The way physicians are paid has shifted significantly over the past few decades.
Straight salaries and fee-for-service models once dominated medical compensation. But for many employed doctors today, particularly in hospitals and large health systems, pay is tied closely to productivity. And productivity, in these contexts, often means one thing: the RVU-based compensation model.
Relative Value Units (RVUs) form the backbone of how services are valued in many healthcare systems. But it's not the RVU itself that governs your paycheck, it's the compensation model our employer builds around it.
Knowing how RVU compensation models work is essential, whether you're reviewing a new contract, trying to understand fluctuations in your paycheck, or simply planning your career long-term.
What Is an RVU Compensation Model?
An RVU compensation model is a system used by medical employers to calculate physician pay based on the relative value of services provided.
RVUs measure the time, skill, and intensity required for clinical services. These units don't have a cash value on their own, instead, they're multiplied by a conversion factor (CF) set annually by Medicare or determined through employer negotiations.
But an RVU compensation model doesn't stop at converting work into pay. It often forms a structured framework with tiers, bonuses, thresholds, and penalties.
These models are intended to balance fairness, transparency, and incentives, though results vary widely by employer and specialty.
RVUs are part of the Resource-Based Relative Value Scale (RBRVS), and they come in three parts:
1. Work RVUs (wRVUs)
These are the units most commonly tied to physician pay. wRVUs account for the provider's direct effort in delivering care, including the technical skill involved, physical and mental workload, level of clinical judgment, time spent, and the overall complexity or risk of the patient encounter. On average, wRVUs make up roughly 50% of the total RVU assigned to a given service or procedure.
2. Practice Expense RVUs
Practice expense RVUs reflect the operational costs of running a practice, everything from clinical staff salaries to equipment, medical supplies, and facility overhead. These typically represent about 45% of the total RVU.
3. Malpractice RVUs
Malpractice RVUs account for the estimated cost of professional liability coverage tied to each procedure or visit, generally making up around 5% of the total RVU.
Most compensation models focus on wRVUs because they directly tie to physician effort. Understanding how they translate to your income is where compensation models come in.
How a Typical RVU Compensation Model Works
RVU-based compensation models tend to follow a basic structure:
- Base Salary (Optional): Some models offer a guaranteed salary for a fixed period, often one or two years, while others skip this entirely.
- wRVU Target: Physicians are assigned a target number of wRVUs annually, based on specialty, regional norms, or historical performance.
- Conversion Factor: Each wRVU is multiplied by a set dollar amount. In the case of CMS, the conversion factor for 2025 is $32.35. This amount may differ by employer and specialty.
- Productivity Bonus: If a physician exceeds their wRVU target, they may receive additional compensation per wRVU beyond the threshold.
- Penalties or Clawbacks: If wRVU thresholds aren't met, some employers reduce compensation in future periods or withhold bonuses.
In most RVU bonus structures, the bonus only kicks in after you exceed a set threshold that typically aligns with your base salary.
For example, if your contract sets a threshold at 4,000 wRVUs and you end the year with 4,500, you'd only receive a bonus for the 500 wRVUs above that mark. If your bonus rate is $50 per wRVU, that's an additional $25,000.
The specifics vary widely, so it's important to understand how your particular contract defines thresholds, rates, and bonus eligibility.
Variations in RVU-Based Physician Compensation
During residency, physician pay is simple and standardized. Salaries are based solely on Post-Graduate Year (PGY), not specialty or hours worked.
A first-year internal medicine resident and a first-year neurosurgery resident at the same institution earn the same income, typically between $60,000 and $75,000 annually, depending on the program. No bonuses, no performance metrics, and no RVU calculations.
But once training ends, compensation becomes far more variable. Attending physicians face a range of payment structures depending on specialty, setting, and employer priorities. Some contracts are rooted in productivity, others in time, and many combine the two.
Here are the most common models physicians encounter:
Base Salary Plus RVU Bonus
This is one of the most widely used RVU models, especially in hospital-employed positions. Physicians receive a guaranteed base salary, with the potential to earn a bonus for exceeding a set number of wRVUs.
For instance, if your contract sets a 4,000 wRVU threshold and you generate 4,500, you'd get a bonus based on those extra 500 units. Bonus rates vary, but $40–$60 per wRVU is typical.
Pure Productivity (RVU-Only)
In this structure, compensation is entirely dependent on the number of wRVUs you generate. There's no salary floor. If you don't produce, you don't get paid. This model is more common in independent practices and high-volume specialties that reward efficiency and throughput.
Tiered RVU Rates
Some contracts increase the conversion rate as your productivity rises.
For example:
- $50 per wRVU for the first 5,000 wRVUs
- $55 for the next 1,500
- $60 for anything above that
This approach incentivizes higher output, but it can also push physicians to prioritize volume, which may affect work-life balance or patient care.
Blended Models
Many employers incorporate non-RVU incentives into the mix. For example, 80% of your pay might come from RVU productivity, while the remaining 20% is tied to quality metrics like patient satisfaction, outcomes, or cost control.
Pooled RVU Compensation
In group practices, individual pay may be tied to the group's total productivity and collections. If you generate 700 wRVUs and the group produces 5,000, but only 3,000 are reimbursed, you might receive 700/5,000 of the total amount collected.
RVU models come in many flavors, and the fine print matters. Two physicians with similar workloads might walk away with very different incomes depending on how their contracts are structured.
Understanding whether your pay is based on raw production, collections, thresholds, or a group pool can have real consequences for your financial planning.
Pros and Cons of RVU Compensation Models
RVU-based compensation models have become increasingly common in healthcare as organizations seek ways to measure and reward physician productivity fairly and transparently.
But like any payment system, RVU models come with distinct advantages and drawbacks that physicians should carefully weigh.
Pros
WRVUs provide a standardized, quantifiable metric to capture the effort and complexity involved in delivering medical services. This helps create a more consistent way to evaluate physician output across specialties and practice settings.
Rather than relying on vague or subjective performance assessments, wRVUs offer a concrete measurement rooted in actual clinical activity.
It also gives practices some strategic control over revenue. By choosing which services to offer, which patients to prioritize, and which insurance contracts to accept, a practice can optimize its wRVU generation.
Physicians attuned to both patient care and business acumen can shape their panel in ways that benefit both.
In addition to this, RVU models bring transparency to physician pay. The formulas and conversion rates used to translate RVUs into dollars are usually outlined in contracts, which means physicians can clearly see how their compensation is determined.
This clarity can reduce confusion or suspicion around income distribution and build trust between doctors and employers. When structured well, the RVU system makes it easier for physicians to understand what they need to do to increase their earnings.
Another strong advantage is the alignment of incentives with productivity. High-performing physicians who generate more wRVUs typically earn more income, which rewards effort, efficiency, and skill. This pay-for-performance approach motivates providers to maintain a consistent level of clinical activity and encourages a culture where productivity is valued.
Cons
Like with most things in life, these benefits come with trade-offs.
One major downside is the pressure to maximize volume. Since RVU-based models primarily reward the number and complexity of services performed, they can unintentionally prioritize quantity over quality.
Physicians may feel pushed to see more patients or perform more procedures, even when that's not in the best interest of patient care or physician well-being.
This volume-driven environment risks burnout and may reduce time spent on thorough evaluations or complex cases.
The same productivity incentives that reward initiative can also foster unhealthy competition. In high-pressure group environments, physicians may feel pitted against each other, competing for the most lucrative procedures, the highest-volume clinics, or even the most RVU-rich diagnoses. This competition can strain collegial relationships and fracture team dynamics.
RVU-based pay often disincentivizes care for lower-income populations. Medicare and Medicaid typically reimburse less per procedure, which means patients covered by those programs contribute fewer RVUs and less income.
Over time, this can erode access to care in already underserved communities and deepen health disparities.
As practices grow, RVU models can also introduce administrative headaches.
Tracking individual physician productivity, reconciling collections, managing call incentives, and adapting for changes in payer contracts all require a back-office operation that's lean, accurate, and adaptable. Many smaller or newer practices can find themselves overwhelmed by the logistics.
Finally, RVU systems are inherently complex, which often works to the employer's advantage. Between all the gears and cogs that turn to churn out the actual salary, even savvy physicians can struggle to understand how their paycheck is really calculated. Those without financial expertise or legal guidance may unknowingly accept terms that undervalue their work or limit their upside.
Key Factors That Affect Your Earnings Under RVU Models
Medicare adjusts RVU payments based on local costs through Geographic Practice Cost Indices (GPCIs). Higher-cost areas receive larger reimbursements. Though private employers may or may not mirror these adjustments.
RVU models don't always account for payer mix. Treating mostly Medicaid patients may mean lower collections, but RVU-based models reward volume regardless of payer. Some employers adjust your conversion factor based on payer profitability.
Your ability to capture RVUs depends on documentation and coding. Under-documenting time, effort, or complexity can lead to underpayment. Investing in EMR efficiency and coder collaboration can improve RVU capture.
RVU earnings often reflect services rendered 1 month prior due to claims processing times. Medicare takes about 30 days to process claims, but some medical providers have also reported getting paid as quickly as 14 days after electronic submission. Regardless, it's important to note that cash flow can be uneven, especially in pure productivity models.
FAQs
1. What is the average conversion factor for wRVUs?
Most physicians earn between $40–$70 per wRVU, depending on specialty and region. Surgical and procedural specialties often command higher conversion factors than primary care.
2. Are RVU targets negotiable?
Yes. Targets should reflect your specialty, experience level, support resources, and regional benchmarks. Always ask how the target was set and whether it's been met by peers.
3. What happens if I don't meet my RVU target?
In pure productivity models, you'll simply earn less. In salary-plus-bonus models, you may lose out on the bonus. Some contracts include clawbacks or future salary reductions, so be sure to read the fine print.
4. Do non-clinical activities count toward RVUs?
Usually not. Teaching, admin work, and leadership roles may earn stipends, but they don't generate RVUs unless otherwise negotiated.
5. How often are RVUs paid out?
Most employers pay bonuses monthly or quarterly. In pure productivity models, payments may be monthly, though there is often a delay due to billing cycles.
6. Is RVU-based pay better than a salary?
It depends on your risk tolerance, work style, and priorities. RVU models reward volume and efficiency, but can create pressure to overwork. A straight salary offers stability, while a hybrid model can provide balance.
