No matter your profession, when searching for new employment or a raise, knowing your value is crucial. While there are many ways to add value to a practice, healthcare provider value, and thus their compensation, is often tied to billing and collections. How is this relationship determined? Put simply, some receive a percentage of revenues and some are paid by RVUs, but which system makes the most sense? This article will discuss two main ways that clinician production is compensated.
Percentages: A Piece of the Pie
Receiving a percentage of collections is quite common, but in my opinion, it’s an inherently flawed system. Not only are percentages arbitrary, but they don’t have any real relation to the amount of time or skill a physician, PA, or NP spends treating a patient, reviewing labs, and coordinating care, not to mention documenting it all! Unless the clinicians are coding their own visit, they may not have much control over what that visit is worth. They certainly don’t have any sway over what an insurance company will reimburse or how successfully the practice collects what it is owed. Many practices end up writing off a significant portion of “bad debt.” All of these variables will decrease practice revenue, and clinician compensation will shrink accordingly.
Enter the Relative Value Unit
RVUs or Relative Value Units are part of the formula Medicare uses to quantify the complexity of work and expense a practice generates seeing patients. RVUs account for three things: 1) expenses to the practice, 2) the actual work being performed by the provider, and 3) the cost of malpractice (the smallest component). We’ll focus on the part most pertinent to employed clinicians–the work component or wRVU.
Every type of encounter is assigned an RVU value by Medicare. A straightforward new patient visit at a PCP’s office might be worth roughly 1 RVU while a quick check-in from the hospitalist would be worth closer to 2 RVUs. Procedures are also assigned RVU values. A joint injection might be worth three quarters of an RVU while a vasectomy is 11 RVUs. These values are not affected by their reimbursements, and they cannot be amended by employers. They are meant to be representative of the work involved in providing that care.
While two insurers may not reimburse a procedure at the same level, when a clinician is reimbursed according to the amount of wRVUs generated, his/her compensation will always be the same. Therefore, assuming adequate demand for their services, the most control providers have over their production pay is what they’ll be reimbursed for each RVU and whether or not there is a production threshold on top of a base salary.
Base and Bonus
Clinicians who are expected to produce a large volume of RVUs per year are often paid purely by production, without a guaranteed base salary. This is common in dermatology practices where clinicians are producing 6,000-7,000 RVUs per year. In primary care specialties, where annual volumes are closer to 3,000-4,000 RVUs per year, it’s more common to have a base salary with a production bonus (whether it’s paid by RVUs or a percentage of collections). My personal preference and recommendation for most clinicians is that they always negotiate a fair base salary to ensure a minimum level of income. Consider this a sort of retainer, e.g. a cost of doing business for the employer. In my opinion, again, a production bonus should be just that–a bonus that incentivizes one to go above and beyond minimum expectations.
If the latter model is utilized, the next step is to determine your compensation per RVU and the threshold at which you start to earn the production bonus. Expect the threshold to be high enough to cover your base salary and perhaps even 30%-50% higher, depending on your benefits package. When researching data to support your base salary requirements, refer to salary guides from professional organizations such as AAPA, AANP, and MGMA.
So, What’s an RVU Worth?
Information on base salary is much easier to find than what an individual RVU is worth, and there is great variability in how different providers are compensated. For example, a primary care provider might make between $30 and $40 per RVU while an orthopedic surgeon is paid closer to $60 per RVU. Hospitalists tend to make about 30% more per RVU than their outpatient internal medicine counterparts–everything is negotiable.
Many employers will offer a tiered incentive plan where the percent of collections received or the reimbursement per RVU increases with increased patient volume. For example, the bonus you collect might start at 10% of collections at an average of 10 patients per day and increase 1% per patient until a max of 20% is achieved seeing an average of 20 patients per day. A tiered RVU system may start at $40 per RVU over 300 RVUs a month and increase by a few dollars per RVU for every additional 25-50 RVUs.
Whatever method is right for you and your practice, one thing is for sure–you need to know you value, be familiar with different compensation models, and have complete access to your productivity information so you can double check the math if needed. When it comes to getting paid for the work you do, consider Ronald Regan’s famous dictum, “Trust, but verify.”