How COVID-19 Has Affected Physician Compensation

A May MGMA survey revealed that 82% of healthcare leaders had seen their provider compensation affected by COVID-19. We’ve discussed the topic of physician compensation on the blog before, but it is important to revisit given the unique circumstances 2020 has brought so far. We’ll primarily be zooming in on the pandemic’s effect on the main productivity-based method of payment called the Relative Value Unit (RVU) model—and how those effects compare to COVID-19’s impact on the other key models of clinician compensation.

Review: 8 Basics of RVUs

First, let’s review 8 basics of the Relative Value Unit (RVU) model of physician compensation:

RVUs are a way of compensating clinicians based on productivity. The RVU signifies the relative amount of physician work, resources, and expertise required to service a patient.
The amount paid for each service is based on the RVU assigned, the annual RVU payment, a conversion factor (how many dollars per RVU) set by Congress, and geographic adjustments.
Medicare updates its Physician Fee Schedule each year, which assigns RVU totals to each of the 10,000+ CPT codes.
RVUs themselves are made up of three components, each with different amount of impact on total RVU and reimbursement:
- Physician Work: Also known as wRVU (w = work). Equates to the required time (e.g., billing and coding, documentation) and intensity(e.g., technical skill and effort; mental effort and judgement) it takes to perform a given procedure. Accounts for largest portion of total RVU and has greatest impact on reimbursement
- Practice Expense: Comprised of costs such as rent, equipment and supplies, consulting and professional services, and staff salaries.
- Malpractice Expense: Professional liability insurance for the provider. Accounts for smallest portion of total RVU.
RVUs can be calculated per visit, per hour, or per provider cost relative to the RVUs.
RVUs can be used as a part of physician compensation, and it is up to the hospital how much pay is attributed to RVUs.
A few key “pros” of RVUs are that they allow hospitals to compare clinicians with their peers; identify when extra clinicians are needed; make determinations about provider compensation and bonus structures; and promote transparency, accountability, and management efficiency.
A few key “cons” of RVUs are that they might be more difficult for smaller hospitals that may see fewer patients or experience wide volume fluctuation day to day; can drive an overly competitive spirit between clinicians; and turn the focus too far from patient outcomes to productivity.