53
KEY VALUATION ISSUES FOR HEALTHCARE LEADERSHIP: PHYSICIAN COMPENSATION & ALIGNMENT IDAHO HFMA SUMMER CONFERENCE
KEY VALUATION ISSUES FOR HEALTHCARE LEADERSHIP:
PHYSICIAN COMPENSATION & ALIGNMENT
IDAHO HFMA SUMMER CONFERENCE
BIOGRAPHIES – JONATHAN HELM, CVA
Jonathan Helm is a managing director in the Professional Service Agreements
Division at VMG Health and is based in the Dallas, TX office. His focus includes
valuation and consulting services for professional service arrangements within the
healthcare services industry. Specifically, he has valued compensation for
professional services that include call coverage, clinical coverage, medical
directorships, physician consulting, clinical co-management, quality incentives,
administrative management, billing & collection, and development.
Jonathan is involved with several healthcare and valuation industry organizations,
including the National Association of Certified Valuators and Analysts (NACVA),
the Financial Consulting Group, the American Health Lawyers Association, and the
American Bar Association Health Law Section. He maintains the Certified
Valuation Analyst (CVA) credential issued by NACVA.
Contact information: [email protected] 972.616.7794
2515 McKinney Ave., Suite 1500
Dallas, TX 75201
www.vmghealth.com
2
BIOGRAPHIES – DJ SULLIVAN
DJ Sullivan, Senior Consultant, concentrates on the clinical integration,
physician strategy, and manpower development service lines at HSG. He utilizes
his prior experience in acute and post-acute healthcare settings, technical data
analysis skills, and process- oriented approach to solving complex problems to
support hospitals and health systems in making confident long-term strategic
decisions related to their physician networks.
Prior to joining HSG, DJ implemented and managed a CMS Model 3 BPCI initiative
in Kentucky after obtaining his Master’s of Business Administration and Master’s of
Healthcare Administration degrees from the University of Utah. He also holds a
Bachelor’s of Science degree in pre-medicine from Brigham Young University.
Contact information: [email protected] 502.814.1198
9900 Corporate Campus Drive, Suite 2000
Louisville, KY 40223
www.HSGadvisors.com
3
ABOUT VMG HEALTH
4
Professional ServicesVMG Health
• 20 Years in Healthcare
• Valuation/Transaction Advisory
Experts
• All financial professionals
• 4,153 Engagements in 2015
• Over 200 Presentations
ABOUT HSG
5
Who We AreHSG builds high performance physician networks so health systems can address complex changes with
confidence. From boosting market power and financial strength to preparing for value-based care, we can help
you define your strategy, implement that strategy and manage your physician network short or long-term. We
guarantee results and deliver the greatest value as a trusted member of your team.
“Building high performing physician networks so health systems
can address complex changes with confidence”
Our Areas of Expertise
Physician
Strategy
Physician Network
Optimization
Accountable
Care
Physician Alignment Strategy
Strategic Plans with Physician Focus
Employed Group Strategy
Creating Shared Vision
Service Line Strategy
Service Line Co-Management
Physician Manpower Plans
Affiliation Strategy
Network Management Outsourcing
Management Advisory
Interim Management
Executive Recruiting
Network Performance Improvement
Provider Productivity Systems
Network Revenue Cycle
Physician Compensation Plan
Practice Acquisitions
Fair Market Value Opinions
ACO Development
ACO Optimization
Clinical Integration Strategy
Hospital Efficiency Improvement
Program Development (HEIP)
Practice Transformation
Direct Contracting
MSSP Applications
COMPENSATION ARRANGEMENT TYPES
6
Administrative Services
Call CoverageCo-management
(fixed + variable)Subsidy
P4P, Bundled, & ACO Payment models
PSA Model
($/WRVU + expenses)
Professional/ technical splits
Clinical Services
Billing and Collection
Management
Development
Medical Director
Telemedicine Hub to spoke
Hub to provider
System to Vendor
AMCs
Tier 1,2,3
(Sunshine Provision)
Pay-for-Performance adds new complexities to “normal” deals.
Varying internal processes for setting compensation.
FMV and commercial reasonableness continues to gain importance in recent settlements
TRENDING VALUATION TOPICS
1. Commercial Reasonableness
2. Hospital-Owned Physician Practice Losses
3. Internal Compensation Tools/Processes
4. Pay-for-Performance in Physician Compensation
7
TOPIC #1 - COMMERCIAL REASONABLENESS
8
CR Definition – According to Stark II:
An arrangement will be considered “commercially reasonable” in the absence
of referrals if the arrangement would make commercial sense if entered into
by a reasonable entity of similar type and size and a reasonable physician (or
family member or group practice) of similar scope and specialty, even if there
were no potential DHS (designated health services) referrals. (69 Federal
Register (March 26, 2004), Page 16093)
TOPIC #1 - COMMERCIAL REASONABLENESS
9
Pre-cursor to determining FMV
Arrangement must make business sense absent considering referrals
Hospital leadership must understand this standard since they will
primarily be the individuals who assess CR. Sample considerations:
Operational assessment – does the community need this service/number of
specialists?
Physician requirements – are the number of hours required?
Financial options – can you lease equipment from a third party vendor at a better
rate than from a physician group?
Counsel’s role – did hospital leadership walk through the business
considerations?
Valuation firm role – is the compensation at FMV?
TOPIC #1 - COMMERCIAL REASONABLENESS
10
Economic/Financial
Reasonableness
1. Essential to the operations of the
organization?
2. Is there a defined and specific
purpose for the subject
arrangement?
3. Does the subject arrangement
represents a sensible and
prudent business arrangement,
excluding the consideration of
referrals?
4. Have current economic
conditions have been considered
in relation to the subject
arrangement?
5. Does the arrangement further
the strategic and financial goals
of the Organization.
Operational
Reasonableness
Physician/Clinical
Requirements
1. Has the Organization’s size,
patient population, and patient
demand been considered (patient
acuity and need warrants
services)?
2. Does arrangement further
patient care, patient satisfaction,
and overall public benefit?
3. Are there safeguards to reduce
and eliminate the possibility of
fraud, prohibited referrals, waste,
or abuse?
4. Has a written agreement
containing the material terms of
the arrangement been
developed?
1. Is a physician required to
perform the services?
2. Is a physician of a particular
specialty required to perform the
services?
3. Does the physician possess the
specialized training, qualifications,
and experience required to
provide the services?
4. Are the duties of the physician
under the subject arrangement
duplicative of any other duties
performed by the Organization’s
personnel?
TOPIC #2 – PHYSICIAN PRACTICE LOSSES
11
Practice losses have recently been a focal point in several cases and settlements.
VMG clients (hospitals, health systems, and law firms) have varying perspectives
on this topic.
Adventist Health System (AHS)
o $118.7 million settlement
o Alleged that AHS was sustaining significant losses on employed physician practices.
Broward Hospital District (BHD)
o $69 million settlement
o Alleged that BHD was sustaining significant losses on employed physician practices.
TOPIC #2 – PHYSICIAN PRACTICE LOSSES
12
MGMA financial data for hospital-owned physician practices shows substantial
losses are the norm.
The losses appear to be heavier in the non-primary care setting (surgical and
non-surgical categories).
Source: Data included in the table is sourced from the MGMA 2015 Cost Survey for Multispecialty Practices.
Net Income (Loss) per Physician FTE
Specialty N* 10th 25th 50th 75th 90th
Multis pecia lty 145 ($461,584) ($304,131) ($185,121) ($96,481) ($20,044)
Nons urg ica l 591 ($633,892) ($417,854) ($232,796) ($80,107) $90,167
P rimary Care 1,166 ($497,829) ($273,379) ($123,660) $0 $94,599
S urg ica l 466 ($788,874) ($545,404) ($352,208) ($155,234) $14,597
*N re fle c ts the num b e r o f g ro ups re s pond ing .
Percentiles
TOPIC #2 – PHYSICIAN PRACTICE LOSSES
13
More specialized surgical practices appear to have the largest losses per
physician FTE.
Source: Data included in the table is sourced from the MGMA 2015 Cost Survey for Multispecialty Practices.
Net Income (Loss) per Physician FTE
Specialty N* 10th 25th 50th 75th 90th
Cardiology 100 ($700,247) ($547,331) ($382,225) ($241,982) $203,430
Neuros urgery 35 ($866,387) ($730,258) ($559,034) ($385,140) $33,706
CV S urgery 33 ($1,185,175) ($947,609) ($749,212) ($575,238) ($249,642)
Orthopedic S urgery 72 ($694,347) ($501,037) ($336,983) ($169,881) ($136,068)
Urology 30 ($551,662) ($416,164) ($244,799) ($163,238) ($7,816)
Family Medicine 578 ($441,286) ($233,324) ($110,041) ($745) $87,617
Interna l Medicine 224 ($418,909) ($250,083) ($127,570) $36 $97,031
*N re fle c ts the num b e r o f g ro ups re s pond ing .
Percentiles
TOPIC #2 – PHYSICIAN PRACTICE LOSSES
14
Some practical reasons for hospital-owned physician practice losses may include:
Reason Explanation
Payor Mix Changes Employed physicians have little control over the payor mix of
their patients.They must treat all patients that enter their
practice / facility.
Expense Allocations Hospitals often must allocate corporate expenses to all affiliated
entities. Such expenses may not typically exist in an independent
practice setting inflating the expense profile of the practice.
Post-transaction
Structural Decisions
Post-acquisition, hospitals often relocate in-office ancillaries to
more lucrative outpatient department settings reducing the
available revenues for the practice.
Specialty Specific Causes Many hospital-based specialties require subsidies as these
physicians do not have any control over both payor mix and
patient volumes/schedule.
TOPIC #3 – INTERNAL COMP TOOLS/PROCESSES
15
Not all health systems are structured alike, FMV process differs based upon:
o Risk tolerance (internal and market forces)
o Health system’s approach to physician agreements (consistent -> each unique)
o Structure of physician alignment team and decision process
Legal, business development, compliance, facility-level
Decentralized or centralized
Health systems are aware of the 3 C’s for FMV deliverables
o Cost
o Compliance (Risk)
o Convenience
TOPIC #3 – INTERNAL COMP TOOLS/PROCESSES
16
Practical Tips for Common Valuation Types
o Medical Directorships: Document services and track time, pay hourly
o Call Coverage: Understand the burden of call per OIG opinions
o Clinical Services: Benchmark productivity
o Stacking: Do total dollars and hours make sense?
Practice Tips for Internal FMV Processes:
1. Determine a consistent process to determine FMV
2. Consider internal thresholds with triggers when a 3rd party appraisal may be needed
3. Monitor to ensure that services were performed
4. Review agreement to verify the need for services still exist
5. Utilize outside counsel and attorney-client privilege under certain circumstances
TOPIC #4 – PAY-FOR-PERFORMANCE
17
Quality payment focus primarily 2003-2010 (sharing savings was a slippery slope)o Hospital Quality Incentive Demonstration (HQID) for over 250 hospitals: 2003-2009
o Physician Group Practice Demonstration for ten physician groups: 2005-2010
o Third party payors and health systems start incentivizing for quality
o In 2008, the Robert Wood Johnson Foundation and California HealthCare Foundation reported results of a national program that tested the use of financial incentives to improve the quality of health care. Notable findings:
o Financial incentives motivate change
o Alignment with physicians is a critical activity for quality outcomes
o Public reporting is a strong catalyst for providers to improve care
Savings alone (Capitation) no longer in the mix – but ACOs emerge with savings and quality thresholds
Multiple models and arrangements exist today beyond Commercial and Medicare ACOso Medicare Shared Savings Program
o Bundled Payments for Care Improvement
o Commercial payor P4P programs growing exponentially
Valuation process considers regulatory guidance, governmental programs and third party payor models
TOPIC #4 – PAY-FOR-PERFORMANCE
18
Goals for VBP per CMS
o Financial Viability—where the financial viability of the traditional Medicare fee-for-service
program is protected for beneficiaries and taxpayers.
o Payment Incentives—where Medicare payments are linked to the value (quality and
efficiency) of care provided.
o Joint Accountability—where physicians and providers have joint clinical and financial
accountability for healthcare in their communities.
o Effectiveness—where care is evidence-based and outcomes-driven to better manage diseases
and prevent complications from them.
o Ensuring Access—where a restructured Medicare fee-for-service payment system provides
equal access to high quality, affordable care.
o Safety and Transparency—where a value based payment system gives beneficiaries
information on the quality, cost, and safety of their healthcare.
o Smooth Transitions—where payment systems support well coordinated care across different
providers and settings.
o Electronic Health Records—where value driven healthcare supports the use of information
technology to give providers the ability to deliver high quality, efficient, well coordinated care.
TOPIC #4 – PAY-FOR-PERFORMANCE
19
2014 RAND Report (Measuring Success in Health Care: Value Based Purchasing
Programs
o Overview
U.S. Department of Health and Human Services requested study
129 VBP programs (91 P4P, 27 ACOs, 11 bundled payments)
Measures: Clinical Quality, Cost, Outcomes, Experience
o Recommendations
Set measurable goals, use national data
Case-mix adjust outcomes measures, use broad set of measures, identify overtreatment measures, monitor
Evolve from narrow process measures to broader set emphasizing outcomes
Sponsor engage providers in design/implementation
VBP sponsors should collect a common set of factors to find best working program
o Need More Information
HHS should develop a structured research agenda to address gaps in VBP knowledge base
CMS should study private-sector programs, program design information not available
Study changes and investments, experiences and challenges
TOPIC #4 – PAY-FOR-PERFORMANCE
20
VBP Arrangements – Market Observations
Standard Process Leading Up to VBP Payments
Recognized organization identifies quality metrics or
average costs
Reporting measures is required, or costs are tracked
Benchmarking data is gathered
Payments for outcomes or savings is observed in
market
Common Factors Included in VBP Arrangements
Lowering costs without sacrificing quality
Quality outcomes payments– individual, services line
level, entire population
Use of technology
Use of care coordinators
Justification for Payments Changing
Payments for Reporting (ie: PQRI)
Pay for Process
Pay for Outcomes
At risk for sub-par quality
Valuation Drivers
Outcomes
New dollars coming in from 3rd parties
Understand service line, practice level or population
TOPIC #4 – PAY-FOR-PERFORMANCE
21
ACO Type Model/Population
Balanced approach for overall model should be assessed
o Opinion on allocation to parties (physicians, hospital – ie 40/60)
o Opinion on distribution among physicians
o Specialists vs primary care physicians
Value Drivers:
Third party funded or from hospital
Infrastructure cost recovery
Buy-in or participation Fee
Time spent/effort – hourly rate paid/existing compensation model
Split of savings – existence of minimum savings threshold
Split of quality - benchmarks utilized, targets tough
Upside and downside risk
Care coordinator payments – ie: Nurse care manager
Available data key to determining support for individual
performance payments
Service line
Understand and value each service,
position
Identify savings or quality metrics
Use benchmarking
Consider OIG’s gainshare and co-
management opinions
Bundled Payments/Individual
Understand market reimbursement
for physician services and quality
outcomes
Identify risk and responsibility of
all parties
Consider caps
FMV in a VBP World: Value Drivers & Guidance for VBP Models
TOPIC #4 – PAY-FOR-PERFORMANCE
22
Three Largest Value Drivers for VBP Model to Impact Compensation
1. Follow the money - understand if the payments are self-funded from the health system or coming from third party.
There is more flexibility with compensation if third party generated and the commercially reasonable standard is easier to meet.
If self-funded, additional compensation based on a portion of any savings may be easier to support compared to quality payments because financial support is not required.
2. Responsibility of parties – parties who have a demonstrable impact on quality and/or cost savings may warrant more of the payment received under a VBP model.
Need to understand metrics and who is impacting them (physicians vs. health system employees)
Primary care versus specialist
3. Risk of parties – parties who take on risk may earn more, while those with limited risk may have limited upside potential.
TOPIC #4 – PAY-FOR-PERFORMANCE
23
VBP Models: Practices are transitioning compensation to VBP
1. Geisinger Health System (1,600 employed physicians; 12 hospitals in Pennsylvania)
Developed a compensation formula to incentivize physicians towards advancing the mission of the health system
80% of a physician’s compensation is set at fixed salary corresponding to how productive they are annually
20% is set tied towards performance incentives defined annually per physician and payable twice a year
2. Advocate Health Care (1,400 employed physicians; 12 hospitals in Illinois)
Physician’s compensation plan established with potential upside and downside risk tied to outcomes, patient experience, and shared savings
Incentive pool established by withholding 5% of compensation at the onset of the year. If no outcomes are achieved, the incentive pool is retained by the employer. If superior performance on outcomes is achieved, an additional 5% is contributed to the pool by the employer and distributed (i.e. physician may receive 105% of compensation).
3. Kaiser Permanente of Northern California (6,500 member physicians)
Physicians are salaried with incentives set based on quality and patient satisfaction along with peer evaluation and assessment by the department chief
Upside and downside risk to the physicians in managing costs and achieving higher quality of care outcomes
PHYSICIAN COMPENSATION
24
“At any given point in time, I could tell you
about three compensation plans” last year’s
plan, which didn’t work; this year’s plan, which
nobody likes; and next year’s plan, which will
fix all our problems.”
ADDING VALUE TO PHYSICIAN COMPENSATION
25
1. Why are organizations redesigning their
provider compensation plans?
2. What elements and parameters must be
part of a successful compensation plan?
3. How are organizations implementing
compensation changes?
4. Impact on resources required to manage
under value-based reimbursement?
ADDING VALUE TO PHYSICIAN COMPENSATION
26
1. Why are organizations redesigning their
provider compensation plans?
2. What elements and parameters must be
part of a successful compensation plan?
3. How are organizations implementing
compensation changes?
4. Impact on resources required to manage
under value-based reimbursement?
TRADITIONAL PHYSICIAN REIMBURSEMENT
27
• Fee for Service (FFS)
• Payment based on volume and complexity of services
Reimbursement Methodology
• Increase volume of face-to-face encounters to increase revenue
• Attract and retain patients
• Cost saving incentive rested with payer, not provider
Physician Incentives
• Provider-based office visit with individual patient
Model of care
PAYMENT TRANSFORMATION – CMS 2015
28
Target percentage of Medicare FFS payments linked to quality and
alternative payment models in 2016 and 2018
Source: CMS Press Release, Better Care. Smarter Spending. Healthier People: Paying Providers for Value, Not Volume, 2015
All Medicare FFS
FFS Linked to Quality
Alternative Payment Models2016 2018
All Medicare FFS All Medicare FFS
30% 50%
90%80%
MACRA
29
CMS responsible for regulations to implement MACRA
Quality Payment Program
Anticipate Final Rule in November • Proposed Final Rule released April 27, 2016 with comment
period through June 27th
2019 thru 2023
Merit Based Incentive
Payment System (MIPS)
Advanced
Alternative Payment Model
Annual 0.5% increase in Physician
Reimbursements 2015 thru 2019
Medicare Access and CHIP Reauthorization Act of 2015 (MACRA)
ALTERNATIVE #1 - MIPS
30
Physician FFS rates
Increase 0.5% per year from 2015-
2019
Held constant from 2020-2025
Increase by 0.25% in 2026
Performance period
starts in 2017 for
payments in 2019
Bonuses/ penalties start at 4% in 2019
and stabilize at 9% in 2022
Required to be budget neutral
CMS projected Year 1 results
• Bonuses – 54.1%
• Penalties – 45.5%
ALTERNATIVE #2 – ADVANCED APMS
31
Physician FFS rates
Increase 0.5% per year from 2015-
2019
Held constant from 2020-2025
Increase by 0.75% in 2026
Currently Proposed Qualifying APMs
Next Generation Medicare ACOs
MSSP Tracks 2 & 3
Comprehensive Primary Care Plus (CPC+)
Comprehensive End Stage Renal Disease Care
Model
Oncology Care Model Two-Side Risk Arrangement
(2018)
Physicians receive a
5.0% annual bonus
payment from
2019-2024 to aid in
the transition to
and the
maintenance of
new payment
models
MIPS/APMS – REPORTING AND SCORING
32
• Replaces PQRS, Value-based Payment Modifier (Quality/Outcomes)
Quality
• Replaces Value-based Payment Modifier (Cost)
Resource Use
• New Category
• Addresses Care Coordination, Patient Safety, Enhanced Patient Access, Patient Engagement
Clinical Practice Improvement Activities (CPIA)
• Replaces Meaningful Use (Medicare EHR Incentive Program)
Advancing Care Information (ACI)
50%
10%
15%
25%
2019
Category Weights
ADDING VALUE TO PHYSICIAN COMPENSATION
33
1. Why are organizations redesigning their
provider compensation plans?
2. What elements and parameters must be
part of a successful compensation plan?
3. How are organizations implementing
compensation changes?
4. Impact on resources required to manage
under value-based reimbursement?
NEW COMPENSATION PLANS
34
Successful provider compensation plans must:
Encourage Physician Leadership
Build a Foundation for Value
Focus on Team-based Provision of Care
ENCOURAGE PHYSICIAN LEADERSHIP
35
Designed
Administrative Time
Co-Management-Style
Incentives
As-Needed Payments
Applying it to your
Plan
• Need to maximize patient contact time
• Medical directorships used to provide supplemental income to key physicians
• No way to reward physicians for shared savings programs or process improvement
Under Fee-For-Service
• Need to allow and encourage physicians to:
• Lead care process evaluation and redesign efforts
• Quality measure stewardship and improvement
• Committee participation
Under Value-Based
Encourage Physician Leadership
CO-MANAGEMENT AGREEMENTS
36
Co-management agreements are becoming more popular and
common, especially in markets with large independent groups
Can be related to entire service lines, specific specialty
groups, ASCs, others
Can be tied to reimbursement reporting measures• MIPS/APM Reporting
• Quality
• Efficiency
• Hospital Measures
• Customer/Patient Satisfaction
Obtain 3rd party appraisal of total co-management fee and
each fee amount• Base Fee – Payment for time
• Incentive Fee – Based on goal achievement
CO-MANAGEMENT AGREEMENTSMETRIC EXAMPLES - ORTHOPEDICS
37
MeasureDRGs
Included
Current
Performance
Level 1
Target 50%
Payment
Level 2
Target 75%
Payment
Level 3
Target
100%
Payment
Measure
Weight
Maximum
PaymentNotes
Clinically Adjusted
Cost per Case
470
$18,091 $16,938 $16,091 $15,244 30% $120,000
Level 1: Peer Group
Level 2: 5% Below Peer
Group
Level 3: 10% Below Peer
Group
462
Clinically Adjusted
Length of Stay per
Case
462
3.8 3.6 3.3 3.0 15% $60,000
Level 1: National Norm
Level 2: National Bench
Level 3: Peer Group
468
467
481
Risk-Adjusted
Readmissions Index
467
3.9 1.4 1.0 0.7 15% $60,000
Level 1: Peer Group
Level 2: National Norm
Level 3: National Bench
468
469
Coding Performance:
Correct Coding %All N/A 96% 97.5% 99% 10% $40,000
Total Incentive Component 70% $280,000
Total Base Component
Maximum of 480 Hours at $250 per Hour30% $120,000
Co-Management Total 100% $400,000
BUILD A FOUNDATION FOR VALUE
38
Capabilities needed for
quality measurement and
management
• Mechanism for physician input
• IT infrastructure and data analysis resources
• Reporting and communication platforms
• Feedback and process improvement systems
0%
1%
2%
3%
4%
5%
6%
7%
Year One Year Two Year Three
% o
f Phys
icia
n C
om
p a
t R
isk
Time increases in
quality dollars to
be consistent
with:
• Physician
tolerance
•Capabilities
•Revenue stream
Total compensation attributed to quality should increase gradually
Build a Foundation for Value
METRIC CONSIDERATIONS FOR COMP PLANS
39
Primary Care•Readmissions*
•Satisfaction survey results
•PQRS reporting
•PQRS process/outcomes
•Medicare cost per beneficiary*
Cardiology•Readmissions* (AMI, Heart Failure)
•Fibrinolytic therapy within 30 minutes
•Satisfaction survey results
•HCAHPS (doctor communication)
•Primary PCI within 90 minutes
•HF discharge instructions
•PQRS
Surgery•Readmissions* (Total hip, total knee)
•SCIP measures
•Satisfaction survey results
•HCAHPS (doctor communication)
•Surgical site infection ratio
•PQRS
Hospitalist•Readmissions*
•Satisfaction survey results
•HCAHPS (doctor communication)
•Blood cultures prior to initial antibiotic
•Initial antibiotic selection
•CAUTI, CLABSI, MRSA, C. Diff
Incorporate Quality and Satisfaction Metrics into
Physician Contracts (as applicable)
TEAM-BASED PROVISION OF CARE
40
wRVU Pooling
Group Based Quality
Scoring
Citizenship Bonuses
Advanced Practitioner
Supervision Incentives
Applying it to your
Plan
• “Cowboys”
• Physicians generate wRVUs independently
• Collaboration happens in spite of compensation plans
Under Fee-For-Service
• “Pit Crews”
• Multidisciplinary approach makes wRVUassignment difficult
• Quality outcomes dependent on multiple specialties
• Team-base culture must be rewarded
Under Value-Based
Focus on Team-based Provision of Care
TEAM-BASED INCENTIVES
41
Team-based incentives are new and trending compensation
structures we have been implementing with many clients Can be compensation withholds or actual bonuses
Can be tied to many reporting measures:• MIPS/APM Reporting
• Quality
• Efficiency
• Customer/Patient Satisfaction
• Productivity (with caution)
Can be service line (Primary Care), specialty (Cardiology), or
even practice/physician (Physician & PA/NP) specific
Obtain 3rd party appraisal of incentive/total comp.
Physician inclusion in development of metrics and goals will aid in
creating buy-in and is CRITICAL to success!
TEAM-BASED INCENTIVES EXAMPLEPATIENT SATISFACTION, QUALITY, ETC.
42
Provider eligible to receive up to $15,000 annually based on achievement
of targeted patient satisfaction scores.
Provider’s incentive will be weighted based on his/her individual results
and overall Emergency Department results.
Individual Results = 60% of Goal
ED Results = 40% of Goal
Example
Individual Patient Satisfaction Results = 82/100
Overall ED Patient Satisfaction Results = 65/100
Weighted Score = 75.2 (49.2 [82 x 60%] + 26 [65 x 40%])
Weighted ScorePercentage of
Incentive Received
Total Customer
Satisfaction Incentive
Greater than 80 100% $15,000
70 to 80 75% $11,250
60 to 69 50% $7,500
50 to 59 25% $3,750
Less than 50 0% $0
TEAM-BASED INCENTIVES EXAMPLEPRODUCTIVITY
43
wRVU Target
Physician (Family Medicine) = 4,868
Nurse Practitioner (Family Medicine) = 3,214
Aggregate Target = 8,082
Aggregate Actual = 8,000
Difference from Target = (82)
Physician
Base $185,000.00
CF $38.00
Individual Weight 85%
Partner Weight 15%
wRVU Target 4,868
wRVU Actual 6,000
Difference 1,132
Bonus Potential $43,000.00
Individual Credit $36,550.00
Partner Credit $0.00
Total Earned Bonus $36,550.00
Total Compensation $221,550.00
Nurse Practitioner
Base $90,000.00
CF $28.00
Individual Weight 85%
Partner Weight 15%
wRVU Target 3,214
wRVU Actual 2,000
Difference (1,214)
Bonus Potential $0.00
Individual Credit $0.00
Partner Credit $0.00
Total Earned Bonus $0.00
Total Compensation $90,000.00
ADDING VALUE TO PHYSICIAN COMPENSATION
44
1. Why are organizations redesigning their
provider compensation plans?
2. What elements and parameters must be
part of a successful compensation plan?
3. How are organizations implementing
compensation changes?
4. Impact on resources required to manage
under value-based reimbursement?
IMPLEMENTING COMPENSATION CHANGES
45
“The world’s best compensation plan won’t
ever see the light of day if your most
influential physicians shoot it down.”
IMPLEMENTING COMPENSATION CHANGES
46
Discovery Phase Building Phase Testing and Implementation
Key
Questions
To Be
Answered
What are the goals of the
new compensation plan?
When do the current
contracts expire and how
will this impact
implementation?
Will physicians need
education on the market
forces driving the need for
a new compensation plan?
What compensation
methods are considered to
be best practice?
What are advantages and
disadvantages of different
methods?
Which methods will work
with our group?
How will the selected
compensation affect each
physician?
Will the plan be financially
sustainable for the
organization?
When and how will the plan
be rolled out across the
physician groups?
Action
Items
Contract review, including
cataloging expiration dates
and key parameters
Interviews/discussion with
key stakeholders
Data review and
benchmarking analysis
Research and presentation
of best practices.
Facilitation of educational
sessions.
Facilitation of collaborative
meetings designed to
evaluate and select options
for each major plan
component.
Financial modeling at physician
and organizational level.
Creation of roll-out timeline
based on contract review
dates.
Creation of regular transition
reports showing performance
under future plan parameters.
ADDING VALUE TO PHYSICIAN COMPENSATION
47
1. Why are organizations redesigning their
provider compensation plans?
2. What elements and parameters must be
part of a successful compensation plan?
3. How are organizations implementing
compensation changes?
4. Impact on resources required to manage
under value-based reimbursement?
CAPABILITIES NEEDED FOR VALUE-BASED
COMPENSATION
48
Mechanism for physician input
Start with process/satisfaction vs. outcomes
IT infrastructure and data analysis resources
Reporting and communication platforms
Feedback and process improvement systems
STRATEGIC CONSIDERATIONS
49
Right number and mix of providers?
Market presence in desired locations?
Is the organization of sufficient size to take risk?
Do the physicians play an active role in strategic
planning for the hospital?
Do you have a plan to bridge FFS to value-based
models?
How vulnerable are core services to decreases in
utilization?
PHYSICIAN LEADERSHIP AND CULTURE
50
Common vision among
the physicians?
Do the physicians
understand their role?
Are physician leaders being identified & developed?
Is this an opportunity to get real value from physician
network?
INFRASTRUCTURE CHANGES
51
Moving away from traditional infrastructure…
Dyad management models: MD’s & Executives
Technology requirements and costs will increase
Greater emphasis on data analytics
Managing patients will change composition of staff: Need providers and managers who can interpret data and guide
best practices for care management
Patient management – (NP/PA’s, Allied Health, Etc.)
Staff will need different set of skills
KEY TAKEAWAYS FOR VALUE-BASED COMP PLANS
52
PRACTICAL TIPS1. Physician involvement is critically important.
2. Balance stability vs. flexibility.
3. Start by incentivizing care processes and patient experience.
4. Start with manageable program-don’t tackle too much.
5. Build in flexibility in the areas of: Base
Productivity
Quality
6. Promote communication and teamwork.
7. Incorporate risk-sharing mechanisms: thresholds, risk corridors,
etc.
8. Understand the legal parameters.
9. Production will always be important!
QUESTIONS?
53
