Using caution with wRVU-based physician compensation

Key thoughts:

• Work Relative Value Units (wRVUs) have the potential to provide a standard measure of physician productivity, and calculate fair compensation based on their activity.
• Pitfalls exist in wRVU-based compensation in employed, large group and academic practices.
• Qualifying these limitations and understanding physician behavior allows for some wRVU incentives, and leads to a more successful formula for a productive organization.

Work Relative Value Units (wVRUs) are the pinnacle of combining skill, effort and risk into a code that can be translated into a fair Medicare reimbursement. When quantifying productivity in a large group, hospital-employed or academic practice, it is now often used to calculate physician compensation. On the employer side, it allows for transparency and standardization, but requires that they provide a steady stream of patients, and they take on the responsibility of establishing a favorable payer mix. On the physician side, they no longer need to worry about a differential in insurance payments, but the general consensus is that they’re relegated to being a “piece-worker.”

The timeliest argument against wRVU-based compensation is that it is not aligned with the new outcome and value-driven US federal mandate, relying on traditional fee-for-service physician incentives of just doing more work. Health systems with preferred patient pools are in the best position to enact outcomes-based compensation. Even if we had a single-payer health system and all physicians were in some form of large-group employment, there are pitfalls to this formula:

• As the number of CPT codes increases, there is a trend towards lowering the wRVUs per procedure. Unfortunately, advancing technology or adding more surgical options does not necessarily mean that a procedure takes less time, training or is lower risk.
• Other disparities within the RVU-system still exist, including bundling multiple procedures in one area of anatomy but not in another. There is also evidence of undervaluing physician visits that require more complex decision-making [1].
• Hungry for wRVUs, colleagues compete for patients rather than support each other, specialists become generalists, and our individual expertise becomes at risk of disintegration.
• Working for RVUs leads to an employed-physician psychology rather than taking an entrepreneurial approach to strengthen their payer-mix, growing their team, and evolving.
• Strict wRVU based compensation is more akin to being an independent contractor paid per unit of work, rather than an employee.
• This formula also does not recognize other physician responsibilities. All physician groups need to advance with a changing best practice, mentor junior physicians and invest in innovation, which are cornerstones of our profession.

wRVUS cannot be the sole determinant of physician compensation, and the employer is also responsible for encouraging (not just supporting) professional development within and outside of the institution. Using caution with a wRVU-based physician compensation formula means 1) monitoring patient outcomes to be sure they are not corrupted by incentivizing the wrong care, 2) rewarding career growth across the institution and 3) working diligently to avoid “talent drain” and “mission drift.” This approach leads to a more sustainable competitive physician group, and helps preserve our integrity.

[1] Katz S, Melmed G, “How Relative Value Units Undervalue the Cognitive Physician Visit: A Focus on Inflammatory Bowel Disease,” Gastroenterol Hepatol (N Y). 2016 Apr;12(4):240-4.

This column is part of a series devoted to clarifying and enhancing the physician-health system relationship. Dr. Ken Altman is Chief of Otolaryngology at Baylor St. Luke’s Medical Center in Houston, TX. He is also Secretary/Treasurer-Elect of the American Academy of Otolaryngology – HNS, and past-President of the American Laryngological Association.

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