our knowledge. As a reminder, we are not lawyers or otherwise licensed to provide individualized advice, so do your own due diligence prior to making decisions based on the content here.

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What is a Relative Value Unit (RVU)?

What is a Work RVU (wRVU)?

How does the wRVU determine my compensation?

What are different structures to an RVU based contract, and what should I be asking?

Additional things to look at or watch out for in your RVU based contract

Last Thoughts


- PSG Salary and Negotiation Databases, which contains information about RVUs expected and wRVU values - most recent access information linked here

PSG 2023-2024 Transition to Practice Educational Series - For graduating trainees to help ensure a smoother transition from training to practice, including events about the job search, contract negotiations, relocation, personal finance 101, and basic business of medicine topics such as RVUs

- Previous events can be seen here

What is a Relative Value Unit (RVU)?

RVUs make up an integral part of the Resource-Based Relative Value Scale (RBRVS), used by the Centers for Medicare & Medicaid Services (CMS) and private payers to determine payment for rendering healthcare. While it doesn’t give you the dollar value for each RVU, essentially, it allows for a system by which all work provided in healthcare is normalized on a scale that incorporates all aspects entailed in that work. Essentially, it provides a metric by which work can be compared and placed on a benchmark scale.

Understanding what RVUs are and how they're calculated.

When RVUs are calculated, the following components are factored into the basis behind the generation of a number:

  • The work of the physician in terms of time needed to complete the service or procedure and the expertise required to deliver this service (this is the work RVU discussed below)

  • Expenses generated by the facility in terms of resources - this may include the cost of the malpractice insurance premiums, technical component fees, and resource utilization including staffing

These components together account for the total RVUs associated with a CPT code. By doing this, the system allows something that requires a lot of physician time (like a surgery) and something that has a lot of technical expenses and staffing costs (like performing an MRI), to be compared.

These RVU values are adjusted regularly by CMS and is guided by the input of the RVS Update Committee (RUC). This committee is comprised of physicians and other healthcare experts, and together with the AMA, it surveys clinicians to aid in the determination of RVU values. Of course, there are a lot of flaws that physicians often point out with this model, but that’s beyond the scope of this piece.

Very importantly, Medicare will pay hospitals and doctors according to the RVUs associated with a CPT code - it is essentially multiplied by a monetary conversion factor with a geographic adjustment.

Employers have lots of uses for the RVU data which help them plan business models and structure contracts. The wRVU (below) is a special application of the RVU used to determine physician compensation by many employers. Not all practices utilize this - for example private practices often have compensation that’s more directly related to collections from a clinician’s billing.

What is a Work RVU (wRVU)?

Work RVU (wRVU) is the RVU number associated with the work the physician provides for a specific CPT. Think of it as a "neutralized" way to quantify the productivity of physicians as it does not factor in variables such as fee schedules or geographic adjustments. The wRVU factors in time spent reviewing the chart, time spent with the patient, and for procedures, pre-procedural and post-op care that was provided related to the procedure.

For example, a clinic appointment with a patient typically has far fewer wRVUs associated with it then a surgery that usually takes several hours and is associated with an inpatient admission. By assessing total wRVUs generated by a physician, an employer can use this as a benchmark for productivity when determining compensation.

The CMS physician fee schedule is published online and is publicly available. Within it, one can find the wRVUs associated with specific CPT codes.

How does the wRVU determine my compensation?

Because every payer (Medicare, Medicaid, private insurance) has a different negotiated amount that is paid per the billing submitted, it can get confusing in an RVU based contract (as opposed to a collections based contract).

To avoid this, in most RVU based contracts, employers (especially hospitals) will provide a dollar amount quoted per wRVU generated by the physician. This can factor into the compensation offered to physicians in different ways, as you will see below. It is imperative to compare this dollar amount with what national, local, and if possible, employer/hospital, averages are within that physician’s specialty.

You should come to the negotiation table with as much of this data as possible, as many employers will use data from databases to justify or structure the compensation that they propose. Ask them what metrics they’re using. Some potential sources are MGMA, Sullivan Cotter, AMGA, other third-party analysis performed by their particular hospital system. Whenever possible, either have them show you this data or get access to it otherwise. Often times your contract attorney or hospital library may have access to the data. You can also check our PSG Salary and Negotiation Database to see what others in the group in comparable specialties, locations, and practice environments are getting (most recent version linked here).

The percentile you are offered could depend on many things, so don’t just assume that an employer is being unfair if you are offered in the 25th percentile (but definitely ask questions!). The employer is offering you a number based on things like what their overhead is, who their payer mix is, whether there’s a large uninsured population or a tendency in their patient population to not pay medical bills, etc. If you know they have a good payer mix, it could be a red flag that they’re just trying to low-ball you, or that their business model is flawed and they’re not doing a great job with billing, coding, and collections.

What are different structures to an RVU based contract, and what should I be asking?

Different employers use different structures. Here are some we commonly see:

  • As you’re unlikely to hit the ground running with a full patient panel, many contracts allow for a certain guaranteed salary (a ‘floor’) for a period of a few years (two is common). Many times, after that guarantee period is over, you switch purely to production without that guaranteed floor, so recognize that your compensation may actually decrease after that period is over if you’re not meeting the target that this salary was based on.

    • Set yourself up for success (and prevent a situation where you’ll be looking for a new job in a few years). It’s very important to determine whether the RVU target they are setting for you is realistic and achievable. Ask questions about the productivity the other physicians in the group are demonstrating and how long it took them to get there.

  • Many contracts offer a base salary and a bonus structure or incentive if you exceed a certain RVU target.

    • Again, determine what the likelihood of you going above these numbers are.

    • Make sure there is no ‘ceiling’ above which they will not pay extra for extra productivity.

Additional things to look at or watch out for in your RVU based contract

Six things to scrutinize in a RVU-based contract other than the $/RVU value

  • Make sure there is a clear and transparent way of knowing what your productivity is. How are reports generated that say what your wRVUs are? If possible, keep your own logs so that you can compare them against the employer’s data.

    • Will they give you a monthly log so that you will have an idea if you’re on target to meet your goals?

  • Make sure there isn’t a clause where the hospital can arbitrarily adjust your base draw without your consent. Ideally, there is a floor that you cannot dip below, so that you can plan and budget accordingly.

  • In some contracts, there is the ability for the employer to take money back if you don’t meet thresholds. Be careful with the wording here.

    • See how often they calculate/average these RVU numbers. Many employers will calculate over a quarter to allow for natural fluctuations in productivity.

    • Specifically ask about what happens with parental leaves, sabbaticals, illnesses, or other longer periods of ‘PTO’. Is there any base payment you will receive during that time?

  • What happens to the RVUs generated in the time period before you leave a job?

  • If you have an RVU based bonus that’s calculated at certain intervals, what happens if you leave a job at an end date that doesn’t coincide with those intervals? Do you still get a prorated bonus for the RVUs, or do you just sacrifice that bonus altogether?

  • How are you compensated for work that doesn’t have RVU values associated with it?

    • For example, if part of your responsibilities are to participate in tumor board, give lectures to trainees, or participate in committees, how will you be compensated for that time? You can see a situation in which people may be disincentivized to participate in these activities and where if you are the one who those non-compensated activities are assigned to, it could hurt your relative compensation as your colleagues are participating in patient care while you’re doing these activities.

    • If you are in a field where you spend a lot of time on the phone with patients, email, charting, or telehealth types of services, are there ways to be compensated for this time?

  • RVU based contracts may not account for how well you’re doing the job, just that you’re doing it. Are there additional things that go into your compensation like patient satisfaction scores or value based care incentives?

Practices factor in the amount of overhead when deciding how much they will pay you per wRVU - do the thresholds for bonus structures or incentives reflect the point at which your overhead has been covered? One of the benefits to being a partner in a private practice is that you get to keep the excess above the overhead. While as an employee you give up some of that right, ideally there is a point above which you are paid more for the income you generate because your overhead has been covered.

Last Thoughts

If you are planning on taking an RVU based contract, be prepared to be a good advocate for yourself, and set yourself up to succeed under this model. You’ll want to learn how to bill and code (and document) effectively to ensure you get credit for all the RVUs that you generate. You’ll also want to keep track and regularly audit the reports your employer is giving you.

An RVU based model can be very good for a physician who is a go-getter and tends to do more work than their peers, as it allows them to be paid in a way that reflects that extra effort, and eliminates some of the frustration often seen in practice models where everyone receives the same salary or compensation.

While it may seem complicated to learn the business of medicine, knowing these basics will help ensure that you negotiate the best contract for yourself. Good luck!

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