RVUs explained for dermatologists
Relative Value Units (RVUs) are a core part of how dermatologists’ work is measured and compensated. RVUs assign standardized value to every service, procedure, and patient encounter. This helps practices and insurers quantify effort, complexity, and cost. Understanding RVUs is essential for making informed decisions about contracts, productivity, and career planning.
What are RVUs?
RVUs are a standardized metric used in U.S. health care to assign value to each medical service or procedure. An RVU expresses how much work, resources, and risk a service requires relative to others. RVUs are a part of the Resource-based Relative Value Scale system, which underlies the physician fee schedule used by Medicare, Medicaid, and many commercial payers.
What makes up RVUs?
Each Current Procedure Terminology (CPT)® code has a total RVU value made up of three components.
A work RVU (wRVU) measures physician effort, time, technical complexity, mental effort, and risk. This usually accounts for about half of the total RVU for a service.
A practice expense RVU represents the cost of running the practice, including staff, equipment, supplies, rent, and utilities.
A malpractice RVU accounts for liability risk and insurance costs associated with providing the service.
The total RVU is the sum of these three components adjusted by geographic and other factors.
How do RVUs translate into dollars?
Once a service has a total RVU, reimbursement is calculated using a formula.
Total RVU x geographic adjustment x conversion factor = payment amount
As the formula illustrates, at least two variables apart from the total RVU affect your personal or practice pay. Geographic practice cost indices adjust RVUs to reflect regional cost differences. It accounts for differences in practice costs, like staff salaries, rent, and other local expenses. This means the same RVU may be worth more in one city than another.
The conversion factor is a dollar amount that multiplies the RVU to yield payment. It’s the key number that turns RVUs into dollars. The conversion factor is set by Medicare each year and updated annually based on policy, inflation, and budget rules. Private insurers often use the same framework as Medicare, so the conversion factor affects most payers either directly or indirectly. Learn more about the 2026 conversion factor.
Collection and contract adjustments mean that the payer’s actual payment may differ from the Medicare fee schedule. This is why the actual money a practice receives can differ from the base Medicare calculation.
For dermatologists, knowing the dollar value per wRVU and your annual wRVU target is essential. Your income depends not just on how many patients you see, but also on the types of services you provide. Procedures often carry higher RVUs than routine office visits, so your case mix can significantly impact earnings.
Understanding this system allows you to track productivity, evaluate compensation offers, and plan your schedule to meet targets efficiently.
Why do RVUs matter for dermatologists?
RVUs are practical because they directly impact compensation. Many employed dermatologists have compensation models that include productivity component measured in wRVUs. Knowing typical wRVUs for your specialty and region helps you understand what is reasonable.
Procedural mix matters. If your practice allows higher-value procedures, they can increase your wRVU generation. Tracking your RVUs also helps with negotiating better pay or clarifying what counts toward productivity.
What are the common RVU compensation structures?
Here are several RVU compensation structures you may encounter:
Base salary with wRVUs bonus offers a guaranteed base plus a bonus for exceeding a wRVU target. This is common in employed and hospital settings.
Pure wRVU model pays entirely based on wRVU production. This can offer higher upside but also higher risk.
Tiered wRVU rates use a base pay for the first set of wRVUs and increase the dollar per wRVU as you exceed thresholds.
Blended models combine salary, wRVUs, and quality or value metrics. Many practices use a blended model to balance productivity with care quality.
When reviewing a job offer or contract, ask these questions:
What counts toward wRVUs?
What is the dollar value per wRVU?
What are the target wRVUs per year?
Are there penalties for not meeting the target?
How often is production reviewed?
Is the payer mix considered?
Is quality or other non-billable work included?
Knowing typical wRVU production for others in the practice or region is also helpful.
How can you maximize RVU-based productivity?
Become familiar with your practice’s wRVU schedule and your personal target. Track visits and procedures with their CPT codes to estimate your wRVU generation. Improve coding and documentation to ensure accurate RVUs. Focus on higher-value services if your practice allows. Monitor your pace monthly or quarterly to stay on target. Clarify what counts, including whether cosmetic work is separate from wRVU calculations. Non-billable work can reduce your productive time, so account for it in your planning.
What are limitations of the RVU systems?
RVU models reward volume, not always quality or complexity. Complex but time-consuming cases may produce fewer wRVUs. Non-billable work is not always accounted for, which can reduce income if administrative duties are high. Contract specifics vary, so two dermatologists with similar workloads may earn very different income. wRVU targets may not account for time off, call duties, or administrative work, so it is important to factor these into your planning.
Key takeaways
Understanding RVUs gives dermatologists a clear picture of how work translates into pay. By learning about RVUs, you can make informed decisions on contracts, monitor your productivity, and maximize your earning potential while delivering high-quality patient care.
Additional AAD resources
Practice finance and operations: See our growing resources for dermatologists on the business side of practice.
How to read a balance sheet: Access our beginner’s guide to balance sheets.
Demonstrate your value: Use our guidance to maximize the financial impact you make.
This content was created with the particular needs of early-career dermatologists in mind. See the rest of our Career Launch resources for young physicians.
