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Health System’s New Physician Payment Model Emphasizes RVU

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A leading national health system has left many of its physicians angry and considering defection after unveiling a new physician compensation model that involves revised restrictive covenants and use of the relative value unit or RVU.

Mercy Health System is implementing the new compensation model in “an effort to standardize compensation for all 2,100 Mercy-employed physicians across the system’s four-state operation, including Missouri. But the model also addresses the changes occurring in the healthcare industry,” writes Samantha Liss in the St. Louis Post-Dispatch.

The compensation model is also meant to combat skyrocketing costs. According to Liss, FY2013 brought “a 30 percent decrease in [Mercy’s] operating income compared with the year prior due to rising costs. While Mercy’s total revenue grew by 6.5 percent to $4.4 billion, its total operating expenses grew by 7.5 percent to $4.3 billion in fiscal 2013.”

How does this involve physician compensation?

Liss reports “the biggest single source of expenses was salaries and benefits, which rose 8.7 percent during fiscal 2013.”

It should be noted that this new model has been five years in the making and was developed over two years by 100 Mercy physicians. Now, the time has come for physicians to decide whether or not they want to sign these new contracts.

The majority of Mercy’s physicians have, but Dr. Gregory Finn of Blue Fish Pediatrics has opted to terminate his association with Mercy, as has cardiologist Dr. Allen Soffer who has opted to restart his private practice career.

One of the cited problems with the revamped compensation model is the “new restrictive covenants added to the new contract. If [Soffer’s] group had decided to sign the new contract and later decided to leave Mercy’s employment, there would have been constraints around hospital privileges at Mercy and certain patient contact.”

The other is the model’s RVU component, under which physicians within the hospital would have move value to the hospital than ones in the outpatient setting. Notes Liss: “For example, a doctor that performs surgery in a hospital would generate more RVUs than a doctor that sees a patient for a checkup in an outpatient setting.”

One expert interviewed by Liss explained, “While RVUs are not new to the healthcare industry, many health systems are turning to the measure as an easy way of standardization... In addition to that, many health systems are also adding a quality incentive metric as well.”

As physicians looking for jobs, would you have signed this new compensation contract or would you have left Mercy? What would have been your reasons for signing on? What would have been your reasons for leaving? How can RVU and restrictive covenants benefit a physician?

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