According to the 2011 Medical Group Management Association’s Physician Compensation and Productivity Report, more than one-third of physician group practices in the U.S. are using some type of “work relative value unit” (commonly known as a wRVU) structure for compensation purposes, and more than 60% of physicians are paid on the basis of some type of wRVU metric. So, physicians clearly have some familiarity with the wRVU concept and its application in calculating physican “pay for productivity” compensation.
However, while wRVU models generally provide compensation based on the productivity of the physician (multiplying the number of wRVUs by one or more dollar multipliers to calculate compensation), there are a number of ways to define exactly what is and what isn’t a wRVU. For example, a wRVU definition may tie productivity to:
- Billable procedures that may be properly and compliantly billed to and collected from third party payors; or
- Billed procedures that not only may be properly and compliantly billed to and collected from third party payors, but are actually billed by the employer hospital or physician group; or
- Billed and collected procedures that not only may be properly and compliantly billed to and collected from third party payors, but are actually billed and collected by the employer hospital or physician group.
So, depending on the definition used in the employment contract between the physician and the employer, not all procedures worked by the physician may end up generating wRVUs and being counted for purposes of compensation. More importantly, as the physician moves from “billable” to “billed” to “billed and collected” wRVUs, he or she moves further away from things within his or her control. In other words, while the physician typically controls whether or not to perform a procedure, the employer typically decides whether to bill for that procedure or not, and the third party payor typically decides whether and how much to pay for that procedure. In all three cases, the physician performed the same procedure; but, in two of the three cases, the physician may not get paid for that performance, if the employer doesn’t bill for it or the payor doesn’t pay for it! Needless to say, a physician is far better off if the amount of compensation earned results from things within his or her control, rather than rests in the discretion of the employer or third party payor.
The Bottom Line: If a physician wants to get paid fully for his or her productivity, then the starting point is to make sure that the employment contract contains a clear and concise definition of a wRVU, one that is based on billable, rather than billed or billed and collected procedures. Here’s one example highlighting how this can be accomplished:
“Employer and Physician agree that, for purposes of determining compensation to which Physician is entitled, a wRVU shall include only those procedures which may be properly and compliantly billed to and collected from a managed care company, insurance company, HMO, governmental payor or other third party payor. Physician understands that certain services rendered by Physician will not result in allowable, contractual or legal charges and, thus, Physician will not receive wRVU credit. However, so long as Employer may legally bill and collect for Physician’s services, Physician will receive wRVU credit for all such services, regardless of whether or not Employer actually bills and collects for those services.”
For a more detailed look at this issue, as well as ten recommendations for determining physician compensation through wRVUs, consider this recent Merritt Hawkins Report on RVU Based Physician Compensation and Productivity (pdf).