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Potential Compliance Issues with Production-Based Physician Compensation Agreements

Posted 6:05 PM by

As many physicians continue to migrate into hospital employment arrangements, administrators need to be aware of potential problems that may arise from production-based employment agreements. A well-executed employment contract is necessary for proper physician integration strategies by health systems.

In order to develop an appropriate structure for a production-based employment contract with an employed physician, many hospitals are relying on payment mechanisms focused primarily on physician work RVUs.  Although an accepted clinical standard of measurement for physician clinical productivity, here are a few items to consider when developing a compensation structure based on work RVUs that is to reflect fair market value:

  • Is compensation being paid for clinical services that are not actually being performed by the physician or under the supervision of the physician? (An example would be mid-level provider services incorrectly attributed to physician productivity.)
  • Are you currently utilizing a billing system that correctly captures work RVUs and the associated coding modifiers?  If incorrectly calculated, work RVU modifier multipliers, which range from 0 to 1.5, can significantly skew a physician’s actual productivity output figure. (Has the billing system being used to calculate work RVUs, been updated to match CMS’s current relative value figures?)
  • Is the historical physician work RVU productivity baseline for the physician, accurate to a sufficient level that will translate to a reasonable and intended compensation once the physician becomes employed by the health system? (For example, if calculating a compensation per work RVU model and the physician’s historical work RVU figures were significantly misstated due to one or two major procedures being erroneously excluded/included, this would create a significant misstatement of compensation to the physician as his productivity would inexplicably change once employed.)

Production-based physician employment contracts are a great tool to ensure transparency and unify goals between physicians and hospital employers. The proper understanding of how work RVUs are calculated and reported, as well as the underlying compliance implications, becomes necessary information when putting together these types of arrangements.

For more information, read the full article "Developing Work RVUs for Production-based Physician Compensation Programs” in the June issue of HFMA magazine

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Katz, Sapper & Miller’s Healthcare Resources Group serves healthcare providers, including physicians, hospitals and health systems, surgery centers, and long-term care facilities. Our team of healthcare professionals has the scope and depth to meet client needs. Learn more.

Comments (1)
Charles Potter MD wrote
CMS has repeatedly stated that the bulk if not all of the MPPR reductions for multiple services on the same day comes out of the practice expense and malpractice expense RVU's and specifically NOT the work RVU's. So if you apply the formula for total RVU's with 50% reductions for additional procedures to only the work RVU's, the physician is then grossly underpaid.
Posted Apr 3 2013 9:37 PM
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