Practice Notes

Three ways to work around the flaws in RVU-based payment

Anita Joseph

We’ve heard from many of you about the flaws of a relative value unit (RVU)-based payment system, and it turns out you’re in good company. 

In the December issue of the New England Journal of Medicine, Eric C. Stecker, MD, and Steven A. Schroeder, MD, assert that RVU-based payments don't account for the expanded profile of physician work under new care delivery and payment models. 

They propose altering the payment system, but note that there are significant logistical and political barriers to reform. In the meantime, progressive provider organizations are proactively restructuring compensation to account for the imperfections in RVU-based payment.

Below are three basic strategies we have seen groups adopt.

Institute a group-wide withhold

To combat underpayment of primary care and some specialties, some administrators withhold a portion of all physicians’ compensation and redistribute it based on performance against specialty-based production benchmarks.

Summit Medical Group, a 365-provider group in Berkeley Heights, New Jersey, withholds 20% of income from all physicians and redistributes the income based on individual physician performance against MGMA productivity benchmarks.

The most obvious challenge with this approach is that specialists may reject the decrease in their income. Summit addressed this concern through messaging to specialists: incenting PCPs to be more productive increases market share and downstream referrals.

Alter per-RVU conversion rates

Some organizations combat underpayment by inflating payment-per-RVU for primary care services and reducing it for procedural services.

For instance, even though unmodified RVUs dictate that a PCP should be paid $40 per RVU, a medical group can dictate that a PCP should be paid $42 per RVU. In this way, the group uses the RVU as a counting mechanism but not a payment one; it can track productivity but separates actual RVU from compensation. This allows executives to calibrate compensation to the strategic needs of each specialty.

Create artificial RVUs

To compensate for non-clinical tasks, organizations may offer stipends or create "artificial" RVUs for administrative and supervisory work and cutting-edge clinical activities, like e-consults.

Hesienberg Medical Group also created an "artificial" RVU to count against physicians’ income guarantees. (The artificial RVU applies for salary-based new physicians, and Heisenberg is still trying to work out how to incorporate telehealth into base compensation without compensating physicians twice for virtual care.)

The RVU system must be altered or replaced at some point; it reduces medicine to bite-size tasks and does not account for the nuances of healing. 

Stecker and Schroeder’s suggestions are valuable ones—but health system administrators cannot afford to wait for this political change to adopt a more nimble compensation system.

Further Reading

To learn more about implementing progressive clinician compensation through payment transformation, see our white paper, Achieving Strategy-Aligned Clinician Compensation.