How Much Should I Be Paid Per RVU?
That is a great question!
These days, if you are hired by a large health care organization to be a full-scope Ob/Gyn, you will probably be paid per work RVU. Often contracts will have a “guarantee” – a set salary for the first 1-2 years of your practice, while you are building up your patient panel – and then you will go “on production,” meaning you will be paid a set dollar amount per RVU generated.
As you will most likely bill thousands of work RVUs per year, even a small increase in the dollar value per RVU affects your paycheck quite a bit.
Therefore, it is important to make sure that you are paid fairly per RVU when you first sign your contract. Any raises you get will most likely be a percentage of the contract from the previous year, so if you sign a low-ball contract, the loss in income for you will be exponential.
The trouble is that we don’t really know very well what a fair RVU reimbursement is. Large employers tend to put confidentiality clauses in their contracts so that “competing” health systems can’t outbid them for doctors. This prevents us from talking openly and honestly about what our services are worth.
There is a powerful group called the Medical Group Management Association (MGMA) that famously performs a survey of physician compensation called the MGMA data set. This data is proprietary and highly confidential. I have heard that it costs about $3500 to see the most recent Ob/Gyn salary data. (I’m not sure, they don’t say on their website how much they charge.) The MGMA data does give average Ob/Gyn compensation per RVU. In general, this compensation is higher in the Midwest and Southeast and lower on the coasts. It is higher in rural than urban areas. I’m sorry I can’t give you MGMA numbers, but I don’t want to be sued by the MGMA! It also describes the average RVUs generated per Ob/Gyn in various settings (academic, private practice, large health organization) and the average total salary. From Ob/Gyns chattering about their salaries, I have seen numbers per work RVU ranging from the low $40s to the high $60s, with most being somewhere in the $50s.
The Fair Market Value Fallacy
Once interesting wrinkle is that nonprofit employers love to talk about “fair market” compensation of doctors. They love to say that they are at risk of losing their nonprofit status if they pay physicians more than what the “fair market” is. They use this excuse a lot to tell Ob/Gyns that, although they would JUST LOVE to pay them more, they cannot, you see, nobody wants the Feds knocking on their doorstep, busting them for overpaying Ob/Gyns. MM-HMM.
Now, I know a little about economics from that Master’s degree in City Planning I got in my 20s. The interesting thing is, physician salaries are a lot like real estate. The true market value of them is… whatever another person is willing to pay for them, essentially. Let’s say a house sold last year for $350,000. However, the local economy is booming, more people want to move to town, and now the identical house next door is sold for $425,000. Guess what? That house was actually worth $425,000 by the laws of supply and demand! Even though the new owners will complain all day long that they “overpaid.”
Same with Ob/Gyns. Let’s say the only practice in town has 5 Ob/Gyns who were each paid $350,000 per year. One retires, and this town is a fine place to live, but nobody is dying to move there. The practice offers a salary of $350,000 for a new Ob/Gyn to move to town. There are no takers. Finally, when they raise the salary to $425,000, that persuades a debt-ridden new grad Ob/Gyn to move to town and join the practice. The fair market value for that job is, by definition, $425,000. Even if MGMA data says $350,000. [nota bene - please see correction addendum below - KS]
Very confusing work RVU formulas
Another trick employers like to use is to offer you a contract with a dizzying formula for calculating your salary based on your work RVUs so that only the corporate accountant can really figure out what you are owed. You may have work RVU “tiers,” “bonuses,” “clawbacks,” and so forth.
Let’s try to demystify some of these for you.
Tiers – it is in your employer’s best interest for you to work as much as possible, even if they have to pay you more for additional work RVUs. That is because you represent substantial sunk costs in terms of benefits, office space, etc. They don’t have to pay any more for these things the more you work. So, they will often offer you a bonus for generating more work RVUs. For example:
0 – 6000 work RVUs – paid out at $50/ work RVU
6001 – 9000 work RVUs – paid out at $52/ work RVU
9001+ RVUs – paid out at $54 / work RVU
Bonuses – Employers will also pay you a lower “base rate” per work RVU but increase it by, for example, a total of 10% for meeting “quality metrics.” Freaking quality metrics, oh my god, they have so little to do with actual quality. Part of the “quality” formula is typically “patient satisfaction.” At my last job, this was the percentage of patients who rated you a 9 or 10 out of 10. It was supposed to be 92% or something. My patients were never that satisfied, and I never got paid out for that metric. Sigh. One of my partners just completely stopped having any discussion about weight or obesity with their patients in an effort to improve their satisfaction metric, which is an interesting unintended consequence. There are also metrics for citizenship, like attending all-staff meetings and taking med students, being on committees, some clinical care metric such as Pap completion rate, vaccination rate, NTSV delivery rate, etc.
I found for my mental health the best thing was to not look at my metrics, assume I would not meet any of them, and just do the best job I could by my own standards. It is certainly not worth the effort financially. Also, constantly reading everybody’s dissatisfied comments about you can really mess with your mental health. I never read my reviews. I just told my office manager to let me know if anything important became a recurring theme. I recommend this approach. So just assume you will not bonus based on metrics.
Clawbacks – This is the sinister and evil counterpart to bonuses. They will actually pay you a base rate and then decrease your pay if you don’t meet your metrics! Yikes. If your contract contains a clawback, just assume you will always have it docked from your paycheck.
Hopefully this article provided some context for dollars-to-RVU conversion factors. I’m sorry I cannot share more specific proprietary information, however, if anybody wants to comment below about their own rate per work RVU, please feel free! Adding region of country, type of practice, and if you are in a small town, big city, etc., would be helpful.
Karla Solheim, MD, FACOG
[nota bene regarding fair market value - I received some additional input from a very nice physician administrator, and I admit I am a jerk for pooh-poohing that the Feds will come after administrators and doctors for having salaries that are allegedly too high. Apparently they have, for millions of dollars in fines! So MGMA is even MORE powerful than I thought.
Anyway, this very helpful administrator states that salaries really need to be within the broad spectrum of MGMA data, and if your compensation is above the 90th percentile for example, your work RVU production should be, too.
HOWEVER - if you and your organization can agree on compensation above the 90th percentile MGMA for a good reason - as long as the organization can document the sound reasoning - this is reasonable, according to my helpful source. For example, being in a rural area with documented inability to recruit and retain at the MGMA average; hospital with high acuity but low volume making the work burdensome but RVUs low (backing up CNMs or family med would be this scenario I believe); call frequency higher than is standard for the hospital volume; etc.
Thank you again to the helpful person who provided more context!]