What is a work RVU, and how does it drive physician pay?

A work relative value unit (wRVU) is the number Medicare assigns to the physician effort behind a single service. A level 4 established-patient office visit, Current Procedural Terminology (CPT) code 99214, carries 1.92 wRVUs. A level 2 visit, CPT 99212, carries 0.70, according to an explainer in the American Academy of Family Physicians' Family Practice Management.

Medicare combines that number with two other relative values to set what it pays for the service under the Medicare Physician Fee Schedule. Employers that pay for productivity typically use the wRVU on its own, multiplying a physician's annual total by a dollar rate written into the contract, according to the Medical Group Management Association (MGMA).

What does a work RVU measure?

Every service on the fee schedule carries three relative value units (RVUs): one for physician work, one for practice expense and one for professional liability insurance. On average, physician work makes up about 51% of a service's total relative value, practice expense about 45% and liability insurance about 4%, according to the American Medical Association (AMA). The AMA's physician work component overview puts the shares at 50.866%, 44.839% and 4.295%.

The work value reflects the time a service takes, the physical effort and technical skill it requires, the mental effort and judgment involved and the risk to the patient, according to the AMA. Practice expense covers overhead, staff, equipment and supplies. It comes in two versions: a nonfacility value for services in a physician's office and a facility value for services in a hospital or other facility, according to fee schedule documentation from the Centers for Medicare & Medicaid Services (CMS).

The resource-based relative value scale (RBRVS) that produces these values is the payment system used by CMS "and most other payers," according to the AMA.

Who decides how many work RVUs a service is worth?

CMS sets the values each year in the Physician Fee Schedule final rule. Most recommendations come from the AMA/Specialty Society RVS Update Committee (RUC), which sends relative value recommendations to CMS every year, according to the AMA.

In the 2026 rule, CMS cut wRVUs for thousands of services using its own methodology, known as the efficiency adjustment. For 2027, CMS proposed values for total hip and total knee replacement of 15.37 and 15.94 wRVUs, below the RUC's recommended 16.70 for each. After public comments, the agency finalized the RUC's 16.70 for both, down from 19.11.

How does Medicare turn RVUs into a payment?

CMS publishes the formula on its fee schedule documentation page:

Payment = [(Work RVU × Work GPCI) + (Practice expense RVU × Practice expense GPCI) + (Malpractice RVU × Malpractice GPCI)] × Conversion factor

Each RVU is multiplied by its own geographic practice cost index (GPCI), which adjusts for differences in practice costs across the country. The three adjusted values are added together and multiplied by the conversion factor, a dollar amount. The conversion factor is what turns relative values into a payment rate, and federal law sets the formula Medicare uses to update it each year, according to CMS' quick reference guide to the fee schedule.

What is the Medicare conversion factor for 2027?

For 2027, the conversion factor is $32.63 for most physicians, down 2.31% from $33.40 in 2026. Physicians who are qualifying participants in an advanced alternative payment model (APM) have a separate factor of $32.95, down 1.83% from $33.57, according to the CMS fact sheet on the final rule. CMS released the rule Nov. 4, 2026, and published it in the Federal Register Nov. 9. The rates apply to services on or after Jan. 1, 2027.

Most of the decline comes from the end of a one-year 2.5% increase that Public Law 119-21 provided for 2026 only. Statutory updates of 0.25% for most physicians and 0.75% for qualifying APM participants offset part of it. CMS also applied an estimated -0.12% budget neutrality adjustment to account for changes in wRVUs for some services, according to the fact sheet and the final rule.

The two separate factors are required by statute and took effect in 2026. Before that, Medicare used one. It stood at $36.09 in 2020 and has not returned to that level since, according to the AMA's history of Medicare conversion factors.

Is the conversion factor in a physician contract the same as Medicare's?

No. In a productivity-based employment contract, "conversion factor" usually means the dollar amount the employer pays for each wRVU. The most common productivity model multiplies a physician's annual wRVUs by that rate, according to MGMA. In MGMA's example, a physician who records 5,500 wRVUs at $60 each earns $330,000 in production-based pay before any other component.

The contract rate is negotiated. Employers often peg it to median compensation-per-wRVU figures from national physician compensation surveys, according to the Healthcare Financial Management Association. Medicare's conversion factor, by contrast, is set in federal rulemaking and applies to all three RVUs.

A typical hybrid plan pays a market base salary that funds an expected level of production, then adds a per-wRVU rate for work above that level and a quality bonus, according to MGMA. The Family Practice Management explainer says physician-owned practices may be more likely to reward productivity, while hospital- or health system-owned practices may be more likely to pay straight salary.

Under the employment exception to the federal physician self-referral law, an employer may pay "a productivity bonus based on services performed personally by the physician," but pay must be consistent with fair market value and can't be set in a way that takes referrals into account, under 42 CFR 411.357(c).

What happens to physician pay when CMS changes work RVU values?

Under a per-wRVU contract, a lower value for a code means fewer credited wRVUs for the same work. For 2026, CMS applied a 2.5% "efficiency adjustment" that reduced wRVUs and intraservice time for most services that aren't billed by time, roughly 7,700 codes, according to MGMA. Time-based services, including evaluation and management visits, care management and behavioral health services, were exempt, as were services on the Medicare telehealth list and services new for 2026, according to McDermott+.

CMS based the 2.5% on the Medicare Economic Index productivity adjustment over a five-year lookback and noted that more recent Bureau of Labor Statistics data yielded 3.6%. It applies the adjustment every three years and plans to post the next list of affected codes for 2029 rulemaking, according to the 2027 final rule.

When CMS revalues codes this way, compensation-per-wRVU ratios and fair market value thresholds rise mechanically because the same pay is divided by fewer wRVUs, according to MGMA. MGMA's guide to modeling an RVU shift lists the responses organizations weigh: holding physicians harmless with "shadow RVUs," adjusting the dollar rate per wRVU, adjusting productivity thresholds or adding quality, value or access components.

Where can physicians look up work RVUs?

CMS' Physician Fee Schedule Look-Up Tool covers more than 10,000 services. Users can search one CPT code, a range or a list and see RVUs, payment amounts and payment policies, either nationally or for a specific Medicare Administrative Contractor (MAC) or locality. For official payment files, CMS directs users to their MAC.

CMS also posts downloadable PFS relative value files, which it updates during the year. The 2027 final rule fact sheet summarizes what changed for 2027, the full final rule explains each valuation decision, and the AMA's RBRVS overview explains how the RUC process works.

Frequently asked questions about work RVUs

What is a wRVU?

A work relative value unit is Medicare's measure of the physician effort behind a service, including time, skill, judgment and patient risk. A level 4 established-patient office visit (CPT 99214) carries 1.92 wRVUs.

How much is one work RVU worth?

It has no single dollar value. Medicare pays by multiplying all three geographically adjusted RVUs by a conversion factor, which is $32.63 for most physicians in 2027. In an employment contract, a wRVU is worth whatever rate per wRVU the contract sets.

What is the 2027 Medicare conversion factor?

It is $32.63 for most physicians, down 2.31% from $33.40 in 2026, and $32.95 for qualifying participants in an advanced alternative payment model, down 1.83% from $33.57. The rates apply to services on or after Jan. 1, 2027.

Does a lower Medicare conversion factor lower a physician's pay?

It lowers what Medicare pays for each service. A physician paid per wRVU is paid on credited wRVUs and the contract's rate, so the effect depends on the contract and on how the employer responds to lower revenue.

Who decides how many wRVUs a service is worth?

CMS sets the values in its annual Physician Fee Schedule rule, usually working from recommendations by the RUC. CMS can and does depart from them.

Where can physicians look up the wRVUs for a CPT code?

The CMS Physician Fee Schedule Look-Up Tool shows RVUs, payment amounts and payment policies by code, nationally or by locality. CMS also posts downloadable relative value files.