March 14, 2017

How 4 organizations are shaking up physician compensation

Daily Briefing

    As alternative payment models that incent value instead of volume become more common, hospitals and health systems are rethinking how they compensate physicians, Dave Barkholz reports for Modern Healthcare.

    CMS is moving toward alternative payment models (APMs), which reward providers based on quality metrics, and is expanding its use of bundled payments, which give doctors a lump sum rather than traditional reimbursements for certain procedures and services. According to Barkholz, CMS' four APMs "now have 359,000 participating clinicians, providing care to 12.3 million Medicare and Medicaid beneficiaries."

    Private insurers are also increasingly using value-based payment models. And hospitals, health systems, and medical groups are now reconsidering physicians' compensation to align themselves with these trends.

    4 examples from the field

    For example, Crystal Run Healthcare, a 300-physician group based in New York, currently ties up to 15 percent of physicians' compensation to cost, quality, and satisfaction measures. Scott Hines, Crystal Run's chief quality officer and medical director, said that fraction is slated to increase to 30 percent over the next three years because "more and more contracts are being tied to clinical quality and lower costs."

    Henry Ford Medical Group in Detroit is also rethinking its compensation model to incent quality—but in a slightly different way. Beginning next year, its primary care physicians will have a higher percentage of their compensation tied to how many patients choose them as their doctor.

    Currently, 66 percent of the group's compensation for physicians is tied to relative value units (RVUs), which are a CMS-defined measure of physician productivity. According to Conway, next year's compensation model will feature a 50/50 split between RVUs and patient sign-ups. Conway explained that the model aims to encourage physicians to perform well on measures of quality and patient satisfaction, especially because consumers will be able to see physician ratings online and select a provider accordingly.

    UnityPoint Clinic, which is based in Iowa and Illinois, wants to tie 33 percent of physician compensation to value by 2020, with another 33 percent based on productivity and 33 percent provided through a fixed salary. Currently, physician compensation at UnityPoint is largely based on productivity (86 percent), with a small portion tied to value (14 percent).

    Keith Seashore, UnityPoint Clinic's CFO, said the medical group is running a pilot of about 20 doctors and 10 advanced practitioners to get feedback and tweak the model before rolling it out slowly to the entire group. According to Seashore, the physicians driving the pilot program think that the 33-33-33 compensation model will better align UnityPoint with its risks under APMs and new MACRA programs.

    Separately, CareMore, a California-based clinic operator and health plan for frail seniors, employs 80 physicians—called "extensivists"—who monitor frail patients to ensure they get the medication and care they need outside of a hospital setting. The physicians stand to earn an additional 5 to 65 percent of their annual salary if they prioritize patients' daily needs in an effort to reduce hospitalizations. According to CareMore CEO Sachin Jain, this care can involve providing services outside a doctor's typical responsibilities, such as making sure patients have proper nutrition and ensuring they aren't facing dehydration due to a lack of air conditioning.

    A different tack

    But not all providers are rushing to implement value-based physician compensation. For instance, Pennsylvania's Geisinger Health System recently put all of its 1,600 employed doctors on a straight salary, Barkholz reports. Previously, Geisinger had tied 20 percent of physician compensation to performance.

    Geisinger CEO David Feinberg said all the system's physicians are compensated at or above the national average. "We don't have below-average doctors so we don't pay anyone below average," he said.

    Geisinger's CMO Jaewon Ryu added that the system's physicians don't need incentives to provide high-quality care. Ryu said that if the system's physicians provide quality care in the right setting, Geisinger will do well financially on the 551,000 enrollees in its health plans for whom the system takes full risk—and it will qualify to collect incentives under value-based payment models (Barkholz, Modern Healthcare, 3/11).

    Let us help you find the solution for physician compensation

    Physician alignment is more essential now than ever. A flood of practice acquisitions and a growing level of physician employment have hospitals trying to find the right balance for physician compensation in an effort to address rising investments. As health systems look for ways to achieve meaningful change, physician compensation—through the process of redesigning and implementing a new model—is often the perfect catalyst.

    Learn more about our approach to designing a tailored physician compensation plan with an Executive Roundtable Session. Our experts will discuss the strategic implications of your existing compensation model on your organization, and how compensation can help align physicians around health system imperatives.

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