How COVID-19 Has Affected Physician Compensation

A May MGMA survey revealed that 82 percent 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:

1. 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.
2. 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.
3. Medicare updates its Physician Fee Schedule each year, which assigns RVU totals to each of the 10,000+ CPT codes.
4. RVUs themselves are made up of three components, each with a 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 judgment) it takes to perform a given procedure. Accounts for the largest portion of total RVU and has the 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 the smallest portion of total RVU.
5. RVUs can be calculated per visit, per hour, or per provider cost relative to the RVUs.
6. RVUs can be used as a part of physician compensation, and it is up to the hospital how much pay is attributed to RVUs.
7. 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.
8. 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.

For more details on each one of these refresher points, visit these three resources:

• Blog: How to Master Provider Productivity with RVUs
• Guide: 6 Benefits of RVUs as a Measurement Standard
• Blog: Using RVUs to Measure Provider Productivity

While these basic facts about productivity-based compensation and RVUs have not changed, what has changed is the health care environment in that they are executed. Let’s turn our eyes to the COVID-19 world we find ourselves in and how the RVU piece of physician pay has been affected.

How COVID-19 Has Impacted RVUs

COVID-19 has undoubtedly brought on a significant shift in the productivity-based piece of clinician compensation. In an interview with SCP Health Senior Vice President and Group Medical Officer Dr. Phil Parker (a staple expert of our RVU posts), he noted that this shift has played out in the following ways:

• Large drops in patient volume—particularly in the earlier months of COVID-19—substantially decreased the total RVUs and have made it impossible for providers to make up the difference in the usual ways (improving documentation, being more efficient, etc.).
• Provider coverage was reduced, which partially affected productivity by concentrating the RVUs over a smaller number of provider hours. However, the volume drop was so severe that provider coverage could not be cut enough to completely offset the reduction in RVUs.
• COVID-19 patients are often sicker than the typical patient and require more resources. While this grows RVUs per patient, it also demands additional staffing. Increased staffing in turn outpaces any benefit of the aforementioned RVU per patient gains.

Comparison: Pandemic Effects on Other Compensation Models

Of course, RVUs are not the only method by which a physician or other clinician gets paid. Dr. Parker shared that in order to fully understand the impact of COVID-19 on compensation and make an informed decision on how to pay clinicians moving forward, it’s imperative to compare the pandemic effects across two other models: flat rate and employed.

Best Practices: How to Make RVUs Work During This Crisis

As noted in the chart above, all the methods of compensation clinicians will take hits in an environment like the one we find ourselves in this year. However, the productivity-based model is the most likely to weather the storm so that both clinicians and hospitals emerge on the other side—not unscathed, but still standing.

Dr. Parker shared a few best practices for maximizing the efficiency and efficacy of RVUs during the COVID-19 pandemic:

• Retain current pay rates
• Reduce coverage based on projections from advanced machine learning analytics
• Flex coverage every single day to align more closely with the need
• Introduce opportunities for clinicians to make up lost income through telemedicine

If you’re interested in learning more about RVUs and how to improve your physician compensation model, SCP Health would love to help. Email us at business_development@scp-health.com to start the conversation.