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0MGMA 2015 Financial Management and
Payer Contracting Conference
MGMA 2015 Financial Management and Payer
Contracting Conference
March 1, 2015-March 3, 2015
Compensation Toolbox:
Guidelines for Building an
Effective Compensation Plan
March 3, 2015
Allison P. Wilson, CMPE, PHR, PCMH CCE
Learning Objectives
After this session, you will be able to:
Design a compensation plan based on practice goals
Implement and monitor a physician compensation plan
Assess current operations to determine areas for improvement
Determination of Practice and
Physician Goals
Practice Assessment
Trend patterns in significant areas:
Collection Percentages
• Use Adjusted Collection Rate (Collections/[Charges-
Practice Controlled Adjustments])
• Significant variances between years could indicate
revenue cycle issues or shifts in payer mix
• Significant variances among physicians could indicate
professional courtesy, timely filing issues, etc.
Practice Assessment
Trend patterns in significant areas:
Production
• Two-year analysis of work RVUs, encounters, etc.
• Identify variances in production overall and per
physician.
• Variances may be due to shifts in payer mix, physician
specialty, etc.
• Review payer mix by charges over the same two-year
period and identify any practice or physician shifts.
Practice Assessment
Trend patterns in significant areas:
Overhead
• Two-year analysis of expenses.
• Compare to MGMA categories and benchmark overall
expenses as a percent of overhead.
• Identify and research variances – new physician, new
technology, additional procedures, etc.
Practice Assessment
Trend patterns in significant areas:
Patient Satisfaction
• If no recent survey has been completed, conduct a
survey to determine a baseline.
• Survey should include questions regarding clinical staff,
physician bedside manner, appointment wait time, in-
office wait time, follow-up/practice communications, etc.
• Conduct survey annually or semi-annually and compare
results.
Practice Assessment
Trend patterns in significant areas:
Good Citizenship
• Timely completion of documentation
• Reporting to work/clinic when scheduled
• Participation in required meetings or activities
Practice Assessment
Practice should also assess its position relative to current
or planned initiatives:
• PQRS
• Meaningful Use
• Value-Based Modifier
• ACO
• PCMH $UCCESS
Practice Assessment
Physician Input:
• Prepare a confidential survey or utilize an
independent source to interview physicians
• Purpose of interview is to assess physician
priorities and preferences, thoughts on current
compensation methodology and desired
changes
Modeling Compensation
Key Elements of Successful
Compensation Alignment
Directly linked to practice goals and objectives
Encourage/reward hard work, production and
high quality
Balance individual and team responsibility
Clarify performance expectations
Aligned with reimbursement environment
Key Elements of Successful
Compensation Alignment
Simple, understood and explainable
Clearly defined and consistently applied
Open and transparent
Fiscally responsible
Legally compliant
Considerations
Exit strategy
Quality of life
Increasingly complex regulatory environment
Physicians
Healthcare Reform
Compensation Models…in order of complexity
Model Message• Equity • We’re all equal
• Special duties • We’re equal except for
__________
• Production • Work, work, work!
• Profit center • But watch expenses too
• Discretionary • Focus on intangibles
• Blended • All of the above is
important
Components of Physician Compensation
Physician
Compensation
Philosophy
Base Compensation
Incentive Component
Quality Measures
Good Citizenship
Leadership
Net Profit/Net Income
Base Compensation
Incentive Component
Quality Measures
Good Citizenship
Net Profit/Net Income
Components of Physician Compensation
Employed Models include:
• Straight salary
• Salary plus bonus
• Productivity-based
• Revenue sharing
(partial/equal)
Base Compensation
Components of Physician Compensation
Influenced by:
• Specialty area
• Physician’s experience
and credentials
• Typically tied to historical
compensation and/or
industry benchmarks
• Often has minimum
production thresholds; may
be 100% at risk if pure “eat
what you treat”
Base CompensationBase Compensation
Components of Physician Compensation
• Base compensation with
production floor
Compensation dependent
on minimum collections,
wRVUs, encounters
Note: Ensure floor is set
to cover physician costs.
Base Compensation
with ProductionBase Compensation
with Production
Components of Physician Compensation
• Achievement of quality,
operational efficiency,
patient satisfaction goals
• Baseline levels determined
using the practice’s
historical and clinical data
and/or comparable
national or regional data,
with incentives paid to
reflect incremental
improvement
Incentive Compensation
Components of Physician Compensation
• Can be based on
improvement or
achievement of specific
targets
• Incentives should be
objective, verifiable,
supported by credible
evidence and individually
tracked
Incentive Compensation
Components of Physician Compensation
• Primary approaches for
shareholders
• Components may have
many variations
Net Profit/Net Income
Net Profit Approach
Collections
Minus Operating expenses
Equals Profit
Profit can be divided
Equally
Production
A combination of equal and production
Net Profit Approach
Total Owner A Owner B Owner C
Total Collections 2,750,000$ 900,000$ 1,200,000$ 650,000$
% of Total 33% 44% 24%
Practice Collections 2,750,000$
Less Operating Expenses (1,200,000)
Profit 1,550,000$
Allocation of Profit
5% Equal 77,500$ 25,833$ 25,833$ 25,833$
95% Production 1,472,500 481,909 642,545 348,045
Subtotal 1,550,000 507,742 668,379 373,879
10% Withhold for bonus pool (155,000) (50,727) (67,636) (36,636)
Total Compensation 1,395,000$ 457,015$ 600,742$ 337,242$
Net Profit Approach
• What is definition of production?
• What counts as an “individual” expense versus an operating expense?
• Are there carve outs?
– Management or other special duties
– Specific “lines of business”
• How are profits allocated?
The larger the “equal” portion, the more the high producers pay a greater % of overhead.
Net Income Approach
Dr. 1 Dr. 2 Dr. 3 Collections Collections Collections
Minus Indiv Exp Indiv Exp Indiv Exp
Minus* Alloc Exp Alloc Exp Alloc Exp
Equals Subtotal Subtotal Subtotal
Less Comp paid Comp paid Comp paid
Equals Comp due Comp due Comp due
* Shared expenses can be allocated many different ways
Net Income Approach
Total Owner A Owner B Owner C
Total Collections 2,750,000$ 900,000$ 1,200,000$ 650,000$
% of Total 33% 44% 24%
Less Operating Expenses (30%
production/70% equal) 1,200,000$ 397,818$ 437,091$ 365,091$
Net Income 1,550,000$ 502,182$ 762,909$ 284,909$
Less 10% Withhold for bonus pool (155,000)$ (50,727)$ (67,636)$ (36,636)$
Total Compensation 1,395,000$ 451,455$ 695,273$ 248,273$
Net Income Approach
• What is definition of production?
• What counts as an “individual” expense
versus an operating expense?
• Are there carve outs? – Management or other special duties
– Specific “lines of business”
• How are operating expenses allocated?
Low Producers and Part-timers
• If Net Income Approach, not an issue.
• Minimum productivity threshold or else…
– Switch to Net Income Approach
– Mandatory withdrawal after a “cure” period
Components of Physician Compensation
Examples include standards
related to:
• Chronic disease
management
• PQRS measures
– Percent of patients that
have BMI measured and
documented
– Documentation/verification
of current medications in
the medical record
Quality Measures
Components of Physician Compensation
According to MGMA’s 2014
Value-Based Executive
Summary:
• Nearly half of the
physicians with a quality
component to
compensation had at
least 10% at risk in 2013.
Quality Measures
Quality-Based Incentives
• Carve out bonus pool ____%
• Objective factors
– Compliance
– Patient satisfaction
– Quality outcomes
– On-time starts
– Employee satisfaction
Quality-Based Incentives
• Select two to three quality incentive goals
– Data available
– Data accurate
– Worth the effort to accumulate
• All or nothing may disincentivize physicians. Consider
tiered approach:
– Target 1= 50%
– Target 2= 30%
– Target 3= 20%
Components of Physician Compensation
“Playing nice in the sandbox”
• Complete documentation
within designated
timeframe
• Attendance at requisite
number of meetings,
trainings
• Community involvement
• Supervision of
non-physician providers
Good Citizenship
Components of Physician Compensation
Considerations:
• Identifies expected
behaviors ahead of time.
• Motivates the physician to
care about the details of the
business in addition to
clinical care.
• Paying for that which should
be expected?
Good Citizenship
Components of Physician Compensation
Participation in leadership
roles may take substantial
time and energy and draw
away from clinical care.
• PCMH
• EHR selection and
implementation, champion
• Peer review
• Expansion strategiesLeadershipLeadership
Compensation for “Special”
Services
• Does basic comp formula encourage and
reward physicians for special services?
– Example: Selection and implementation of EHR,
championing PCMH, etc.
• Best to have a policy in place before, not
after, special services are performed.
Physician Phase Out
Does comp formula have provisions for
physician phase out?
- Reduced or no call
- Full or prorated share of expenses
- Defined timeline for phase out
Penalty for “Noncompliance”
Trend to protect the group against adverse
impact of individual’s actions
Must have a policy in place before, not after,
problem arises.
Implementation and Monitoring
Implementation
Revising compensation can be a very
complicated, sensitive process. Managers
must approach the process very
methodically.
Allow enough time for evaluation,
conversation and modeling to ensure
everyone understands the process and
there is complete transparency.
Implementation
Based on practice assessment,
select two to three models that would
best meet the practice and physician
goals.
Model physician compensation for
the prior year to show the potential
net effect of the changes.
Implementation
Discuss the pros and cons of each
model as a group.
Communicate to physicians how data
was accumulated in each
component.
Implementation
Obtain feedback and buy-in.
Make revisions as necessary and
confirm final plan.
Finalize implementation timeline.
Transparency
YOUR TEXT HERE
1
2
Minimize surprises
Prepare a dashboard or summary
report of the various components and
share with physicians monthly
Monitoring
Monitor plan for
effectiveness
Quality metrics should be
revised as appropriate As practice strategic initiatives
shift, the model should be
reviewed and revised as
necessary
46MGMA 2015 Financial Management and
Payer Contracting Conference
MGMA 2015 Financial Management and Payer
Contracting Conference
March 1, 2015-March 3, 2015
Contact Information
Allison P. Wilson, CMPE, PHR, PCMH CCE
Manager
(404) 266-9876