Managed Care

Change from salary to relative value units leads to higher income for physicians













A Minnesota medical group that contracted with HealthPartners, a not-for-profit HMO, was able to improve cost of care, physician compensation, and patient access without harming patient satisfaction when the group converted from a salary payment system for physicians to one solely dependent on physician productivity. Before 1998, physicians were paid a salary, with all their patients coming from the health plan in a full capitation system. As the plan accepted more self-insured employers and other health insurance, it had to change its business practice. So, too, did the medical practice. The findings were published in the American Journal of Managed Care.

In 1998, 105 primary care physicians generated 275,000 work relative value units with an average pay of $123,500. By 2002, the same physicians generated 374,000 work RVUs and averaged $148,000 in pay. The group also improved its appointment scheduling, reducing the size of nurse staffing. This cut the cost of providing services, says Steven Lewandowski, lead researcher. "With the increase in efficiency, there was more standardization. This led to consistent and better quality of care. When physicians were engaged in innovation, they changed from being just employees to being innovative, revenue-producing professionals."

RVUs and patient satisfaction, 1998–2002

Compensation per work RVU and per FTE for 105 primary care physicians, 1998–2002

Source: HealthPartners Research Foundation, Minneapolis, Minn.

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