What Are You Worth? Physicians, Know Your Relative Value

Published: 10/27/2016 8:17:51 PM

What Are You Worth? Physicians, Know Your Relative Value by John Hoffman

As we discussed in our last article, Current Procedural Terminology Codes (CPTs) are the language with which America’s healthcare billing system communicates. They convey everything from the types of procedures performed to the billing amount for office visits. Another extremely important use for CPTs is that they serve as the basis for calculating Relative Value Units, or RVUs.

RVUs are a measure of value used by the Centers for Medicare and Medicaid Services (CMS) in the reimbursement formula for physician services. They can also be used in a number of other ways.

  • A physician has run his own medical practice for many years, and now he's being offered a job by a large hospital system. During the negotiations, RVU analysis shows how productive that physician is and his value to the facility. That is what will be used to negotiate the compensation arrangement for that physician.
  • In other words, a physician who does a lot of work and treats many patients—and is earning two million dollars a year—is going to be worth more than a physician who bills fewer RVUs and is earning $500,000.
  • If a practice made up of multiple physicians fails and decides to dissolve, it is not unusual for lawsuits to arise between the different physician shareholders. If it is alleged in litigation that a certain physician was not pulling his or her weight, RVUs are used to determine objectively how active each shareholder has been in the practice and their appropriate compensation. Sometimes agreements are crafted that state when a shareholder leaves the practice, his or her buyout agreement will be based on RVUs.

In cases like the two examples above, it is not uncommon for the physician to negotiate without knowing his or her RVUs. Usually the practice or hospital will perform the analysis and make their determinations based on what they find. By being equipped with their own independent analysis, physicians can then negotiate from a position of strength and say, "I know what I'm worth"—instead of accepting what the other party says as the absolute truth.

If you have a shareholder dispute, or have been approached to join a hospital system, it's important to get a CPT/RVU analysis of your billings performed, so that when you're negotiating your employment agreement you're going to have the information needed to get the best compensation that you can.

For more information about our services, contact us here.

Nawrocki Smith LLP

290 Broad Hollow Road, Suite 115E

Melville, New York 11747

Email: info@nsllpcpa.com

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