Work RVU contracts have pitfalls for dermatologists

From the President

Brett Coldiron

Dr. Coldiron is the Academy's current president.

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In March, I, along with many colleagues, offered predictions for the future of the specialty. One of the things I said was that, “By 2020 there will be more large dermatology groups and more dermatologists employed by large multispecialty groups, at lower incomes. Many young dermatologists will belatedly realize they have signed poor contracts that pay for their productivity based on work relative value units, not realizing that practice expense relative value units comprise up to two-thirds of certain dermatology RVUs.” (You can see all of our answers at www.aad.org/dw/monthly/2014/march/what-will-dermatology-look-like-in-2020.)

My hope is that this column will prevent my prediction from coming true or, at the very least, that it will result in dermatologists knowing what they’re signing up for before they sign a work RVU contract.

There is a reason why group practices and accountable care organizations (ACOs) want to sign dermatologists to work RVU contracts. They sound great in theory — you get the benefits of working for a group (they handle the billing as well as the regulatory compliance issues and have greater negotiating power with insurers) and you still get paid based on your own productivity rather than collecting a salary that doesn’t increase as your effort increases.

But you should know how these contracts work in practice. You may not look closely at how the codes you bill are valued, or you may be a resident just about to take your first job, largely innocent of the intricacies of billing and coding. Having represented dermatology on the AMA’s Relative Value Update Committee for more than a decade, I know those intricacies well. And the fact is this: Work RVUs make up only about 35 percent of a dermatologist’s income. The rest comes from practice expense RVUs (a big part of dermatology’s code values) and malpractice RVUs (a much smaller part); the sum of the three values, Work + Practice Expense + Malpractice, for any given code is multiplied by a payer’s conversion factor to generate the amount you’re reimbursed. When you see how much Medicare pays for a particular code, you’re seeing the results of that equation, and dermatologists in private practice typically collect the full value of it.

If you sign a work RVU contract, your employer will keep the other two parts of the equation. [pagebreak]

For a primary care doctor, who are the majority in multispecialty practices, billing consists largely of evaluation and management codes with high work RVUs and low practice expense values, so this is a great deal — their work RVUS are 85 percent of evaluation and management codes, and while the group’s overhead is 50 or 55 percent, they only pay 15 percent. Primary care physicians do much better under this arrangement than on their own.

A work RVU contract will result in you paying more of the overhead. How? Say you perform a biopsy valued at 2.86 RVUs. Your work RVU contract will credit you with 0.81 RVUs and the clinic will keep 2.05. You can see that you’re footing more of the bill for the overhead. It starts to make sense why so many dermatologists are in small group practices.

Maybe the biopsy example doesn’t cut it for you. Wondering how the codes you bill most often stack up? You can download the entire database of code values at www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Relative-Value-Files-Items/RVU14A.html.

I hope these words make you think twice before signing a work RVU contract. You should instead ask for a contract based on a percentage of total collections or total RVUs. I think it is unfair and deceptive to foist these work RVU contracts on young dermatologists who don’t know any better. Dermatology can and will thrive in the changing health care environment, particularly if we are knowledgeable about contracts. Discovering you are bound by an unfair contract causes resentment and changing jobs is a major disruption to your life and career. Dermatologists should be paid fairly for what they do. Make sure you are.