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Published July 28, 2022

A PYA Perspective: A Practical Guide for Operationalizing Sustainable and Aligned Market-Based Provider Compensation

Thoughts, Experiences, and Stories From the Field by the Experts at PYA

The last few years, healthcare leaders have been balancing a few spinning plates. And it’s no wonder, considering the number of billowing industry disruptors. The admittedly partial list of disruptors below, even in its incomplete state, is enough to make medical group leaders sweat and hospital and health system executives’ heads pound! All the spinning plates make provider compensation planning difficult and filled with ambiguity. For the foreseeable future, it looks like spinning will be the rule—injecting chaos when it comes to successfully balancing market value compensation planning with recruiting competitiveness, affordability, and timeliness.

OMG! Wow!  Shazam!  {Insert Your Own Private Exclamation—and Other Disruptors—Here!}

  • Medicare Physician Fee Schedule (MPFS) changes
  • Split/shared billing
  • COVID-19 income protection
  • Voluntary slowdowns
  • Concentrated ramp-ups
  • Labor cost
  • Inflation
  • Compensation and production survey submissions
  • Production-based vs. schedule-based
  • New hires
  • Burnouts
  • Phase-outs
  • Leadership pay
  • Growth
  • Legacy

Cutting Through the Chaos by Dousing Disruptors with Discourse

In volatile times, generating consensus, uniformity of purpose, and comradery are more important than ever. Robust discussion and lively discourse bring transparency and mutual understanding. Degrees of alignment improve. Both developing and established relationships can survive and strengthen during times of disagreement. 

The time-tested strategy for ensuring successful and strong relationships is communication. Relentlessly communicate. Communicate again. Then, communicate some more. 

History provides tangible advice where communication aligns objectives between hospitals, health systems, and employed medical groups. With compensation planning, a two-committee approach can drive success. Medical group leaders want assurance of sustained market-based compensation and ongoing recognition of the culture driving their medical group and their income distribution plan. Hospital and health system leaders want affordability and common performance incentives. Both groups demand regulatory compliance and recruiting success.

Achieving Alignment

From an operations perspective, consider the following practical outline of a tactic proven to achieve transparency and alignment in compensation planning for hospital and health system employed medical groups.

One important note: the “gold standard” from a regulatory compliance perspective includes maintaining a Provider Compensation Committee on Compliance as the final, and sole, authority for setting and approving provider compensation pay rates and amounts. This body must maintain control of all provider compensation issues and be superior in hierarchy to any other group. All subordinate committees should be referred to as advisory to the Provider Compensation Committee on Compliance.

  1. Establish a Provider Compensation Advisory
    1. Voting membership consists of:
      1. Physician leaders from individual specialties—or at least leader representatives from:
        1. Primary care
        2. Medical specialties
        3. Surgical specialties
        4. Acute care or hospital-based specialties
      2. Advanced practice provider leaders from at least:
        1. Primary care
        2. Medical specialties
        3. Surgical specialties
        4. Acute care or hospital-based specialties
  • Medical group operations leader
  1. Hospital or health system operations leader
  2. Medical group finance leader
  3. Hospital or health system finance leader
  1. Non-voting content experts should be expected to participate and attend as called or needed
  2. Function/output
    1. Ensure fairness exists within and between specialties as it relates to all forms of pay (from base salary to call to incentives)
    2. Adjudicate and approve exceptions to established methodologies for matters without implication to Fair Market Value and Commercial Reasonableness
  • Recommend approval to Provider Compensation Committee on Compliance
    1. Annual pay-rate adjustments
    2. Changes in pay-type methodology
  1. Provider Compensation Committee on Compliance
    1. Voting membership consists of:
      1. Unaffected individuals, such as the non-physician members of the hospital or health system Board Executive Committee
      2. Hospital or health system General Counsel or legal designee
    2. Non-voting content experts should be expected to participate and attend as called or needed
      1. Outside valuation consultant with independently authored opinion letter
      2. Medical group operations leader
  • Hospital or health system operations leader
  1. Medical group finance leader
  2. Hospital/health system finance leader
  1. Function/output
    1. Final adjudication and approval
      1. Mid-year exceptions to established methodologies for matters with Fair Market Value and Commercial Reasonableness considerations
      2. Annual pay-rate adjustments
      3. Changes in pay-type methodology

Balancing the provider compensation planning process to include a Provider Compensation Advisory Committee as a complement to the Provider Compensation Committee on Compliance instills the communication necessary to build trust and preserve the important culture of your hospital employed medical groups.

If you would like more information about provider compensation planning and compliance, or would like assistance with any matter related to compliance, strategy and transactions, or valuation, one of our executive contacts would be happy to assist. You may email them below, or call (800) 270-9629.

Executive Contacts

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