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What are Work Relative Value Units (wRVUs) in Physician Employment Agreements?

When a physician provides a service, the reimbursement amount for that work is often measured through a metric referred to as work relative value units (wRVU). Although not every physician may be subject to wRVUs, such as physicians who have their own private practice, many physicians who work in large healthcare organizations may be required to meet a minimum amount of wRVUs.

The goal of the wRVU model is for physicians’ compensation to be directly correlated to the amount of work they perform, regardless of the patient’s insurance plan or the revenue generated during the services. Focusing on the amount of work performed has proven to be more effective than the previous method of tracking a physician’s productivity by the number of patients seen and number of services performed. Additionally, calculating reimbursement simply off the amount charged to the patient can be ineffective as well because the amount does not necessarily reflect the underlying value of the work provided. As such, the current wRVU model is the standard compensation model that many physicians and employers use in the healthcare industry.

How wRVUs Operate

The calculation of wRVUs considers a multitude of factors such as:

  • the work the physician is performing;
  • the costs associated with the necessary equipment;
  • the skill required;
  • the costs of liability insurance and;
  • the time associated with the procedure.

The total work that is involved in a physician performing a service typically includes the preservice work provided before the service (i.e., reviewing medical records, surgery prep), the work provided during the service (i.e., medical examination, surgery), and the work provided after the service has been performed (i.e., post-operative care, further documentation).

Typically, each service performed by a physician has an associated number called a CPT code. Each CPT code receives a wRVU that is combined with the previously mentioned factors to create a total RVU. From there, the total RVU is multiplied by the Medicare conversion factor (currently placed at $32.74 in 2024) to determine the reimbursement amount of the service. The Medicare conversation rate is determined by the Medicare Economic Index, however, it is important to note that private insurance companies and Medicaid may have a different conversion rate for wRVU to dollars.

Benefits of the wRVU Model

One of the most common benefits of the wRVU model is the transparency associated with it. The wRVU’s and the conversion factor are standard. This makes it easier for a hospital to administer and prevents one doctor from getting paid more than another while performing the same work. Despite wRVUs leveling the playing field by standardizing the compensation for each service performed, the implementation of wRVUs can create healthy competition among physicians as well. The wRVU system encourages physicians to maintain a steady stream of patients. As a result, the hospital has the possibility to flourish as physicians compete to acquire new patients.

The steady stream of patients not only helps the hospital in acquiring new patients but also in retaining already existing patients. The wRVU model may encourage physicians to follow up with their patients more often, as post-operative care and other post-procedure services are included in the compensation model.

Downsides to be Aware of

Though the wRVU can provide many benefits to employers such as easy implementation of the system and healthy competition in the work environment which increases physician productivity and patient numbers, the wRVU model can also have some cons.

Since the wRVU model relies on CPT codes in their final calculations for reimbursement, services performed by physicians that do not have an associated CPT code, such as tasks performed outside of patient care do not get compensated. In an effort to reach the amount of wRVU’s physicians need, those tasks not associated with a CPT code may lose priority to tasks that will be compensated instead. This can also encourage physicians to focus on the quantity of the work they perform, rather than the quality.

While healthy competition in a work environment can be a good thing, especially for employers, for physicians it may create a challenging work environment. In a hospital, peers often collaborate to discuss the best route for a patient’s treatment. In a competitive environment, it may discourage that collaboration, harming not only the physician’s productivity but the patient as well.

As a result of these effects the wRVU model may have on physicians, it can lead to burnout which then can impact the physician, patient, and the employer.

Negotiating wRVUs

Some physicians may have the ability to negotiate their wRVUs. The process for negotiations may be more limited for physicians in larger organizations but may be possible for those in private practices or smaller groups. Understanding the terms of the contract can help a physician negotiate wRVUs with insurance companies or a hospital administration. It is important to note, however, that reimbursement rates provided by Medicare and Medicaid are determined by the government and not open for negotiation.

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It should be noted that I am not your lawyer (unless you have presently retained my services through a retainer agreement). This post is not intended as legal advice, it is purely educational and informational, and no attorney-client relationship shall result after reading it. Please consult your own attorney for legal advice. If you do not have one and would like to retain my legal services, please contact me using the contact information listed above.

All information and references made to laws, rules, regulations, and advisory opinions were accurate based on the law as it existed at this time, but laws are constantly evolving. Please contact me to be sure that the law which will govern your business is current. Thank you.

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