YuLin Zhen, Photography Editor

This summer, Yale New Haven Hospital changed the pay model for physicians without consulting them. The change was meant to increase transparency and efficiency, but physicians have mixed thoughts about it.

In July 2024, Yale New Haven Hospital switched to a funds flow based payment model for physicians, mandating that physicians’ compensation now depend on a relative value unit, or RVU, rather than the time or complexity of their work. Out of five YNHH doctors the News talked to, three felt negatively about the change while two were neutral in their stance. 

Physicians across different specialties have raised concerns, arguing that the new pay system fosters competition, reduces collaboration and incentivizes doctors to procedures based on profit rather than patient need. Others argued that it is an imperfect model but the least bad of all options. At YNHH, the imperfections of this model are exacerbated by the hospital’s operational inefficiencies.

Dr. Arnar Geirsson, the director of the Cardiovascular Institute and Surgical Heart Valve Program at Columbia and who worked as a surgeon at Yale between 2007 and 2023, told the News that the shift was not well received by physicians at Yale.

“The model has caused lots of angst among physicians at Yale as well as other academic hospital systems who have done similar things, ” Geirsson wrote to the News.

YNHH did not respond to a request for comment.

Historically, physician salaries included a fixed salary and additional incentive-based pay, negotiated between the hospital and individual departments.

Under the newly implemented funds flow model, doctors’ compensation is tied to a unit called the Relative Value Unit — RVU — which measures the value of the medical services they provide. The value of such services is determined by the American Medical Association, which assigns procedures RVUs based on the time, skill and resources required to provide them, with higher RVUs assigned to more complex or resource-intensive procedures. 

This model aligns pay with productivity metrics, focusing on the volume and type of work performed rather than solely on the necessity or complexity of the procedures.

The funds flow model aims to create a more transparent, formulaic approach to resource allocation. It has been adopted by other academic institutions, such as Johns Hopkins University and Stanford University.

Proponents argue that the model can enhance financial accountability and streamline operations. Critics have raised concerns about its potential to make doctors prioritize procedural volume or higher-valued procedures at the expense of urgent but lower-valued ones.

The funds flow model at YNHH

The transition to the funds flow model at YNHH has been years in the making. 

Under the previous financial structure, physician compensation was largely determined by agreements between the hospital and individual departments, with a mix of base salaries, shift-based pay and, sometimes, backdoor financial bonuses.

In July 2023, the hospital introduced the funds flow model as a trial, running parallel to the existing system. 

During this pilot case, departments could choose to opt into the new structure or retain the older model. However, by July 2024, the hospital mandated a full transition to the RVU-based system without consulting any physician groups.

“The employed physicians, the faculty, the department chairs to that level, nobody was involved,” said Jane, another YNHH physician who also will be referred to by pseudonym. “They did not consult any of the physician groups. Basically, nobody was consulted. It was imposed and announced.”

In the new pay system, procedural specialties, like surgeons and interventionists, were tied to productivity metrics, while non-proceduralists, such as anesthesiologists, remained shift-based.

This model incentivizes physicians to increase their procedural output by tying compensation directly to productivity and performance metrics. 

According to John, another YNHH physician who requested anonymity due to fear of retaliation, this could potentially help reduce patient backlogs, improve access to care and streamline operations. Bonuses tied to metrics such as reduced patient wait times further encourage departments to prioritize high-need cases and operate efficiently.

“I talked to a few people, and they say the same thing: that people have anxiety … because they don’t know how it’s going to work out — maybe for better, maybe for worse?” said John. “Because of the unknown territory and because there is no transparency whatsoever.”

Another oft-cited advantage, John explained, is the increased transparency in financial compensation. By eliminating the backdoor bonuses, previously negotiated in private deals between departments and the hospital, the RVU-based model establishes a more standardized compensation system, thereby reducing pay discrepancies across departments.

Howard Forman, a professor of radiology and biomedical imaging at the School of Medicine,  wrote to the News that the pay system can also help the “medical school have a better handle on sources of funds and helps better define the expectations for the academic medical center.”

Growing anxiety among physicians

The new model, however, has polarized the medical community. 

Proceduralists now face intense competition for high-RVU procedures, often neglecting lower-revenue but critical care. Non-proceduralists, on the other hand, express concern over heavier workloads and stagnant compensation.

Under this model, physicians may feel the need to focus on certain types of cases that boost their RVU generation, often at the expense of essential but less lucrative interventions, Jane said.

In Jane’s view, this creates a dangerous precedent where patient care decisions may be driven by financial considerations rather than medical necessity. According to John and Jane, low-revenue but essential procedures that reduce patient length of stay are often undervalued under the RVU-based model. 

Jane said that physicians at YNHH are also concerned that this model could shift the hospital’s dynamics away from team-oriented care, as teams are forced to vie for the same service lines to secure higher revenues.

“What it’s going to do is to make sure that different specialties that do similar procedures start competing with each other for money and for cases,” Jane said. “It increases in-fighting and increases patient risks because it puts patients up for doctors who are more likely to do procedures even if they are unnecessary.”

This shift also places significant pressure on department chairs, according to John. If they do not get enough money under the new system to pay for all physicians, the departments may need to cut staff and make other doctors work longer hours, he explained.  

Similarly, inpatient care, which involves treatments requiring hospitalization and overnight stays, typically generates less revenue than outpatient procedures, where patients receive treatments without being admitted to the hospital. This may lead to inpatient care being deprioritized as both physicians and hospitals focus on more lucrative outpatient cases. 

The new model has shaken the morale of some physicians.

Additionally, for many physicians at YNHH, the transition to the RVU-based compensation model has created significant unease rooted in a lack of transparency from hospital administrators. According to Jane, while the stated goal of aligning hospital and physician productivity metrics appears straightforward, the broader motivations behind the change — and how it will impact different specialties — remain unclear.

“There’s a sense of being in a grey area,” Jane said. “The administration hasn’t clearly explained their long-term plans or how this will affect our roles and compensation in the future.”

“Thus,” John adds, “though people are complying with the new system … there is a degree of anxiety, because people don’t know exactly how it’s going to affect their compensation and the workload.”

Model’s alleged financial motifs

According to both Jane and John, the switch to the RVU model — which Jane described as “austerity measures” — appears to be part of Yale New Haven Hospital’s efforts to address long-standing financial deficits. 

In recent years, Yale New Haven Hospital has made significant investments aimed at expanding its footprint and enhancing its reputation, including the acquisition of peripheral hospitals. However, Jane believes these investments, while prospectively strategic in the long term, have contributed to substantial budget gaps as they have yet to generate revenue at the pace required to offset their costs.

Jane warns that the RVU model could undermine the hospital’s academic mission, shifting its focus from research and innovation to revenue generation. 

“It moves institutions toward a private practice style of operation. It eradicates the academic spirit,” she said, arguing that over time, this could harm YNHH’s ability to attract top talent and provide cutting-edge care.

However, not all physicians see the model as inherently flawed. John acknowledged that the funds flow model could theoretically succeed in aligning hospital and physician goals, increasing productivity and improving patient outcomes.

The key barrier, he argued, lies in the hospital’s operational inefficiencies, which have hampered physicians’ ability to play to the model’s strengths. According to John, outdated equipment, slow patient transport systems and delays in scheduling all prevent the hospital from maximizing productivity — thus, undermining the success of implementing the model to its fullest potential.

“The main thing is that if the hospital improves efficiency and doesn’t penalize physicians for its own inefficiencies, this could be an amazing model,” John concluded. “If they partner with physicians to enhance efficiency and allow them to work at the top of their field, it could truly succeed.”