Physician Compensation: Is Your Comp Plan Rewarding Value?

The evolution to value-based payment is well underway as payers are increasingly tying reimbursement to the achievement of quality-related goals — everything from patient satisfaction scores to specific measures of quality and efficiency. In fact, it is estimated that 50 percent of physician compensation will be value-based in the next 10 years. 

 

Still, fee-for-service is slow to die. Most physician groups are operating with physician compensation plans that are based at least in part on production. For many, the emphasis remains on volume over value.

 

The challenge is for physician groups to at least begin adjusting their compensation methodology to include incentives for quality, outcomes and reduced costs. Here’s how:

The first step is to convene a compensation committee that asks this critical question: “How do we remain economically viable in the future of value-based care?” The answer starts by evaluating current compensation, with an eye toward integrating value-based incentives into the plan. 

 

Here, it’s important to get representation from throughout the practice — a physician leader and other key physicians as well as practice administrators and outside consultants, such as your CPA. 

Next determine how to gradually incorporate value metrics into the current compensation model. Consider the addition of just one quality metric now to the current compensation method. The goal is to create incentives that 1) make sense to the physicians, and 2) represent a fair measure of the value metric selected.

 

For example, a practice might choose patient satisfaction as the quality target. A pool of 5 percent of net income could be created (or withheld) and distributed back to physicians who achieve targeted goals: 2.5 percent for patient satisfaction scores and 2.5 percent for meeting productivity targets. Patient satisfaction could include a number of patient care measures such as the number of referrals, inpatient admissions, length of stay, ancillary services, patient panel size and patient satisfaction survey results.

 

Here, it might pay to work with several payers over a period of time to establish a physician compensation methodology based on attaining aligned quality metrics. 

It’s critical that the data being used to allocate compensation is perceived as relevant — and reliable — by physicians. Use the practice’s own data, not data from a payer or outside source. Then, ensure that data used is both transparent and accessible so that physicians can easily project their income for the year.

Consider “shadowing” any changes to the compensation model for a year. A delayed implementation allows for glitches to be discovered and corrective changes implemented. Physicians then would have an opportunity to understand and adjust their practice style and methods to the new quality incentive methodology before implementation.

 

Ultimately, healthcare reimbursement is moving slowly but inevitably from paying for volume to rewarding value. Savvy practices are beginning to adjust their physician compensation methods now to ensure economic viability down the road in the brave new world of value-based payment.

 

Our accounting professionals are uniquely qualified to help with the financial modeling and guidance you need you to incorporate quality measures into your physician comp plan. Contact us if you would like us to assist you.