Why Some Specialties Are Paid More Than Others

Evidence based insights into physician compensation, RVUs, contracts, healthcare economics, and personal finances. For residents, fellows, and early-career attendings.

Life and Finances, in Medicine.

What Is This About?

Let's start with a question that almost every medical student, resident, or attending has asked at some point. Why do some specialties earn significantly more than others? And perhaps even more confusing: Why can two physicians generate the same number of RVUs and still have very different incomes? To answer that question, we need to understand an important concept. Not all RVUs are worth the same amount to every employer.

Why Should Medical Professionals Care?

As we previously discussed, CMS establishes a Medicare Physician Fee Schedule and assigns RVU values to medical services. We also learned that geography affects reimbursement through the Geographic Practice Cost Index, or GPCI. But there is another layer to the story. Hospitals, health systems, and private practices often establish their own compensation formulas for physicians. As a result, the dollar amount an employer pays per Work RVU may vary significantly between specialties and between institutions.

Why? Because different specialties generate different types of revenue. For example, primary care physicians spend most of their time performing evaluation and management services, using E/M codes. Surgeons and procedural specialists, on the other hand, generate revenue not only through office visits but also through procedures, surgeries, and facility-based services, by using CPT codes. As a result, specialties such as orthopedic surgery, neurosurgery, gastroenterology, interventional cardiology, and others often generate larger volumes of RVUs than many cognitive specialties. But RVU volume is only part of the story.

The other part is the dollar value employers are willing to pay for each RVU. Historically, some of the highest compensation-per-RVU rates have been found in specialties such as hematology-oncology, neurosurgery, and orthopedic surgery. At the other end of the spectrum, specialties such as family medicine and general pediatrics have often received lower compensation per RVU. Now, it's important to understand what that does, and does not mean. It does not mean that a pediatrician is less important than a neurosurgeon. It does not mean that one specialty works harder than another. And it certainly does not mean that physicians in lower-paid specialties cannot earn excellent incomes.

What it does mean is that different specialties operate within different economic environments. A pediatrician and a hematologist-oncologist may each generate RVUs, but the financial value of those RVUs to an employer may be very different. As a result, a pediatrician may need to generate more RVUs to reach the same level of compensation as another specialist who is paid a higher dollar amount per RVU.

So why are employers willing to pay some specialists more per RVU? One major reason involves the other two RVU categories we discussed earlier: Practice Expense RVUs and Malpractice RVUs. Remember, physicians primarily focus on Work RVUs. But employers receive reimbursement related to all three categories. Work RVUs. Practice Expense RVUs. And Malpractice RVUs. Together, these additional payments are often referred to informally as facility revenue or facility rates. These payments help cover the cost of operating a healthcare facility. They contribute toward equipment, instruments, supplies, nursing staff, office space, operating rooms, technology, and many other expenses. They also help offset malpractice insurance costs.

Now consider a surgeon performing a complex procedure. That procedure may require specialized equipment, expensive instruments, operating room personnel, anesthesia services, recovery staff, and significant facility resources. It may also carry a higher risk of litigation compared with a routine office visit. As a result, employers often receive substantially more total revenue from procedural and surgical specialties than they do from purely cognitive specialties. Because of that additional revenue, employers may be willing to pay those specialists a higher dollar amount for each Work RVU they generate.

In other words, compensation is influenced by much more than physician effort alone. It is also influenced by the economics of healthcare delivery. The resources required to provide care. The facility revenue generated by that care. The malpractice risk associated with that care. And the market demand for that specialty.

That's why two physicians can generate the same number of Work RVUs and still receive very different compensation. The RVUs may be identical. But the economics behind those RVUs are not. And that brings us to other important questions.

If compensation varies not only by specialty but also by employer, how do hospitals and medical groups decide what constitutes fair physician compensation? How do they determine whether an offer is competitive? And where do those benchmark numbers come from?

In our next article, we'll discuss one of the most influential organizations in physician compensation: MGMA, the Medical Group Management Association, and how its compensation data shapes physician contracts throughout the United States.

The Bottom Line

RVUs are more than work RVUs. Practice expense and malpractice RVUs can significantly influence why some specialties are paid more than others.

Key Takeaways

✓ Specialty compensation varies in part because different specialties rely on different mixes of procedural CPT codes and cognitive E/M codes.

✓ Practice expense and malpractice RVUs also contribute to compensation differences between specialties, not just work RVUs.

✓ A higher conversion factor does not always mean a higher compensation. How you code and bill for the services you provide may have a major impact.

“RVU is a tool to measure productivity, not the quality of your work”.

MD&D Quote of the Day

What’s Next?

Next: Who Decides What Physicians Earn?
Beyond RVUs and productivity.

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