Vanderbilt Pay Plan Spurs Clinician and Scientist Balance

Physician Compensation Report, April, 2001

The RVU-based pay plan for about 220 physicians in the Department of Medicine at Vanderbilt University Medical School in Nashville strongly encourages all of them, even committed researchers and clinicians, to keep some balance in their workload between clinical and academic pursuits.

The plan also is a system which permits service in clinical posts in the community, regardless of how well they pay, by converting dollars received into RVUs. The active program of community outreach and contracted services with other medical institutions broadens the school's income stream and its supply of patients for educational purposes, and serves the nonprofit mission of serving local communities (see previous article).

Gregg Tarquinio, MBA, CPA, vice chairman of the department of medicine, says the basic goal of the pay plan is an 80%-20% split between clinical and academic effort for every physician. For 120 Clinician Educators, the split is 80% clinical, 20% academic. For 100 Physician Scientists, the split is 80% academic, 20% clinical.

After one and half years in effect, most physicians like the plan. "Physicians frequently offer to explain the pay system to new recruits," Tarquinio notes. The plan is particularly fair at evaluating comparable amounts of clinical work equally, regardless of seniority, he adds, thereby aiding the school's goal of attracting bright new faculty members. Recently he has been "getting calls from all over" the academic medical community to learn more about Vanderbilt's system.

Higher Production Lifts Current, Future Pay

Clinical work is measured in RVUs for both clinicians and scientists. The RVU measure is total RVUs (the professional and technical components combined) because when the system was modeled two and a half years ago, MGMA only published total RVU data. (Today it publishes both professional and total RVU data).

The clinical goals for clinicians and scientists are measured against MGMA RVU benchmarks. For each specialty, the benchmark is the 75th percentile of total RVU production; clinicians must achieve 80% of that, and scientists must achieve 20% of that. MGMA academic RVU benchmarks are used except for specialties in which MGMA did not have enough data to publish the relevant benchmark; for those specialties, the MGMA "regular" RVU benchmarks are usually used.

The 80%-20% breakdown works to set annual salaries. Actually, Tarquinio explains, "In most years, a clinician is evaluated only on his or her clinical RVU production." To the extent a clinician's productivity exceeds current year fixed salary, he or she will receive a higher fixed salary the following year. If the clinician comes in under that level, the fixed salary component may be reduced, but added, non-fixed earnings are still possible.

In any given year, clinician pay is 90% fixed salary, while approximately 10% "floats at risk" based on RVU production levels. For instance, if someone's salary level reflects 6,000 RVUs, and the person is producing at an annual RVU rate of 7,000, then that physician will be in line for an increase, coined a "quarterly production adjustment" or QPA, of 250 RVUs at the end of quarter, or 1,000 for the year.

"We assume" each clinician is performing academic duties such as teaching rounds or assisting on research papers, Tarquinio says. The 20% academic effort is evaluated on decisions about promotion or tenure.

In most years, a scientist is also evaluated only on his or her performance for academic progress. They must submit applications for research grants and perform their current research to receive increases which are "recommended by the institution," Tarquinio says, a more subjective measure than RVUs, but one common in many medical schools. To be eligible for research bonuses, however, scientists must produce RVUs at the 20% benchmark levels. The clinical benchmark is set not only to balance the scientist's knowledge but also because the department has clinical expenses, like malpractice insurance and CME, even if the physician manages just one patient in a year.

Vanderbilt does not attempt to equate clinical and academic work, he says. The former is evaluated by RVUs. The latter is measured by the combination of objective and subjective measures noted above, with internal standards for whether the 80% and 20% levels of achievement (for scientists and clinicians, respectively) are reached or exceeded.

School Balances RVUs for Clinical Posts

To keep lower paid clinical posts, such as a medical directorship at a county hospital, attractive to faculty members, the medicine department takes two steps. First, it calculates a dollar value per RVU (essentially, the clinical benchmark salary divided by the benchmark RVUs for each specialty). The pay to the department from a given community medical post is divided by the RVU dollar value to get the number of RVUs for that post. Thus -- if the department obtains a good price for filling the post -- there will be no financial penalty for holding that post even if reimbursements to the department for treating patients there are poor. Second, if the school does not obtain a good price for the post, perhaps because the hospital in question simply can't afford to pay market rates for medical directors, the school may add RVUs in order to meet Vanderbilt community objectives and shield the physician from financial harm.