Time to revisit benchmarks for physician pay

It's time to overhaul the current use of the work relative value units (RVUs) to determine how physicians are paid, argues an article in the most recent issue of HFM Magazine.

"Because of the way the data for these benchmarks are gathered and the manner in which the benchmarks typically are applied in compensation formulas, there is a built-in 'benchmark creep' that defies the financial realities of individual medical practices," write Darin Libby and Dave Wofford of ECG Management Consultants in San Diego. "As a result, physician compensation levels tend to increase more rapidly than the professional fees that they generate."

They note that the trend toward hospitals buying physician practices has also driven up compensation, as many of those doctors are compensated at higher levels as an inducement for selling in the first place. And in many instances, RVUs don't cover practice expenses and other overhead. As a result, many hospitals are actually losing money per physician on staff.

Hospitals are under pressure to confront the financial challenges: They now employ about 200,000 doctors nationwide. Many of them left their practices because they no longer wanted to deal with administrative headaches.

The issue of how to pay physicians working for a hospital or healthcare system has been a longstanding one. Most are paid based partly on productivity as opposed to just a straight salary. That can create problems such as encouraging overutilization, while causing specialists to be reluctant to provide care pegged at lower value RVUs.

Instead, the authors say, hospitals and healthcare systems may wish to peg pay-per-RVU lower than median, at, for example, 40 percent instead. They may also wish to use what the authors refer to as peer benchmarks. Healthcare systems may also want to consider alternate benchmarks, such as compensation based on actual collections, they write, "which is much more closely related to the actual economics of the practice in question."

To learn more:
- read the article

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