Is Your Bonus Attainable or Just a Tease?

Leigh Page


November 17, 2016

In This Article

The RVU-Based Formula Is Gaining Momentum

A popular bonus compensation formula, according to Merritt Hawkins and other experts, is based on relative value units (RVUs). This formula is considered fairer for doctors because it's not based on collections, claims, or payer mix. The 2016 Merritt Hawkins report shows that 58% of the bonuses in the employer agreements it handles are based on RVUs.

To be precise, the metric is called the "work RVU" (wRVU), because it only measures the work portion of the RVU and removes expenses the employer is paying for. The wRVU output is compared with a benchmark, broken down by specialty and region, which is developed in an independent survey conducted by a third party, such as the Medical Group Management Association. The median is the 50th percentile, and the physician is expected to perform above the median, such as at the 70th percentile.

But even the wRVU has drawbacks, according to a review[4] by Medical Business Advisors, a consultancy firm based in Rockville, Maryland. Like all productivity measures, wRVUs encourage an "every man for himself" mentality, with physicians competing for wRVUs rather than sharing patients, the report stated. Also, new physicians who don't yet have sufficient patients or referral sources are at a disadvantage, Medical Business Advisors stated.

Nevertheless, provided they're not set too high, RVU-based bonuses are fundamentally fairer than traditional productivity bonuses, which tend to be based on collections, says Gregory Mertz, managing director of Physician Strategies Group, a Virginia Beach-based company that advises on compensation models for physicians.

"Collection-based incentives were more popular a decade or two ago," he says. "They're fading away because they weren't fair to physicians." But even today, 22% of bonus arrangements are still based on net collections, according to the 2016 Merritt Hawkins report.

This collection model can still work in private practices, where each physician "eats what [they] kill," Mertz says, but not so much in hospitals. Many hospitals have poor claims-collection rates, which have the effect of reducing physicians' performance on this measure. Physicians "can't do anything about their performance if the hospital has a poor collection rate or is writing off a lot of charity care," he says.

One way to deal with the collections problem is to base the bonus on gross billings, but this approach is quite rare. The 2016 Merritt Hawkins report found that only 2% of bonuses were linked in this fashion. Another approach is to base the bonus on the number of patient encounters, but Merritt Hawkins found this is also fairly rare, accounting for just 8% of its contracts.

A concern about basing the bonus on visits is that it may force physicians to cut appointments short to meet the threshold. Hill reports that hospitals often want their primary care physicians to see one patient every 15 minutes, which many doctors think is too little time.


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