Clarifying the Very Misunderstood ?Compensation per wRVU?

Thursday, May 10, 2018 | Joel Sauer

Lately in my work and conversations I’ve been reminded (again) of how misunderstood the metric “compensation per wRVU” is in our community. Not just within the provider population, but with our health systems and, most importantly, those who make contracting decisions. This fundamental disconnect is leading to very bad outcomes like pulling away the ability of cardiology groups to pool compensation in an employment environment. Getting our arms around what this metric is and isn’t is thus critically important. The following article, which was part of our 2017 Cardiovascular Provider Compensation & Production Survey report, should be helpful in explaining the metric compensation per wRVU.

Peer surveys, like the MedAxiom Cardiovascular Provider Compensation and Production Survey, publish a measure showing compensation per work Relative Value Unit (wRVU). Table 1 shows data from the 2017 MedAxiom survey report (based on 2016 data) for cardiology. This statistic is perhaps the most misunderstood of the published compensation data and is often given more weight than it deserves in compensation discussions. The below details exactly what this measure is and is not, along with some ways it can be influenced by different circumstances.

This metric is the product of total actual physician compensation divided by wRVU production. In other words, it is a calculated rate. Each of these calculated amounts is then compared to all the others to arrive at a bell curve distribution (25th percentile, median, 75th percentile, etc.). Most surveys, including MedAxiom’s, consider compensation from all sources for the “Physician Actual Compensation.” Looking again at Table 1 for the 2016 data, the median for cardiology was $55.77 per wRVU; half of the cardiologists earned more than $55.77 per year, half earned less.

Using an illustration for clarity, in 2015 Dr. Jones earned $515,000 from all sources (clinical comp, incentives, directorships, administrative time, etc.) and produced 8,500 wRVUs in that same time period. Her compensation per wRVU then calculates to $60.59 ($515,000/8,500). Based on the data from Table 1 (and more specifically within the MedAxcess database) she would be around the 65th percentile nationally for compensation per wRVU.

This does not mean that Dr. Jones, who happens to be employed by a health system, was contractually paid $61 per wRVU for her production. She may have an employment agreement that includes multiple income sources. Table 2 shows an example of how this might look from a math standpoint. In fact, Dr. Jones’ employment contract specifies that she is paid $55 for each clinical wRVU she performs. In addition, she is eligible for a value incentive (quality, cost, service) and performs a medical directorship and is compensated for that time. This then pushes her overall compensation per wRVU to $60.59. It is this latter number, not her contracted rate that is published in our survey.

There is also the notion that the published median ($55.77 in Table 1) is really what most physicians are being paid per wRVU. As can be seen in Figure 1, there is huge variability in this calculated rate, ranging from $17 to $200 per wRVU. How can this be?

Consider a physician hired to work predominantly in a heart failure clinic environment. For the most part this doctor will bill within the Evaluation and Management (E&M) spectrum of the CPT codes—not a wRVU-intense ecosystem. In order to be market competitive, this organization contracted him at $550,000 per year and he was able to generate 4,500 wRVUs in the deeply subspecialized heart failure domain. This calculates out to $122 per wRVU in compensation.

In this same practice there is a non-invasive physician who has been predominantly assigned by the group to read imaging studies. She is also paid a base of
$550,000, but is able to generate nearly 20,000 wRVUs because of the type of work performed. Her compensation per wRVU calculates out at $27.50.

Clearly these are extreme examples to illustrate the point, but these scenarios do exist and—when considered with other variabilities—force us to pause when putting too much weight on the compensation rate per wRVU.

Another significant factor impacting compensation per wRVU is pooling. Many cardiology groups, including those integrated with a hospital or health system, pool compensation and distribute it to the individual doctors using myriad formulas. Even under identical individual production circumstances and an identical total compensation pool amount, different distribution methods will result in different compensation per wRVU.

Table 3 shows an example of this in an integrated group where the physicians are all contractually paid $60 per wRVU. In this example the compensation creates a pool that the cardiologists then determine (with appropriate oversight) how to distribute individually. This group has chosen to split compensation 50 percent equally and 50 percent based on individual wRVU production—a very common phenomenon in cardiology practices. As can be seen, there is wide variability on compensation per wRVU at the individual physician level even though contractually all are paid a consistent rate. The distribution process can cause widespread variability on compensation per wRVU in private groups as well.

Here are some other interesting data. When you look at the top performers in terms of generating wRVUs, there is a direct correlation with these physicians also being top total earners (top box of Table 4). However, these same top producers are in the bottom of the heap in terms of compensation per wRVU (last column of that same box); there is an inverse relationship between high wRVU production and compensation per wRVU. Not surprisingly, in these same data we find that the lowest producers in terms of wRVUs are also the lowest earners (Table 4).

There is an inverse relationship between high wRVU production and compensation per wRVU.

In the second box of Table 4, where we sort by Total Compensation (the independent variable), the top earners are also the highest in terms of compensation per wRVU. However, this correlation is not nearly as strong as with the comparison above. Further, you can see that the correlation between being in the top earning quartile and top production in terms of wRVUs is very strong.

It is safe to conclude with cardiovascular physicians that high (as compared to peers) productivity leads to high compensation, but that high compensation does not also mean high compensation per wRVU.

 

Conclusion
The compensation per wRVU is a calculated rate (total compensation/wRVU production), whereas both wRVUs and total compensation are reported. Further, myriad circumstances—including clinical role, internal distribution method contract terms, etc.—impact the resulting individual physician compensation per wRVU. It is extremely important for all these variables to be considered—both by administrators and physicians—when using this singular point from survey data to guide physician compensation.

 

 

Illustration: Lee Sauer

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