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Published July 7, 2015

A 6-Step Approach to Align Physician Compensation with Your System Goals

With the inception of the Physician Quality Reporting System (PQRS), Meaningful Use, Patient-Centered Medical Homes, and Accountable Care Organizations (ACOs), the industry shift toward quality has become more apparent each year. Hospitals and private practices now are held to a higher standard with regard to compliance with the triple aim concept of high quality, low cost, and positive patient experience. As patient satisfaction and performance on quality metrics have begun to directly impact reimbursement from the Centers for Medicare & Medicaid Services (CMS) and commercial payers, health systems and private entities around the country are realigning physician compensation plans to reflect this new reality.

PYA’s experience and observations mirror the overall shift occurring in the industry. The clear trend demonstrates a movement away from pure productivity-based (wRVU only) models and a shift toward those that incorporate incentives or at-risk components for non-productivity elements like patient satisfaction, “good citizenship,” quality metrics, and others. Based on a 2014 HealthLeaders survey, most compensation plans have a portion of compensation at risk for successful reporting of quality components. We have also observed a shift from models that only incorporate these elements as a “bonus” to standard pay, to those that place compensation at risk (possible withhold). This risk is offset by the upside potential to earn above historical compensation levels.

Groups must take a strategic approach to aligning industry standards and strategic goals in their compensation plans:

  1. Consider the components and requirements of each quality program with which the group participates to ensure components are relative to current goals (in order for the compensation plan to be meaningful in driving behavior). Narrow the selection of potential performance metrics for inclusion in the compensation plan to those that are most critical for success.
  2. Track historical performance trends in the areas of productivity and patient experience.   Conduct an assessment of operations to determine barriers to success in these areas, including scheduling, workflow bottlenecks, inefficient telephone utilization, etc. Also, identify additional opportunities for improvement, such as improved care coordination and timely patient monitoring and follow-up.
  3. Obtain stakeholder input on proposed changes to the compensation plan, and identify a core physician group to assess and recommend quality performance goals. Prepare a confidential survey or utilize an independent resource to interview physicians. The purpose of this phase is to assess physician priorities and preferences, thoughts on current compensation methodology, and desired changes. Physician buy-in will be critical to successful implementation of the plan.
  4. Model potential options for net effect on current physician compensation. Discuss the strengths and weaknesses associated with each model. Following subsequent discussion, select a model and discuss options for implementation. It is not advisable to make changes retroactively. Instead, the implementation should occur on a future date, following education and communication of changes to the physicians. Also, consider a phased-in approach.
  5. Upon finalization and implementation of a physician compensation plan, leadership must continue to monitor industry standards compared to practice performance. While it is inadvisable to revise compensation plans each year, it is important to review elements and monitor strengths and weaknesses for future revisions.
  6. Provide transparency for monitoring performance relative to compensation plan guidelines. Physicians should be provided with a monthly or quarterly dashboard of performance to date. This will eliminate surprises at the end of the reporting period and may also aid in improving performance if physicians are made aware of unsatisfactory performance.

Based on our years of experience with practice operations, value-based incentive programs, and compensation plan design, PYA is well positioned to assist independent practices as well as health systems with employed or affiliated physician practices in beginning the process of successful compensation alignment.

If you would like more information about physician compensation alignment, contact the experts listed below at PYA, (800) 270-9629.

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