Physician productivity usually refers to clinical productivity. Clinical productivity and formulas based on units of work have become the most common method of physician compensation. Indeed, the Medical Group Management Association in 2007 reported that 16% of group practices used RVU’s (or WRVU’s) to calculate physician compensation and productivity and that 34% of physicians had their compensation/productivity based on RVUs. Only three years later, MGMA reported that 35% of group practices were using RVU compensation/productivity formulas and 61% of physicians were compensated based upon RVU “production.”
A 2011 survey by Merritt Hawkins Associates, a major physician recruitment firm, showed that a salary plus a production bonus was the type of compensation formula offered to physician candidates in 74% of the physician search assignments. The survey also showed that in 50% of searches, the compensation formula was based upon RVUs (or WRVU’s). Of note is the fact that in most cases the productivity measurement was NOT based upon quality of care, patient volume, any cost effectiveness metric or revenue generated.
Besides RVUs or WRVUs, there are other ways to measure clinical productivity. Patient encounters are easily measured but do not reflect actual collections and gaming of the system is possible by encouraging short patient visits. Gross charges are also easy to calculate but do not reflect contractual adjustments or collections. Charges adjusted for insurance contracts are relatively easy to produce but are based on uncollected charges and since payer mix can vary between physicians in the same group, does not allow apples-to-apples comparison with other physicians. Net collections do reflect actual collections but may discourage physicians from providing care to uninsured or poorly insured patients. In some groups, a combination of one of the above methods may be in use that takes a middle ground.
Issues for Physician Groups
Unfortunately, a number of physicians are either not aware of the details of productivity formulas, billing procedures or the group simply does not track RVUs or WRVUs. In a recent industry survey, the percentage of physicians who say they are unaware of billing and administrative decisions is about 10%. A recent survey of Vascular Surgeons (1/3 academic) showed that only 50.3% said they or their group kept a record of RVU’s/WRVU’s. About 70% stated some of their compensation was based on productivity, with 48% stating their productivity determined 76-100% of their compensation. More physician-owned groups reported that their compensation was based on productivity than full-time employed Vascular Surgeons. Net collections was the most common measure of productivity (35.3%) followed by WRVU’s (24.8%).
Most groups use common benchmarks such as MGMA or AMGMA data for the productivity part of compensation formulas. A problem with tying physician compensation strictly on a per RVU or WRVU production is that when insurer payments change or groups have a bad year with a negative operating margin, the model may not be sustainable. As I have previously discussed here, RVUs as the only basis for calculating physician compensation has its drawbacks. Collections are after all still king.
For instance, for PCP’s, in addition to RVU or WRVU productivity, achieving benchmarks for management of chronic diseases like diabetes or hypertension, patient satisfaction, care coordination and other important functions must be in the mix. This is becoming more important with the medical home concept. Participation and contribution to the group’s overall strategic plan should also be rewarded.
These new incentives may create some confusion, but physicians will begin to see the model as fair and transparent over time. In general, it is recommended that any behavioral change incentive must constitute at least 20% of the total compensation plan to get attention.
Accountable Care Organizations (ACOs) are being established in every state. Large and small physician groups are now becoming part of ACOs especially in large metropolitan areas. In the last count of 221 ACOs, 70 were physician-based. In addition to Medicare ACOs, commercial ACOs are also taking off. If the goal for physicians is to be a big part in reducing the cost of healthcare in the U.S, compensation models for physicians must also be aligned with incentives for ACOs. Therefore, “productivity” must include measures other than clinical productivity. For instance, to maintain quality of care non-financial incentives must be created. These metrics can include: patient satisfaction scores, mortality and morbidity rates. ACOs will also need physicians to lead in the operations, innovation and quality and customer service areas. One such metric is to assign each of these activities a WRVU, which is then multiplied by the number of units on an annual basis.
For the physician side, it is clear that reimbursements are not going up. In most groups there is usually a physician who assumes an unpaid administrative role and works with the business manager or the most senior physician simply has the manager reporting to him/her. This worked well when reimbursement was good and overheads relatively low. With operating margins decreasing and reimbursement dropping, not only do physician groups need a well-educated manager, but a physician who is knowledgeable, keeps up with the changes and can look at future opportunities for growth. With Medicare ACOs, for instance, beneficiaries will have the choice to go and receive their care outside your ACO and you will have no control over costs. So, physician leaders will have to be intimately aware of costing, budgets and financial controls. Therefore, in medical groups of varying sizes, the administrative physician must be compensated or be given credit for these activities when calculating productivity.
Bhagwan Satiani, MD, MBA, FACS, FACHE, is President of Savvy-Medicine (www.savvy-medicine.com), a business education consulting organization and Professor of Clinical Surgery, Division of Vascular Diseases & Surgery, Department of Surgery, The Ohio State University College of Medicine, Columbus. He is the author of the 3-volume set “The Smarter Physician” published by MGMA and co-author of “The Coming Shortage of Surgeons: Why They Are Disappearing and What We Can Do About It.”