RVUs and the Future of Physician Compensation Models

Recent surveys are showing a growing shift toward value-based incentives as a component of discretionary compensation, but production in the form of work RVUs are still the most prevalent salary factor.  To review, Relative Value Units (RVUs) are based on a scale originally designed to determine reimbursements from Medicare and/or Medicaid. RVUs represent a calculation of the effort expended by a physician when treating patients as a reflection of the time, skill, training required, and intensity of the service being performed. Using RVUs as a measure of productivity has been widely accepted because the scale reflects the reality that patient interactions are not equal.  For example, a physician treating complex or high acuity patients will earn more RVUs than one who treats ten low acuity patients in a day. For up to date RVU values, you can download the 2018 Physician Fee Schedule from the Centers for Medicare and Medicaid Services.

Primary Care Physicians are in demand throughout most of the United States, even though the recent Medical Group Management Association (MGMA) Physician Compensation Report results are not reflective of a high-demand market. The MGMA report along with the American Medical Group Association (AMGA) Compensation Survey show that physicians are receiving annual increases in the range of 1% to 4% depending on the specialty.  These modest increases are expected to continue in spite of the projected physician shortfall of between 42,600 and 121,300, as reported by the Association of American Medical Colleges.

According to the MGMA survey, the annual median reported RVUs was 4,928 in family medicine, 4,698 in internal medicine, and 4,902 in pediatrics.  Both the MGMA compensation survey and AMGA survey reported flat productivity in family and internal medicine, although pediatric RVU reports differed.  The AMGA survey results show a decline in median pediatric RVUs while the MGMA survey indicated a measurable increase in pediatric productivity.

The latest challenge for healthcare industry administrators has been adjusting physician compensation to model the shift toward value-based measurements.  In 2009, approximately 41% of medical groups related that at least some of their physician compensation had a value-based component as opposed to 60% in 2016.  Overall, value-based pay accounted for less than 7% of a physician’s total compensation.

As is often the case, Medicare/Medicaid reimbursements are driving much of the healthcare industry changes.  For example, look no further than the 2016 passage of the Medicare Access and CHIP Reauthorization Act (MACRA) which builds upon many of the payment and delivery reforms that originated with the passage of the Affordable Care Act. One of the stated goals of MACRA legislation is that 85% of all Medicare FFS payments will be tied to quality by the end of this year.

It may not be too radical to envision future physician compensation models that do not contain an RVU/production component.  More likely, as health care reform measures continue to push greater access, drive value over volume, and control reimbursement levels, RVUs may become largely irrelevant.

Are you having difficulty with physician compensation?  Our team at Jackson Physician Search can help.  Contact us today to learn more about our team of industry experts and what we can do for you.