Getting AMPed up for Physician Compensation Models

By David Friend and Venson Wallin

The days of maximizing daily patient visits are waning, with the emphasis on visit quantity being replaced by quality – visits of value. As the drivers of healthcare reimbursement continue to refocus on new performance-based models, better clinical processes will, in general, mean higher reimbursement. Medicare and Medicaid have already incorporated improved clinical processes into determining provider reimbursements, with commercial insurers sure to follow.

The treating physician is a critical component of a successful clinical process. Over the years, however, physicians have had to focus on productivity as they’ve been expected to treat more and more patients daily with increasingly complex conditions. Some believe the constant chasing of productivity measures such as relative value units (RVUs) – a significant metric used in determining physician compensation – has led to a reduced focus on the quality and cost of patient care processes and outcomes. While steps are being taken nationally to address less-than-optimal clinical processes, it’s time for health systems and physician groups to dial up the energy on incenting visits of value.

Expectations for Performance Focus

The Affordable Care Act (ACA) attempts to incent value-based care with various initiatives, including programs that penalize readmissions and hospital-acquired conditions. It mandates that CMS use cost and quality data to adjust physician payments under the Medicare Physician Fee Schedule. Beginning in 2015, this Value-Based Payment Modifier will apply to physicians in groups of 100 or more; in 2016, it will impact physicians in groups of 10 or more; in 2017, all physicians participating in fee for service Medicare will be affected.

Physician Compensation Models for Improved Clinical Processes

Some health systems are beginning to reevaluate physician compensation models. In all likelihood, commercial payers will follow with value arrangements of their own. And the continued emergence of narrow networks and ACOs necessitates that practice groups analyze their compensation models in order to demonstrate high value in terms of clinical processes and outcomes. MGMA’s Physician Compensation and Production Survey: 2014 Report Based on 2013 Data found that the percentage of compensation plans among participants based 100% on productivity has declined (39% in 2013 vs. 50% in 2012), and that the trend is expected to continue, with plans that combine salary and incentives gaining a greater share.

Getting “AMPed” Up: Three Guiding Concepts

So what should hospitals and practice groups do to address the move to value-based compensation? Focus on three concepts: Autonomy, Mastery and Purpose.
  • Autonomy: the freedom of a physician to make appropriate decisions for his or her patients
  • Mastery: a physician’s ability to achieve the highest level of professional training
  • Purpose: a physician’s access to the resources and opportunity to attain the best possible outcomes for his or her patients
It is critically important that what has traditionally been an “us vs. them” approach to compensation design be replaced with a “we” approach. Once physicians, health systems and other network partners work together to create a compensation model that accommodates the AMP, the practice group/health system can identify the specific measures that they feel will lead to accomplishing shared goals, for example measures relating to breast cancer screening, assistance with tobacco cessation or readmission rates. There is no “cookie cutter approach.” Only drivers that can directly result in desired change should be included.

Overloading a compensation model with measurements should also be avoided as it will only increase administrative burden without a corresponding return on investment. It is also important to keep in mind that some drivers may promote the wrong behavior if not modeled correctly. For example, a measure regarding clinical guidelines should be flexible enough that physicians have the ability to prescribe clinically appropriate exceptions.

In the end, choose a combination of drivers that complement each other, promote efficient processes and positive outcomes, and minimize unnecessary costs of care. By following these simple rules, you can get your physicians “AMPed” up and drive success across the organization, be it a physician group, health system or ACO/narrow network.