Working as a NP in the ER, I am paid a flat hourly rate in addition to payment based on productivity. Similarly, as a nurse practitioner, you may be offered a position where you are paid on a productivity basis rather than a flat salary. So how exactly is productivity payment calculated? I will explain in a series of posts. Let’s start with the basics- the RVU.
The RVU (Relative Value Unit)
Productivity among healthcare providers is calculated using a measure called the RVU (Relative Value Unit). Medicare, the leader in determining payment for medical services, assigns each diagnosis and procedure a CPT (Current Procedural Terminology) code. Then, each CPT code is assigned an RVU. The RVU ranks on a common scale the resources used to provide a medical service and is used to determine how much you will be paid. The RVU ranking system takes into account three factors:
1. Provider Work– Certain medical conditions take longer to diagnose and certain procedures are more labor intensive than others. For example, suturing a 1 cm laceration does not take as long as suturing a 9 cm laceration. A 9 cm laceration repair CPT code will be assigned an RVU of 4.67 while the 1 cm laceration is assigned a RVU of just 3.73. The RVU system ranks the more labor intensive procedure higher on the scale.
2. Practice Expense– Seeing patients costs a medical practice money. The practice must pay for medical supplies and equipment as well as employ nurses or medical assistants. A standard office visit for a patient following up for hypertension requires fewer resources than suturing the 9 cm laceration mentioned above. RVU’s take this into account; an office visit for hypertension is assigned 1.29 RVU’s while suturing a 9 cm laceration has a value of 4.67 RVU’s resulting partly from the additional expense the practice incurs in procedural work.
3. Professional Liability– All healthcare providers must have malpractice insurance. Some medical conditions and procedures are riskier to treat than others resulting in increased insurance premiums. Riskier procedures and diagnoses are ranked higher on the RVU scale than those that incur little risk. Using our example above, a standard office visit for hypertension involves very little legal risk on the part of the provider. Suturing a laceration could potentially lead to medical complications and therefore carries a higher risk of a malpractice lawsuit. The higher RVU for the laceration repair takes this into account.
The chart below shows an example comparing the three part breakdown of the RVU of a standard office visit, a diagnostic colonoscopy and a total hip replacement.
In my next post, I will explain how the RVU is factored into your paycheck.