As a retired CFO of over 40-years and Past-Chair of the AMGA CFO Council I experienced more than once the impact of the “recalibration” of Work RVU’s (wRVU) by CMS. The first and foremost thing that all CFO’s recognize is that when CMS does it’s “magic” the end goal is that the sum of the new parts are designed to add back up to the original whole, i.e. budget neutrality. With that as the starting point every CFO knows that there are no more dollars in the pool than when the process began. Worse yet is that depending on the organization’s specialty mix, their revenue from Medicare could be going down. So, how does the CFO balance the organization’s budget in response to CMS’ changes?
There are multiple ways to accomplish this, but if the CFO must accomplish the balancing with wRVU’s as their primary or only lever, the choices become limited to only a few:
- Freeze wRVU’s for one or more years
- Recalibrate the wRVU conversion factors that they use for each specialty in order to achieve neutrality
- Project the impact of the change to each specialty and develop a multi-year transition process that achieves neutrality each year while allowing the change to slow take effect.
Choice 3 has many pitfalls including the significant uncertainty of changes in market salary driven wRVU conversion factors that could arise across specialties over the course of the transition period. It would take an extremely accurate crystal ball on the part of the CFO to design a transition process that avoided that trap. Absent that clarity, the CFO might face having to recalibrate their wRVU conversion factors every year of the transition period, which will take significant staff resources to accomplish.
Simple algebra quickly tells you that choices 1 and 2 will effectively produce the same answer. However, since the optics are quite different between the two choices, why would the CFO consider recommending choice 1? Here are some suggested ideas of how to sell choice 1:
- Familiarity. Everyone knows what the current wRVU’s mean to their incomes, thus any planned changes to the utilized conversion factors can be readily understood and related to.
- No surprises. It is hard enough each year to communicate and reach consensus with the planned changes in conversion factors. Adding another layer onto that makes it almost impossible to create a sense of fairness and transparency.
- You don’t know what you don’t know. Trying to out guess the impact of the wRVU changes on salaries before one or more years’ worth of salary survey results are available is “virtual alchemy.” Even the best crystal ball is having to make many assumptions about the trajectory of every specialties’ salary in the marketplace in addition to the topline impact to the organization’s budget.
- Memory. Ever feel like “only the ones you missed” is what is remembered? Don’t take it personal but consider that hard feelings over a mistake in the compensation system can last a long time and can grow into urban legends causing the organization to be on the defensive even after the effects are long gone.
- The devil is in the details. Freezing wRVU’s for one or more years allows the organization to build a data war chest for use to create transparency around any changes “as they occur.” Salary survey data can then support necessary changes in wRVU conversion factors. All CFO’s know this is coming, but how can you assure your doctors that you are doing the right thing if the data is not yet available? CFO’s can also see coming the impact to the topline, not just from the change in reimbursement, but also from the change in true production which will likely be impacted by the recalibrated wRVU’s. Without a history of the revenue impact across specialties, transparency of decision-making is lacking.
Suffice it to say that when it comes to compensation plans “fairness” is in the eye of the beholder. Being able to support the decisions that your organization makes with solid data is the best means of being viewed as transparent. While transparent decisions do not always equate to fairness in each individual’s mind, it places the organization on solid ground to communicate how and why it made the best decisions possible.