Compensation Outlook: Its No Small Change

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compensation_1340814313.jpg - Money Tree

The fee-for-service payment model has drawn fire in recent years for rewarding volume rather than value. The Relative Value Unit (RVU) that serves as a foundation for many physicians’ compensation also has landed in the cross hairs of critics who argue its use encourages doctors to perform more procedures, regardless of need. Cardiologists have fared relatively well under this system, but with the growing emphasis on patient-centered and quality care, this payment model likely will change. And so may compensation.

The RVU model, like many programs designed to meet federal needs, is rife with acronyms and complexity. It was designed within Medicare’s Physician Fee Schedule in the early 1990s as a way to determine the cost associated with a particular service to set physician fees. RVUs take into account physician work, as well as practice and malpractice expenses. Many private payors and hospitals have adopted the RVU model for determining reimbursement and as a component in negotiating compensation.

The Centers for Medicare & Medicaid Services (CMS) relies on an expert advisory committee of 31 medical professionals, many of whom are appointed by specialty societies, to collectively make recommendations to CMS for RVUs that are linked to physician billing codes. The committee, known as the Relative Value Update Committee (RUC), surveys members’ professional peers for estimates of factors such as the time it takes to perform a procedure. Results are then used to deliberate recommended RVUs.

Cumulative Wealth Potential by Career*
Cardiologists $5,171,407
Primary care physician $2,475,838
MBA graduates $1,725,171
Physician assistants $846,735
*From college graduation through retirement at age 65
Source: Health Affairs 2010;29[5]:933-940

Productivity and profits

The RVU is a product of the fee-for-service world and all its associated flaws, says James C. Blankenship, MD, director of cardiology for Geisinger Medical Center in Danville, Pa., and the American College of Cardiology’s member on the RUC. “If you see a patient in clinic or do a procedure that has an RVU value to it, the value is true whether the procedure is done well or badly, or whether it is needed to save a life or is unnecessary,” says Blankenship, who has served on the RUC for about 12 years. “It doesn’t reward quality; it rewards volume without respect to quality.”  

This model also skews in favor of specialists who perform procedures—such as some cardiologists and cardiology subspecialists—compared with less procedure-focused doctors such as primary care physicians. And the resulting financial gap can be huge. In an analysis of accumulated lifetime wealth, researchers at Duke University in Durham, N.C., calculated that an average cardiologist’s career wealth would exceed $5 million while a primary care physician would amass approximately $2.48 million. The totals included income starting at college graduation through retirement at age 65 as well as living, education and tax-related expenses (Health Affairs 2010;29[5]:933-940).

“For doctors who make their money from procedures, far and away their time is better spent doing procedures than in doing evaluation and management services,” says the study’s senior author, Kevin A. Schulman, MD, MBA, a professor of medicine and business administration at Duke. “The dollar per hour is far greater.”

At the same time, the current U.S. payment model encourages overutilization, which may be the antithesis of quality care. “Obviously, one of the best measures of quality is to always do the right thing and not too many things,” Schulman says.

Pay, RVU Annual Averages
Physician Compensation (More Than 1 Year in Specialty)
Cardiology: Electrophysiology $532,380
Cardiology: Invasive $467,715
Cardiology: Invasive-Interventional $528,454
Cardiology: Noninvasive $431,740
Physician Work Relative Value Units
Cardiology: Electrophysiology 11,548
Cardiology: Invasive 8,622
Cardiology: Invasive-Interventional 9,524
Cardiology: Invasive-Interventional 6,634
Source: Medical Group Management Association’s Physician Compensation 2011 Report Based on 2010 Data

Time for a correction

In 2006, researchers from RTI International in Research Triangle Park, N.C., explored the “time creep.” McCall et al noted a shift toward longer RUC-generated estimated times for surgical procedures compared with the initial study used to establish RVUs. Comparing operating room data