The RVU illusion: How health care is being valued and paid otherwise

For decades, physician compensation has been anchored to the Relative Value Units (RVUs), a system designed to quantify the value of medical services. On paper, it is elegant: physicians generate RVUs, those RVUs translate into dollars and productivity is rewarded accordingly.

But today, that system is quietly breaking down.

The problem is not with RVUs themselves — it is with the growing disconnect between what care is "worth" and what is actually paid.

In the traditional model, the total allowed payment for a medical visit is shared between the insurer and the patient. The insurer pays its portion according to an agreed contract, and the patient contributes a copay and/or deductible. RVU-based compensation assumes that both portions are ultimately collectible.

That assumption is no longer valid.

A combination of policy shifts, including changes tied to the No Surprises Act and evolving credit reporting practices, has dramatically weakened the enforceability of patient financial responsibility. Medical debt is less likely to impact credit scores, and patients — understandably — are prioritizing other financial obligations over health care bills. At the same time, practices face increasing friction, both regulatory and reputational, when attempting to collect at the point of service.

The result is a growing portion of "phantom revenue": charges that exist in the RVU-based accounting system but are never realized in payments.

Consider a straightforward office visit. A physician generates the same RVUs, and delivers the same care, regardless of whether the patient's $40 or $75 copay is ever collected. The RVU system records full productivity. Compensation formulas may credit the physician accordingly. But if the patient portion goes unpaid — and increasingly it does — the practice must absorb the loss.

This creates a fundamental distortion.

Physicians are incentivized and evaluated based on gross production, while practices survive on net collections. The gap between the two is widening, and no amount of increased productivity can fully compensate for revenue that simply never arrives.

In specialties with high visit frequency, such as ophthalmology, the impact is magnified. Repeated encounters mean repeated copays — and repeated opportunities for non-collection. A busy clinic can generate strong RVU numbers while simultaneously experiencing margin compression that threatens its sustainability.

The consequences extend beyond accounting.

When compensation is tied to theoretical revenue rather than actual collections, practices face difficult choices. Some are beginning to rethink payer participation, limit exposure to high-deductible plans or shift toward hybrid compensation models that incorporate collections alongside RVUs. Others are investing heavily in front-end financial workflows, though even the best systems cannot fully overcome broader economic incentives facing patients.

None of these is an ideal solution.

The deeper issue is that the RVU framework was built for a health care economy that no longer exists — one in which patient responsibility was both expected and enforceable. As that foundation erodes, the system's outputs become increasingly detached from financial reality.

If policymakers and payers want to preserve access to care, they must recognize this misalignment and do so quickly. Payment models should reflect not just the theoretical value of services rendered, but the practical realities of how health care is financed and paid for today.

Until then, physicians will continue to operate under an illusion: being credited for revenue they never receive and working within a system that measures productivity with precision — but viability not at all.

Glenn N. Pomerance, M.D., is a practicing ophthalmologist in Chattanooga, Tenn.