The term “productivity” is technically defined as the “measure of the efficiency of a person, machine, or system in converting inputs into useful outputs,” according to the Business Dictionary. The higher the output versus input, the greater the productivity.

In healthcare, hospitals and practice groups measure provider productivity in Relative Value Units (RVUs), a national standard set by Medicare/CMS to determine how much to pay doctors for their services. It's a number based on the volume of work or effort physicians expend in treating patients for each of the services and procedures covered under the Physician Fee Schedule.

RVUs themselves are determined as part of the Resource-based Relative Value Scale (RBRVS), a system for “describing, quantifying, and reimbursing physician services relative to one another,” according to ACEP.

The RVU/RBRVS system was created to bring more uniformity to Medicare’s reimbursement systems while also trying to control escalating medical spending in an era when reimbursements are in decline.

Let's take a closer look at how RVUs work, how they relate to provider productivity, what the pros and cons are of their use, and how hospitals and practice groups can master their value to gain the most profit.

How RVUs Work

RVUs do not represent monetary value. Instead, they signify the relative amount of physician work, resources, and expertise required to service patients. The actual dollar amount of payment for those services only comes when a conversion factor (CF) — dollar per RVU — is applied to the total RVUs accrued. Congress sets the value of the CF each year, so it can vary from one year to the next.

The total RVUs consist of three components:

  1. Physician's work: This metric equates to the amount of time, skill, training, and intensity necessary to perform a given procedure. The work RVU accounts for 53 percent of the total RVU; 
  2. Practice expense: These expenses comprise costs such as rent, equipment and supplies, consulting and professional services, and staff salaries; 
  3. Malpractice expense: This expenditure describes the liability expenditures borne by or on behalf of the provider. This RVU represents just three percent of the total and is rarely accounted for on its own. 

Each component is multiplied by a factor known as the Geographic Practice Cost Index, or GPCI, to account for variations in living and business costs across the country. Add the three elements together, multiply the resulting sum by the CF, and you reach the reimbursement dollar amount that Medicare or HMOs pay.

Calculating RVUs

In an interview, Dr. Phil Parker, Group Chief Medical Officer for SCP, said there are three ways to measure productivity with RVUs: RVUs per visit, RVUs per hour, and provider cost relative to RVUs.

RVUs per Visit

Using the patients per hour metric alone does not account for acuity, however, so the number of RVUs a doctor can build up differs based on the severity of the patient's condition. Typically, this means a doctor who sees more patients could collect more RVUs than one who sees less.

That’s not always the case, said Dr. Parker.

"In the ED, a doctor who sees approximately two patients per hour is considered the norm," he said. "However, he may only see one per hour if the patients he encounters are in critical condition. Based on the quality of his documentation, that provider could actually accumulate more RVUs than a physician who sees more patients."

While that’s true, Dr. Parker stressed the importance of seeing more patients to generate RVUs instead of relying on fewer high acuity patients.

"It helps our hospitals more if we emphasize speed and efficiency,” he said. “Seeing higher acuity patients can generate more RVUs but seeing more lower acuity patients is the most efficient way to generate RVUs.”

RVUs per Hour

Serious procedures require a higher level of time, skill, and intensity compared to a typical well-patient visit, which means they would yield a higher RVU.

"The number of RVUs credited relates directly to the CPT codes, and those relate to what's on the chart," Dr. Parker said. "That's why it's necessary to put in all relevant factors, including the patient's history, results of the physical exam, any decision-making, what the doctor did, how the patient responded, the critical care involved, and the appropriate diagnosis. Be as accurate and detailed as possible."

He added that it's important to document critical care, including the amount of time spent working with a patient.

"All those minutes add up, so be disciplined and document the time," he said.

Cost per Hour

"Hospitals want to control how much they have to pay a physician per hour," Dr. Parker said. "A facility with extremely low volume will have to pay a provider more than one with a higher volume, to make up the difference."

He cited this example:

"Hospital A has physician coverage 24 hours a day and sees 48 patients per day (an average of 2.0 patients per hour) with a provider compensation of $200 per hour. Hospital B has the same amount of coverage but only sees 36 patients each day (an average of 1.5 patients per hour) with provider compensation of $180 per hour. While Hospital B pays less overall, the doctor gets paid more per patient and per amount of work."

He added that provider cost per RUV is a measure of the ED's financial efficiency: the lower the cost for every RVU generated means greater profitability.

"Ideally, if reimbursement and provider costs were equal, the practice would pay for itself," he said. "The more imbalanced reimbursement is to provider compensation, the more likely a program will require hospital subsidy."

Related Resource: How COVID-19 Has Affected Physician Compensation

RVU Pros & Cons

There have been several ways of calculating physician productivity and compensation over the years. Prominent among them are volume-based metrics tied to the number of patients doctors see per hour or the amount of income they bill for or collect.

An organization that puts part of a doctor's pay under an RVU plan, however, encourages productivity and creates the opportunity for physicians to earn more while also sharing some of the financial risks.

Dr. Parker illustrated the benefit this way:

"For example, let's say the hospital pays doctors $100 per hour, with 75 percent guaranteed and 25 percent tied to RVUs based on acuity, volume, and how hard the doctor works. The average doctor would make the $100 hourly rate while the above-average would exceed that target." 

There are three primary ways doctors can generate the most RVUs, according to Dr. Parker: "See patients quickly, do all the appropriate procedures you can, and document explicitly."

From his standpoint, that means reducing LWOTs, not turning over procedures to specialists ("They'll get the RVUs and you won't.”), and not omitting important pieces of information out of the chart, which could result in down-coding and fewer RVUs.

One drawback to using RVUs applies to smaller hospitals that may see fewer patients or where there is a wide volume fluctuation day-to-day.

"If I only see 15 patients per shift as opposed to a provider who sees 25 or more during his shift, I would be at a disadvantage if my compensation was based, in part, on RVUs," Dr. Parker said.

In those cases, he recommends either paying physicians a flat rate per hour or reducing the percentage attributed to RVUs (10 percent as opposed to 25).

Mastering Productivity with RVUs

According to Dr. Parker, mastering provider productivity comes down to following a particular formula: Set up the appropriate amount of coverage for your patient volume and acuity, pay doctors appropriately to stay competitive, and incentivize physicians to be highly efficient using RVUs.

He concluded his comments with this advice to hospital and practice group medical directors: "Know how you are performing in RVU-related metrics, right-size your coverage, review charts for documentation opportunities, and drive up volume by reducing LWOTs with throughput efficiencies."

Familiarize yourself with the benefits of RVUs as a measurement standard of provider productivity.