As a physician, the compensation you earn is based on various factors. Your employer will specify your compensation methods in your physician contract.
Before you sign that contract, it’s essential to understand all of the terms. The best way to do this is to have a contract review specialist review the details for you.
But it’s also important to have your own understanding of what the details mean, especially when it comes to compensation.
Are you getting ready to sign a new contract that specifies a wRVU compensation model?
Here is our definitive guide to wRVU physician compensation.
What is wRVU Compensation?
Let’s start by defining what a wRVU compensation plan is. The acronym wRVU refers to work relative value units.
Here’s how it works:
For every patient examination or procedure you perform, you’ll receive a certain amount of work RVUs.
Those wRVUs are then multiplied by a conversion factor, which is a specific dollar amount. Every CPT code used for Medicare and Medicaid billing has a coordinating wRVU. They are pre-determined based on the complexity of the procedure or patient visit.
The more wRVUS you have, the more money you’ll earn.
RVUS are determined by looking at three components:
- The work of the physician
- Expenses incurred by the hospital or practice
- The cost of malpractice insurance premiums
The work of the physician is the wRVU.
When you add the other two elements in, all three combined equal your total RVU.
The units take into account the time and clinical skills of the physician. They account for the overhead expenses needed to perform the work. They also consider the cost of professional liability insurance, including monthly malpractice premiums.
RVU compensation is the most popular payment model. It is common for physicians employed by hospital groups and health systems to receive compensation in this way.
Many independent physicians don’t pay attention to wRVUs because they work under different physician compensation models. But physicians employed by large healthcare groups should understand how wRVUs work.
See our definitive guide to contract reviews and learn how we can help you maximize your earnings today.
How to Calculate RVUs
If your employer pays via an RVU compensation model, you should understand how they’re calculated.
RVUs determine physician payments based on the level of difficulty of a procedure or patient evaluation. Physicians interact with patients in different ways. wRVUs take into account the complexity of each interaction.
Every CPT code used in billing is assigned a specific wRVU. The wRVU then gets added to the other two RVUs (practice expenses and insurance). Together, they become the total RVU.
The total RVU then gets multiplied by the Medicare conversion factor. The current conversion factor for 2020 is $36.0896. This is standard, regardless of the CPT code.
You can learn the wRVU associated with each CPT code by downloading the 2020 Physician Fee Schedule from CMS.gov.
It breaks down like this:
The more complex a patient interaction is, the more wRVUs assigned to it. The more wRVUs you have, the more you’ll earn.
According to a recent study of wRVUs by specialty, the following physicians report the highest median wRVUs:
- Cardiovascular surgeons: 9,822
- Neurological surgeons: 9,333
- Radiologists: 8,862
- Ophthalmologists: 8,438
- Orthopedic surgeons: 8,009
- Urologists: 7,364
- Cardiologists: 7,336
Physicians with the lowest median wRVUs are:
- Psychiatrists: 3,689
- Oncologists: 4,198
- Rheumatologists: 4,401
Values may vary between hospitals, as there are various physician compensation surveys from which to gather information.
The top three surveys to be aware of are:
- Sullivan Cotter Physician Compensation and Productivity Survey
- American Medical Group Association (AMGA) Medical Group Compensation and Financial Survey
- Medical Group Management Association (MGMA) Physician Compensation and Production Survey
The Benefits of Using a wRVU Compensation Model
Using an RVU compensation model results in different benefits for employers versus physicians.
Here’s how each party can benefit from this payment structure.
Benefits for Employers:
Hospital groups and health systems pay their physicians through wRVUs for various reasons.
For one, it creates transparency. wRVUs are standard. The conversion factor is standard. There is no flexibility to pay less or more to one doctor over another (at least not in terms of straight wRVU compensation).
Employers are able to compensate physicians more through bonuses and other methods of payment.
Most physician contracts require that a physician have a minimum number of wRVUs per month or per year. And in order to meet these requirements, physician work needs to include a certain amount of patient care. This encourages physicians to have a steady stream of patients.
This model also leads to a more sustainable and competitive group of physicians. Most physicians find that they need to retain their patients and acquire new ones to meet their minimum amount of wRVUs. This often causes physicians to compete for patients, keeping the hospital as busy as possible.
The wRVU compensation model is a value-based compensation system, which employers love. It encourages physicians to be more productive, which means that doctors are likely to see more patients and perform more evaluations and procedures.
The other big benefit of this payment model is that it’s an easy system for practice management to administer. It’s essentially a flat-rate payment system that does not deviate. Conversion rates and wRVUs by CPT code are adjusted at the end of every year for the following year.
Benefits for Physicians:
There are benefits for physicians as well.
wRVUs are not affected by the differential in insurance payments and the percentage of the bill the patient pays on their own.
You are paid for your wRVUs based on codes submitted, not codes collected and paid for. You’ll be paid whether or not your employer is able to collect payment from your patients.
wRVUs are also beneficial to physicians who prefer to focus on patient satisfaction rather than billing and collecting. You’ll be able to dedicate a greater amount of time to practice and less time to administration.
Pitfalls of the RVU Compensation Model
There are also some downsides to the RVU model.
The pitfalls for employers are not the same pitfalls for physicians, so let’s take a look at each individually.
Pitfalls for Employers
wRVUs are just one part of a physician’s compensation. Employers still need to encourage and support their physicians’ professional development. Hospitals that don’t offer any compensation other than wRVUs are likely to see their best physicians move on to find new employers.
In some cases, wRVUs are paid on a sliding or graduated scale. That means that the more wRVUs a physician has, the more they’re paid for each one. This method can be beneficial to physicians but difficult for hospitals and health groups to administer.
Pitfalls for Physicians
In general, wRVUs offer more benefits for employers than for doctors. There are significantly more cons than pros for physicians. Physicians working with an RVU model won’t be able to do anything to change these, but you should be aware of them.
You Won’t Be Paid for Everything You Do
One of the biggest downsides to wRVU payment is that they only apply to billing procedures that have a CPT code. Mentoring younger physicians and handling other tasks outside of patient care are not billable in this format.
Get Ready for Competition
In most hospitals, wRVUs create a highly competitive situation among physicians in the same field. Colleagues tend to compete with their equals rather than support them. This is especially the case if your hospital offers a sliding scale payment model.
With a graduated scale, you’ll make more per wRVU the more wRVUs you have. And that means that most of your colleagues will want to rack up as many as possible. Physicians are less likely to refer patients to other doctors and more likely to compete to gain new patients.
You Might Feel Like an Independent Contractor
There is one other pitfall of wRVUs that many physicians dislike. Being paid for a specific “unit of work” tends to make a physician feel more like an independent contractor than an employee.
In addition, wRVUs reward the volume of care, not the quality of care. With the pressure to have more wRVUs, it can be tempting for some physicians to focus on quantity over quality.
This doesn’t benefit the physician in the long term, and it doesn’t help the patient either.
Bundled Procedures Cause You to Earn Less
One of the worst parts about wRVUs is the fact that some procedures get bundled together or discounted. This is often the case in bilateral procedures, where the wRVU for the second side of the body is less than that for the first side of the body.
For example, if a physician performs breast surgery, they will earn 100% of the wRVU for the left side, but only 50% of the wRVU for the right side. Most physicians would prefer that they earn the full 100% of the wRVU for each side, as doing both sides doesn’t require any less work.
This also occurs when multiple procedures are done at the same time. No less work or time is required on the part of the physician, yet the second wRVU is often reduced.
Anything that alters the standard wRVU is called a modifier. Unfortunately, there are a variety of modifiers that can come into play. It’s common to see modifiers attached to your wRVUs if you’re:
- performing a repeat procedure
- working with a co-surgeon on the same procedure
- performing more than one procedure at a time
You Could be Underpaid
Physicians should keep track of their wRVUs to ensure that they’re being paid for them. And this can be a tricky thing to do.
Certain specialties have a limited amount of CPT codes, while other specialties have dozens to keep track of. The less you have to deal with, the easier it will be.
The best way to keep track of yours is to review your patient visits and procedures at the end of each day. Write down all the codes you plan to bill for that day and check it against the record kept by your administration.
Also, make sure that your billing department is using the right codes. Providing CPT notes can help minimize discrepancies.
Create an Excel spreadsheet and track your wRVUs per day. At the end of the period, compare them with the administration’s count to ensure that they are accurate. If you find any discrepancies, you’ll want to address the situation immediately.
See also: Disability Insurance for Physicians
Why Independent Physicians Should Care About wRVUs
The RVU model is used mostly by large hospital groups and health systems. Independent physicians and those in private practice usually don’t pay that much attention to their work relative value units.
However, independent physicians can benefit by understanding what they are and tracking their own.
wRVUs are also an important factor if you want to merge your practice with that of another doctor.
Before you merge, know your wRVUs and look at those of your potential new business partner. Both partners should have roughly the same amount in order to ensure that the partnership will be fair and beneficial to both parties.
If you think you might want to sell your practice, you’ll definitely need to know your wRVUs. Your wRVUs are indicators of your patient volume and efficiency, which is something a hospital or another physician will want to see before buying your practice.
The more wRVUs and productivity you demonstrate, the more likely you are to find an interested buyer for your practice.
Understanding RVUs can be complex, but it’s important to know, at the very least, the basics of how this type of compensation is determined.
If your salary and compensation depend upon wRVUs, it will be stated in your physician contract.
The best way to protect yourself in an employment agreement is to have a contract review specialist look at your contract for you. A review specialist will know if your contract includes fair payment terms. If it doesn’t, they can help you negotiate the terms to make it more beneficial for you before you sign.
If you’re ready to sign a new physician contract, contact Physicians Thrive for contract review now.