How valuable are RVUs?

Raul Morffi MDNovember 30, 2010

Disclaimer…

Topics• Define wRVUs• Compensation and production statistics– MGMA (medical group management association)

2008 report on 2007 data– What salary should you expect?– How many patients do you need to see to make your

salary? • RVU tiered model• RVUs versus traditional compensation• Contract negotiation tips

2010 physician fee schedule

• MGMA handbook• CPT codes

Relative Value Units

• Compensation for 1.0 RVU:• 25th%, median, 75th%, 95th%• ~$34, $39, $46, $57• Mean: $42

• What are Medicare and Blue Cross paying your employer for common office visits?

Annual wRVUs

• w/ OB: 25th% median 75th% 95th%– 3,868 4,664 5,555 6,691

• w/o OB: 25th% median 75th% 95th%– 3,701 4,600 5,606 6,796

• Calculate annual compensation using median RVU reimbursement ($39) and median annual wRVUs

• 4600 x $39= $179,400• 4664 x $39= $181,896

How many patients will I need to see?

• Number of wRVUs per encounter:» 25th%, median, 75th%, 95th%

• w/OB: 1.12, 1.23, 1.37, 1.58• w/o OB: 1.10, 1.20, 1.36, 1.69

» w/ OB (4664/1.20) w/ OB: (4664/1.23)

• Encounters: (3,833) (3,791)• 233 days (pts/ day): 16.6 16.2• 185 days (pts/ day): 21 21

Annual wRVUs

• Median– Single specialty: • w/ OB: 4,650 w/o OB: 4,657

– Multispecialty: • w/ OB: 4,664 w/o OB: 4,591

– Hospital Owned: • w/ OB: 4,488 w/o OB: 4,540

– Not Hospital Owned:• w/ OB: 4,754 w/o OB: 4,736

wRVU what ifs…

• Hospital owned practice w/ OB:– 4,488 wRVUs annually• Median: $39 per wRVU=

– $175,032 annual compensation

• Median: 1.23 wRVUs per encounter= – 3,649 encounters (21 days “PTO”, 7 holidays, take out

weekends= 233 clinic days= 16 patients per clinic day– Or work 4 days/ weeek= 20 patients per clinic day

What about first 2 years of practice?Median annual encounters:

w/ OB: 3,046w/o OB: 3,365

Multiply by Median wRVUs per encounter, then multiply by median $/ wRVU: w/ OB: 3,046 x 1.23 = 3,746 wRVUs x $39= $146,094w/o OB: 3,365 x 1.2 = 4,038 wRVUs x $39= $157,482

Median compensation for first 1-2 years in practice:w/ OB: $149,922

w/o OB: $147,456

Overall median compensation for 2007:$190,012

8-17 yrs in practice

• Median annual encounters:– w/ OB: 3,786– w/o OB: 4,118

• Median compensation:– w/ OB: $200,582– w/o OB: $178,126

Psalm 23:2

Traditional Reimbursement Model

• Charges collected minus overhead– Median collections of gross charges: ~65%– Median compensation of collections: ~ 60%• With this, assume mean overhead is ~40% (sometimes

60% or more)

• Recall wRVU reimbursement percentage of Medicare and Blue Cross payments.

Some real numbers…

• Median charges:– 1-2 years in practice: ($108,680-$163,020)

• w/ OB: ~418k w/o OB: ~456k– 8-17 years in practice: ($154,400-$231,700)

• w/ OB: ~594k w/o OB: ~553k

• 95th percentile charges:• w/ OB: ~860k w/o OB: ~837k

• Subtract 35% adjusting for collections and then subtract 40-60% from the remaining value to adjust for overhead.

Payor Mixes

44

8

38

10

0

5

10

15

20

25

30

35

40

45

M-care M-aid Pr. Ins Unins

When is Traditional model preferred?

• When private insurance is well over 50% of your payer mix with concurrent low uninsured and Medicaid population.

• When performing endoscopy

wRVU tiered model

• Increase $ value of each wRVU by ~$2 for every 300-500 wRVUs produced:

• Gaurantee: $170,000• Target total annual wRVUs: 4,400• Tier 1: <4,400 wRVUs: no production incentive• Tier 2: 4,400- 4,700 wRVUs: $38.64/ wRVU• Tier 3: 4,701- 5,000 wRVUs: $40.64/ wRVU• Tier 4: 5,001- 5,400 wRVUs: $42.64/ wRVU• Tier 5: 5,301- 5,700 wRVUs: $44.64/ wRVU

How much is the tiered system worth?

• 4701 wRVUs @ 38.64= $181,646• 4701 wRVUs @ 40.64= $191,048

General thoughts on contract negotiation

• You are in the driver seat.• Take your time, make sure everything is how

you want it before you sign.• Absolutely utilize legal counsel and Darrel

McCool.• Use MGMA handbook for benchmarks!• Know your payer mix.

Contracts

• Set a guarantee that you can actually produce in 1-2 years.

• All bonus checks will be assessed flat 25% federal tax in addition to state tax, ss, and medicare tax. Roughly 40%

• Make CME and other expenses apart of your salary to avoid frustration of reimbursement.

• Give yourself a raise each year (5-7k).

Contracts

• If using RVU system avoid flat rate, this can add 10-20k per year to your salary.

• Avoid onerous or unreasonable conditions:– i.e. You will receive your bonus if and only if you

meet three criteria including 9/10 charts reviewed quarterly must have accurate coding, etc.

• If you set up additional salary for ER call or other services make sure the language is very specific.

Contracts

• If using a traditional reimbursement model make sure compensation is based on specific minimum percentages for collections and overhead

• Regardless of your reimbursement model, make sure you receive monthly financial statements and you are paid bonus at least quarterly.

• Always ask for a little more than you hope to get.• You can renegotiate your contract at anytime.

Opinion• Minimum guarantee: 170k (no ER call)• 4-5k/ yr. added to salary for CME• wRVU tiered model production bonus • 5-7k/ yr. raise• 20-30k signing bonus• Loan repayment• Stipend? Caution.• Relocation allowance: instate 6-7k• 15-20% of salary/ yr./ midlevel supervised

References…