RVU compensation explained: how to read a production contract
Production contracts are where physician pay goes to become opaque. The recruiter says "$280,000 base plus productivity upside," everyone nods, and the actual economics live in two numbers nobody discusses at dinner: the conversion factor and the threshold. Read those two numbers correctly and you can value the contract in five minutes. Read them wrong and you can work a full year of extra effort priced at zero dollars.
The vocabulary, quickly
A work RVU (wRVU) is Medicare's unit of physician effort — every CPT code carries a wRVU weight. A level-3 established office visit (99213) is about 1.3 wRVUs; a total knee replacement is about 19. Your annual wRVU total is a productivity odometer that doesn't care about your payer mix — which is exactly why employers like paying on it.
The conversion factor (CF) is what your employer pays per wRVU — commonly $40–$80+ depending on specialty. The threshold is the annual wRVU count you must clear before production pay starts. Below it, you earn base salary only.
The three contract models
Base plus production: comp = base + (wRVUs above threshold) × CF. The most common structure, and the one with the trap (next section). Pure production: every wRVU pays the CF, no base, no floor — all volume risk is yours, so ramp-up guarantees for the first year or two are essential. Greater-of: you earn base or total production, whichever is larger — the friendliest structure, where base acts as a true floor.
The threshold trap
Here is the five-second audit every physician should run on a base-plus-production offer: divide the base salary by the conversion factor. That quotient is the wRVU count your base implicitly buys. If the contract's threshold is meaningfully higher than that number, there's a dead zone — a band of work that's above what your base pays for but below where production kicks in. Every wRVU in that band is priced at exactly $0.
The reverse also exists: a threshold below base ÷ CF means you earn production dollars on work your base already covers — a genuinely physician-friendly structure worth recognizing when you see it.
Questions that expose the real contract
"What's the median wRVU output for this role, at this site, last year?" Not the national specialty median — this clinic, this schedule, this payer mix. Your realistic volume determines whether the production upside is real money or decoration. Cross-check against MGMA/AMGA survey medians for your specialty. "Current-year or frozen RVU schedule?" CMS re-weights codes annually; the 2021 E/M revaluation moved office-visit wRVUs substantially. A contract locked to an old schedule quietly diverges from the work you actually do. "How is the draw reconciled?" If you're paid a draw against production, ask what happens in a low quarter — clawbacks have ruined more physician budgets than any conversion factor. "What counts?" Supervision of APPs, resident teaching time, and non-billable admin work often generate zero wRVUs while consuming your day. A schedule full of unweighted work makes any threshold harder to clear.
The uncomfortable summary
An RVU contract is not a salary with a bonus. It's a formula, and formulas don't care what the recruiter emphasized. Extract the three numbers — base, CF, threshold — run base ÷ CF, model your honest volume range, and negotiate the dead zone if there is one. It's the rare negotiation where you can point at arithmetic instead of arguing about worth.
This article is an educational overview, not legal, tax, or financial advice. Contract terms vary widely — have any agreement reviewed by a qualified contract attorney.