Documenting and rewarding productivity

Nurse practitioner (NP) salary and bonuses often are based, at least in part, on the revenue the NP brings to a practice. An example of a bonus formula offered an NP recently is:

"In addition to base salary, the Company may, but shall not be required to, pay the Nurse Practitioner a performance bonus, the amount of which shall be determined by the Company in its sole and absolute discretion, based on a maximum of fifty percent (50%) of net revenues after expenses generated by Nurse Practitioner in excess of one hundred twenty thousand dollars ($120,000.00) per year, not including fees for capitated patients."

There are 4 things wrong with the wording of this clause. First the words "may, but shall not be required to pay" make it unlikely that the NP ever will get paid a bonus. "May" should be changed to "shall" or "agrees to pay." Second, it would be in the NP's interest to have a minimum percentage stated. Stating a maximum percentage does nothing for the NP. Third, the NP should get a percentage of fees for capitated patients she sees. Fourth, the contract should state how often the bonus will be figured and paid.

If we clean up the language, this bonus would be formula is simple. The practice totals the collections on the NP's fee-for-service billings, subtracts $120,000 from that number, and pays the NP whatever percentage the NP and the employer have agreed upon. Accounting for capitated patients is complicated, however.

Other ways of judging productivity

Provider productivity may be based on the following:
Total gross charges
Total net medical revenue
Revenue minus expenses
Patient panel size
Growth rate of patient base
Hospital admissions
Visits or consults
Office hours
Practice coverage
Volume of procedures
Number of cases

Productivity may be affected by the time a provider spends at the office, the efficiency of the provider, the fee associated with the procedures the provider performs (some procedures bring in more money than others, some insurers pay higher fees than others for the same procedure), the patients' ability to hear, understand, communicate and move, the provider's motivation, and the presence or absence of distractions.

RVUs as a way to determine productivity and compensation

Recently, some practices have been tracking relative value units (RVUs) as a way of measuring and documenting physician and NP productivity. An RVU assigns a value to one CPT code relative to other CPT codes. This is part of a system called the resource-based relative value scale (RBRVS). The RBRVS, developed by the Health Care Financing Administration (HCFA), now the Center for Medicaid and Medicare Services (CMS), is used to determine reimbursement for Medicare Part B services. Under the RBRVS system, services are reimbursed on the basis of the resources expended to perform the procedure rather than simply on the basis of historical trends.

Practices often turn to this method when they employ both primary care providers and specialists. Specialists traditionally are paid more and because their fee schedule rates are higher, may generate more revenue. However, they may not be working harder than the primary care providers. By tracking RVUs, the practice can document the work a clinician performs, irrespective of variation in fees among specialties and health plans. If using RVUs to document work done, salaries can be adjusted based on an accepted measurement, rather than tradition. Furthermore, when a practice is reimbursed under both capitation and fee-for-service, the RVU system captures the work involved in treating capitated patients. Note that the system assumes that providers are adept at selecting the CPT codes that appropriately represent their work. If a provider is not a good coder, and assigns every visit a level 2 (out of 5), then that provider will not get credit for all of his work.

There are three components to a relative value: 1) practice expense component, 2) work component, and 3) malpractice component. The work RVU takes into account the time it takes to perform a service, the technical skill and physical effort involved, the mental effort and judgment required, and the stress due to potential risk. Each component is adjusted geographically using three separate Geographic Practice Cost Indexes (GPCI). The final formula to arrive at an area specific relative value is:

(Practice Expense RV x Practice Expense GPCI)
+
(Work RV x Work GPCI)
+
(Malpractice RV x Malpractice GPCI)
______________________________________
= Relative value

The relative value is then multiplied by a single nationally uniform "conversion factor" to arrive at a monetary value.

For example, for CPT 99214, in 2005 the work RVU was 1.10, the practice expense RVU was 1.03 and the malpractice RVU was 0.05. The total RVU for 99214 was therefore 2.18. To convert the RVU to a monetary amount, multiply by the conversion factor (37.8975 in 2005). The payment for CPT 99214 in 2005 was $82.61.

All of the RVUs can be downloaded from the CMS web site at http://www.cms.hhs.gov/PhysicianFeeSched/01_overview.asp (accessed October 2006). RVUs are updated annually and reviewed in depth every 5 years.

Copyright 2006, Carolyn Buppert
This article is taken from The Green Sheet, published monthly from the Law Office of Carolyn Buppert. To order, click here. For more detail on productivity incentive plans and bonuses, see "Productivity Incentive Plans for NPs." To order, click here. For more information on billing and coding, see "Safe, Smart Billing and Coding for Evaluation and Management" and "Billing Physician Services Provided by NPs in Specialists' Offices, Hospitals, Nursing Homes, Homes and Hospice." To order, click here.

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