Hidden financial dangers of wRVU thresholds in medical employment agreements [PODCAST]

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Health care attorney Dennis Hursh discusses his article “wRVU threshold risks in physician contracts.” Dennis explains the critical distinction between a guaranteed salary and a draw against future earnings where failure to meet production targets can lead to clawbacks. The discussion covers how employers often set unrealistic wRVU thresholds that exceed historical data or MGMA benchmarks while failing to provide adequate marketing support to meet those goals. Dennis highlights the importance of ensuring new physicians have guaranteed income during their ramp-up period and warns against contract language that credits productivity only when billed rather than when services are rendered. Listen to learn how to protect your financial future by identifying and negotiating these treacherous contract provisions before signing on the dotted line.

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Transcript

Kevin Pho: Hi, and welcome to the show. Subscribe at KevinMD.com/podcast. Today we welcome back Dennis Hursh, health care attorney. Today’s KevinMD article is “wRVU threshold risks in physician contracts.” Dennis, welcome back to the show.

Dennis Hursh: Thanks, Kevin. It is great to be here.

Kevin Pho: All right, so tell us what your latest article is about.

Dennis Hursh: I have run into more and more contracts now where the employer gives the physician a salary, but it is dependent on a certain number of work relative value units (wRVUs), and a lot of issues come up with that. I mentioned in my article that one of the first issues is that the salary doesn’t mean anything. I am seeing some contracts now that say they pay you a specific salary assuming you are going to work a certain number of wRVUs. If you do not work the wRVUs, there is nothing in the agreement that says they will take back money. So first you have to see if it is just a meaningless clause. What I think they do sometimes is set it up and then at renewal say that the assumption was you would do this many wRVUs, and you didn’t, so now they are going to reduce your salary. In effect, you have to look at the effect of that provision.

The biggest thing you have to look at is whether it is a reasonable threshold. If you have been there for a few years, we know what your wRVU production is. There is no reason why if you have been producing 6,000 wRVUs a year that we would come in with a contract that says your minimum is 8,000. There is no reason to believe that you are going to hit that this year if you haven’t in previous years. Obviously, you can look at benchmarks, but your own history is probably an even better guide. There are a few things to be aware of there.

If you are just starting your practice, you should not be expected to be super productive. If they just hired a new physician, that physician is going to take some time to ramp up. A practice should have a guaranteed salary for at least a year, and a lot of times for two or three years. Another thing I see that makes me nuts is where they give you a median salary for your specialty in a location, and it is dependent upon you doing the 60th percentile of productivity. There is a mismatch there. If they want to pay you at the 60th percentile, it is reasonable to expect 60th percentile productivity. But I see these mismatches all the time where the salary is low and the threshold is high. There is a gray area where you are working harder than what you are being paid for, but you are not being compensated.

Another issue that is very important is that you ought to be able to confirm your numbers. I had a specialist physician working really hard seeing patients with a full schedule. They came in and were going to fire him. It was not a reduction in salary; they were going to fire him because he was so unproductive, and his contract did not give him the right to audit. We finally talked to the administrator, and they were showing him as having two patients a day. I do not know if they were mixing up provider numbers or what they were doing, but this was a fully engaged, very busy physician. The numbers they were showing showed him seeing about two or three patients a day. It is important that you be able to confirm it.

The last thing you have to worry about is when it is credited. It makes sense that if you see a patient today, you will be credited for the wRVU today. A lot of contracts do not use the date of service. They use the date of billing. I have had instances where a hospital billing staff got short-staffed. You cannot blame them if you are the CEO. You want your billing staff sending out the bills for the $900,000 ICU visit, not the physician office visit. It is a reasonable business decision to put off billing. However, I have had physicians lose bonuses because something screwed up. They were busy, but their wRVUs were not billed. As far as their contracts said, they were not being productive.

Kevin Pho: Before asking some questions, for those who are not familiar with the intricacies of physician contracts, just give us a 30-second primer of what a wRVU is and how that factors into most physician contracts.

Dennis Hursh: To say most might be a stretch, but it is important. A wRVU is a work relative value unit. The Centers for Medicare & Medicaid Services, the government looking at how to pay physicians, has done a lot of studies. The concept of a wRVU is that it represents the work you have done. It is a little biased because they prefer procedures over thinking. You tend to get more wRVUs for a procedure than even a very difficult patient that you are trying to piece through what is going on. In general, the concept is that a wRVU represents a certain amount of work. A complex cardiothoracic surgery is a lot of wRVUs, whereas a level one office visit is going to be significantly less. That is the concept that shows how much work you are doing or how productive you are being.

In a hospital situation, it is not a bad way to do things. If you did collections, you would be penalized if you were seeing Medicaid patients or the uninsured. This means at least you are getting paid the same amount for a private pay patient, a patient with really good insurance, or a charity case. You are still doing the work. In that sense, it is not a horrible thing that you are paid on wRVUs. You just have to watch out for these issues.

Kevin Pho: Approximately what percentage of physician contracts are based or influenced in part by wRVUs?

Dennis Hursh: I can’t say exactly, but from what I have seen, I would say probably 80 to 90 percent. A lot of them will have salaries and then give you a productivity bonus if you exceed a certain number of wRVUs. They give you so much per wRVU, and some are really “eat what you treat.” A lot of times after you have been there a few years, you are on “eat what you treat.” They pay you a draw and call it a salary. They are going to pay you a certain amount, but they are going to true it up at the end of each quarter and at the end of each year. If it turns out you were not that productive, they are going to want some money back.

Kevin Pho: When you first introduce that concept of wRVUs, there are a variety of red flags and things to be careful of that physicians should be aware of. In general, when it comes to these wRVU targets, where do administrators and hospital systems get these numbers from in terms of the target percentile value?

Dennis Hursh: There are benchmarks. The ones I like are from the Medical Group Management Association, but there are others out there, and some of them amalgamate several benchmarks. Sometimes it seems like they just get a consultant in that says if you can get this many wRVUs out of the doctor, we are going to make a lot of money. Some of them do not seem to have any relationship to benchmarks at all, but in theory, they are based on some kind of benchmarking.

Kevin Pho: In terms of the percentile that physicians should aim for, whether it is the 50th percentile or 75th percentile, how do they come up with those numbers? Are they just purely consultant-based? Are they just pulling these numbers up from thin air?

Dennis Hursh: I think they are one I see a lot, which is the 60th percentile. They expect you to be at the 60th percentile of productivity. I wouldn’t have as much of a concern with that if you were being paid at the 60th percentile. It seems fair that you would be producing at the 60th percentile. My concern is when they are paying you less than that, but they expect you to be producing at the 60th percentile.

Kevin Pho: Let’s go through a couple of scenarios and just tell us your advice if a physician finds themselves in that particular scenario. Let’s say the target wRVU is the 60th percentile. If a physician is producing under that for that year, tell us the type of risks that they may encounter if they are producing under the target wRVU value.

Dennis Hursh: In a lot of cases, they will figure it out. Let’s say we are paying you $100,000 and we expect 100 wRVUs at $1,000 per wRVU. These numbers are crazy, but say it is $1,000 a wRVU. If you come in at 98 wRVUs, a lot of times they will say that they were paying you $1,000 per wRVU, and you were two short. You owe them $2,000 in that scenario. They will say this is your salary divided by this number of wRVUs, and that is what they are going to charge you if you do not hit it.

Kevin Pho: If a physician exceeds that target, would they get some sort of bonus based on how much they exceed that target by?

Dennis Hursh: They should get the same. Another thing I see is that a lot of times they will penalize you more for the wRVUs you do not make than you would think. If you are getting $100 a wRVU, if you go over the thresholds, you should get $100. A lot of times if you miss it, the penalty is $100, but they will give you $50 for every wRVU over the threshold. There should be a match there. If you are penalized, you should get the same amount if you go over.

Kevin Pho: You also mentioned the mismatch. If a physician produces above the target wRVU but is still getting paid below their production, how does that gray area or mismatch sometimes get resolved?

Dennis Hursh: Usually it does not. That is the kind of thing you have to negotiate in your contract. If you say that you will accept a certain salary, and that salary is the median, and you accept a certain threshold, and that is the 60th percentile, that is where it is. If you come in at the 55th percentile of productivity or 59th percentile of productivity, you get your salary and that is it. A lot of it is just in your contract. What you are being paid should match up to the percentile productivity you are expected to produce.

Kevin Pho: From the spectrum of contracts that you see, you mentioned some red flags that need to be negotiated specific to wRVUs when a physician first works for an employer. Review for us the top three concerns a physician should think about at the negotiating table when it relates to wRVUs.

Dennis Hursh: I think the first thing is whether it is a reasonable threshold. If you are paying me at the 50th percentile, then the threshold should not be at the 60th. I always think the date of service is very important. You should also be able to confirm the numbers. I think those are probably the three biggest things that you need to focus in on.

Kevin Pho: From your experience with physician contracts, how much wiggle room is there for those specific things that you talked about? Are they mostly included, or is it something that employers push back on? Tell us the type of reactions that you get.

Dennis Hursh: The one that I get the most pushback on is the mismatch between salary and productivity. A lot of times they say that their compensation committee has said this is what the other physicians are making and they think the 60th percentile is right. That is the one I get the biggest pushback on. Sometimes they will say that administratively they just cannot do that. Administratively, they know a wRVU when it hits the billing system, so they cannot do it. I am not going to argue about that. Confirmation usually is not a big deal. If you think about it, if you are an employer and you are paying me on productivity, if you are smart, you are going to be keeping me apprised and saying where I am. You might say that I am behind and maybe I should schedule more patients or do something. The confirmation usually is not such a big issue, but salary versus threshold is probably the biggest one that I see and sometimes the hardest to negotiate.

Kevin Pho: When it comes to these wRVU compensation systems, of course, it has to be accurate in terms of the measurement of the wRVU. Should a physician independently keep track of their own wRVUs, or is it OK to rely on what the hospital comes up with?

Dennis Hursh: I think it pays to keep track of your own. I do not think it needs to be tracking that you saw Susie Smith and did this wRVU. I think just keeping your schedule and looking at it helps. If suddenly your production has dropped and you do not feel like you have been a lot less busy, it is nice to have something to go back on. Even keeping your schedule a lot of times will remind you that Susie Smith had a complex procedure. You can check to see if that is reflected or if a big procedure was billed. I think it does help to keep track. I hear there are some folks out there that are now developing software to catch your own wRVUs. I have not spoken to anybody that is using it, but it seems like if it would be easy to do, it would be a nice thing to keep track of.

Kevin Pho: Let’s talk about another scenario, and that is the new physician. A lot of times new physicians get guaranteed salaries for the first one to two years, and then they switch over to a productivity-based wRVU system. In that situation, what should physicians look out for, especially new physicians coming out of residency who may not be familiar with any of this? What are some of the red flags they should look out for whenever they are looking at their first contract with a guaranteed salary for the first couple of years?

Dennis Hursh: The first thing is you should still be eligible for productivity. The fact that you may not hit it and you are going to get your salary anyway means you should still be eligible for a productivity bonus. It is the same thing. The productivity threshold should be pretty close to your compensation threshold. That is one thing to look at. If you are getting a productivity bonus, you want to be able to confirm it, along with all the things we have talked about. The other thing you want to check is to make sure that it really is a guarantee. I have seen some contracts that had a guaranteed salary, but the employer kept track of the wRVUs. At the end, your salary was guaranteed, but you have a deficit on the wRVUs, and that rolls into the next quarter. So you are starting your first quarter on productivity in the hole. It is important that if it is guaranteed, it means any deficit is erased when the guarantee period ends. I have seen people really nailed by that one.

Kevin Pho: Let’s zoom out a little bit. I think that with a lot of productivity-based contracts, I have heard that some may be transitioning to more quality metrics influencing compensation, or value-based metrics influencing compensation. What are you seeing in terms of that hybrid where productivity may be becoming less important and more of these quality metrics and value-based metrics are coming in and influencing compensation instead?

Dennis Hursh: I am seeing it, but I see too many that say you have 10 percent or even 20 percent potential quality compensation dependent on you hitting the wRVU targets. Some of them are written where they want you to hit 5,000 wRVUs. If you hit 4,999 wRVUs, then the quality bonus is off the table. If you think about that, it is maddening. Quality is quality. If you are doing good quality, you should get that bonus. It should not be contingent on maintaining a certain productivity. That is the biggest trap you have to watch out for. I am seeing more and more quality compensation coming in.

Kevin Pho: It sounds like as of today, a lot of hospital systems still value productivity above all else.

Dennis Hursh: They do. There is money involved. The reason they are doing quality, let us not kid ourselves, is because the payers are incentivizing them on quality. I would love to say the hospital administrators just spend all their time worried about patient care, but I do not think that is true. They are compensated based on quality, but the bottom line more times than not is going to be based on physician productivity. They are still very focused on that.

Kevin Pho: Today, we are speaking at the beginning of the new year. As it relates to physician contracts and especially productivity-based metrics like we are talking about today, what kind of trends do you see in 2026 coming up when it comes to these physician contracts? Is there anything new on the horizon that physicians need to be aware of and look out for?

Dennis Hursh: There is nothing new. I think it is just becoming more critical as time goes on. Ten years ago, I would see the occasional wRVU threshold. I would say even then 90 percent of them were productivity-based. They would pay you your salary no matter what, but if you exceeded the threshold, you would get a bonus. Then it became pretty much that you have to do this to earn your salary. Now I think the big trend is, as you said, quality. The quality should be an independent portion. It should not be dependent on productivity. To a certain extent, they do conflict with each other. If you are compensating me for quality, compensate me for quality. Do not compensate me for quality only as long as I am also grinding out the wRVUs.

Kevin Pho: I think just as important as the wRVU target is the dollar per wRVU that physicians are compensated on. Tell us your thoughts about that. I see from the physician boards that there is a pretty big regional variability when it comes to the dollar per wRVU, and that actually is going to be just as important as the RVU value number itself, right?

Dennis Hursh: Absolutely. There are benchmarks for that. This is not the kind of thing where you lick your finger and see which way the wind is blowing. There are benchmarks that say for this specialty and this region, employed by a hospital or a physician practice, this is the benchmark. There has to be a really good explanation if they are under the median benchmark.

Kevin Pho: Is there any negotiating wiggle room when it comes to that dollar per wRVU number?

Dennis Hursh: I have gotten it. It is hard because a lot of times they say their department gets a certain amount of dollars per wRVU and they cannot pay the other physicians less than they are paying you. They say they have to do it. However, sometimes you can negotiate and say that if they are doing that, then the threshold should be smaller. If you are paying less per wRVU, then you should have a proportionately smaller threshold.

Kevin Pho: We are talking to Dennis Hursh, health care attorney. Today’s KevinMD article is “wRVU threshold risks in physician contracts.” Dennis, as always, we will end with some takeaway messages that you want to leave with the KevinMD audience.

Dennis Hursh: Just be aware of it. So many people look at it and say they are paying a good salary. They have looked around and talked to other people, and it seems like a good salary. It may not really be a salary. You really have to look at it and make sure it is not in fact a draw against productivity. If it is, you have to make sure that it is a reasonable productivity threshold so that you are actually going to get paid what they are seemingly promising to pay you.

Kevin Pho: Dennis, as always, thank you so much for sharing your perspective and insight, and thanks again for coming back on the show.

Dennis Hursh: It was my pleasure. Thanks.

What are the hidden financial dangers of wRVU thresholds in medical employment agreements?

Hidden Financial Dangers of wRVU Thresholds in Medical Employment Agreements [PODCAST]

As physicians, we’re trained to diagnose and treat – but navigating the complexities of medical employment contracts frequently enough feels like a different kind of challenging diagnosis. One area consistently causing financial headaches? Work Relative Value Unit (wRVU) thresholds. These seemingly straightforward metrics can harbor hidden dangers that significantly impact your income and career trajectory. this article, informed by years of contract negotiation experience and insights from the field, breaks down the potential pitfalls.

Understanding wRVUs: A Rapid Refresher

wRVUs are a standardized measure used to quantify the value of medical work. They aren’t dollars, but rather a relative weighting assigned to each service you provide – from a simple office visit to a complex surgical procedure. Employers use wRVUs to assess physician productivity and, crucially, to determine bonus eligibility and even continued employment. A higher wRVU generally indicates more extensive or complex work.

The Allure & The Trap: How wRVU Thresholds Work

Initially, a wRVU-based compensation model appears attractive. It rewards productivity, incentivizing physicians to see more patients and provide more services. However, the devil is in the details – specifically, the thresholds built into the contract.

Here’s how it typically works:

1. Base Salary: You receive a guaranteed base salary.
2. wRVU Target: The contract specifies a wRVU target you must achieve.
3. Bonus Structure: Bonuses are paid only if you exceed the wRVU target. The higher you go above the target, the larger the bonus – theoretically.
4. Tiered Thresholds: Many contracts don’t have just one threshold. They have tiers. For example:

* 0-1000 wRVUs: No bonus

* 1001-1500 wRVUs: Bonus of $X per wRVU above 1000

* 1501+ wRVUs: Bonus of $Y per wRVU above 1500 (often a lower rate than the previous tier).

This tiered structure is where the danger lies.

the Hidden Financial Dangers

Several factors can create significant financial disadvantages:

* Unrealistic Targets: The wRVU target may be unattainable given the practice’s patient demographics, available resources (staffing, equipment), or the complexity of cases. Negotiate a realistic target based on historical data from similar physicians in the same setting.

* Decreasing Bonus Rates: As mentioned above, tiered systems often decrease the bonus rate at higher wRVU levels. This disincentivizes maximizing productivity and can feel punitive for high-performing physicians.

* Expense Allocation & wRVU Calculation: How are expenses factored into the wRVU calculation? If you’re responsible for covering significant practice expenses (e.g., malpractice insurance, CME), this reduces your net income, even if you hit your wRVU target. Clarify exactly what expenses are deducted before wRVUs are calculated.

* Coding Audits & Downcoding: A practice’s aggressive coding audit policies can lead to “downcoding” – where your submitted codes are reviewed and reduced, lowering your wRVU count. Understand the audit process and your rights to appeal.

* Changes in Payer Mix: A shift in the percentage of patients covered by different insurance plans (payer mix) can dramatically affect wRVU values. Medicare and Medicaid typically reimburse at lower rates than commercial insurance. A clause protecting you against significant shifts in payer mix is crucial.

* RVU Compression: The Centers for Medicare & Medicaid Services (CMS) periodically updates wRVU values. These updates can lead to “RVU compression,” where the value of certain services decreases, making it harder to reach your target. Contracts should address how RVU updates are handled.

* Non-Compete Clauses & wRVU Impact: If you leave the practice before the contract term ends, a non-compete clause could prevent you from practicing nearby, limiting your ability to generate wRVUs and potentially triggering repayment obligations for signing bonuses or other incentives tied to wRVU performance.

Real-world Example: The Case of Dr. Ramirez

Dr. Ramirez, a cardiologist, signed a contract with a seemingly generous wRVU bonus structure. However, the contract stipulated a high wRVU target and included a tiered bonus system with decreasing rates. Furthermore, the practice implemented a strict coding audit policy. Despite seeing a high volume of patients, Dr. Ramirez consistently fell short of her target due to downcoding and the diminishing bonus rates. She ultimately realized her actual earnings were significantly lower than projected, and she felt trapped by the non-compete clause.

Benefits of a Well-Negotiated wRVU Contract

A fair and obvious wRVU contract can be mutually beneficial:

* Incentivizes Productivity: A well-structured system rewards hard work and efficiency.

* Aligns Physician & Practice Goals: When both parties benefit from increased productivity, it fosters a positive working relationship.

* Attracts & Retains Talent: Competitive compensation packages are essential for attracting and retaining qualified physicians.

Practical Tips for Negotiation

* Seek Legal Counsel: Always have an experienced healthcare attorney review your contract.

* Due Diligence: request historical wRV