The following article was originally published by the American Association of Provider Compensation Professionals.
For hospitals and health systems in the United States, one of the most common methods for compensating physicians for their clinical and procedural services is via the work relative value unit (WRVU). In this article, we discuss some of the benefits, as well as potential pitfalls, of physician per-WRVU compensation models.
The RVU System
The Relative Value Unit (RVU) is the principal unit of measurement of the Resource-Based Relative Value Scale (RBRVS) utilized by the Centers for Medicare and Medicaid Services (CMS) in determining reimbursement for medical services covered under government health care programs. The WRVU is the component of the total RVU meant to reflect provider work effort or the relative level of time, skill, training, and acuity required of the physician or advanced practice clinician providing the service. Each Current Procedural Terminology (CPT) code involving a professional provider component includes an associated level of WRVUs as reported by the Physician Fee Schedule published by CMS.
Common Compensation-per-WRVU Models
- Pure Compensation-per-WRVU – Example: A physician is compensated at a rate of $50 for all WRVUs personally produced during the calendar year.
- Base Salary plus WRVU Bonus Compensation – Example: A physician is compensated with an annual base salary of $400,000, plus a compensation-per-WRVU rate of $50 for all WRVUs personally produced above 8,000 WRVUs during the calendar year.
- Tiered Compensation-per-WRVU – Example: A physician is compensated at a rate of $58 per WRVU for all WRVUs produced up to 7,000 WRVUs in the calendar year and is then compensated at a rate of $65 per WRVU for all WRVUs produced beyond 7,000 in the calendar year.
Benefits of the Compensation-per-WRVU Model
- Compensation is directly tied to physician work effort/productivity directly incentivizing physicians to be clinically productive.
- The RVU system is utilized by CMS in determining reimbursement under government sponsored healthcare programs so significant time and research goes into determining WRVU values by CPT code that capture physician work effort.
- The compensation-per-WRVU model is very commonly used by health systems across the country.
- With consideration to Stark Law and the Anti-Kickback Statute, compensation-per-WRVU models set at reasonable levels theoretically would not take into account the volume or value of referrals, because the WRVU is based solely on the subject provider’s work product, and not the volume of referred technical or ancillary services such as X-rays and CT scans.
- Per-WRVU compensation is not directly correlated with a patient’s ability to pay so physicians are not penalized for treating indigent payors.
Common Pitfalls in Structuring Compensation-per-WRVU Models
Risk to Quality of Care
Misinterpretation of Survey Data
Inverse Relationship Between Annual WRVUs and Compensation-per-WRVU
Advanced Practice Clinician Production
Health systems and hospitals who contract with physicians who work alongside advanced practice clinicians (APCs) should consider how these APC services are recorded under a physician compensation-per-WRVU structure. Most physician compensation and productivity surveys require that respondents report WRVUs for personally performed services, meaning that reported annual physician WRVU and compensation-per-WRVU survey data does not include any productivity, incident-to or otherwise, performed by APCs. As such, when determining a compensation-per-WRVU structure for a physician, it is recommended that compensated WRVUs only include those generated from personally performed services, particularly if the physician receives separate stipends for APC supervision.
Modifier Adjustments
Similarly, many of the physician compensation and productivity surveys referenced in determining compensation-per-WRVU specifically request that respondents report WRVUs that have been adjusted for the impact of any CPT code modifiers. It is recommended that physicians are compensated based on modifier-adjusted WRVUs rather than unadjusted WRVUs as both survey data and payor reimbursements reflect adjustments from modifiers.
Physician Fee Schedule Changes
Another consideration when structuring a compensation-per-WRVU model is the ever-changing Physician Fee Schedule published by the Centers for Medicare and Medicaid Services. Between 2020 to 2021, CMS made significant changes to WRVU factors for certain CPT codes. For example, based on procedural profile data from MGMA, physician specialties such as family medicine (without OB), urgent care, and rheumatology experienced an uptick in annual WRVUs of over 20% using the CMS 2021 factors when compared to the equivalent set of services in 2020. It is important to ensure that proper adjustments are made to survey data utilized to determine compensation-per-WRVU amounts to account for these changes to the CMS Physician Fee Schedule. Additionally, hospital administrators should ensure they understand the impacts of the ongoing Covid-19 pandemic on recent survey data.
Key Takeaways
Per-WRVU physician compensation models are widely used throughout the healthcare industry as they incentivize physician productivity and often align with health system goals of creating patient access to care. However, it is important that hospital administrators are well versed in health care compensation regulations, market survey data, and fee schedule changes to ensure the compensation amounts paid to their affiliated physicians are compliant and consistent with FMV.
Sources
Centers for Medicare & Medicaid Services. (2024). Physician Fee Schedule. CMS.gov. https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched
Information based on VMG’s internal analysis of MGMA’s 2021 Procedural Profile Survey – 2021 Report Based on 2020 Data and MGMA’s 2020 Procedural Profile Survey – 2020 Report Based on 2019 Data and CMS WRVU Factors.
