How to Align Physician Compensation with Value Based Care

From The Consultant’s Corner 5/5/16

How to Align Physician Compensation with Value-Based Care

The move from volume-based to value-based reimbursement models is undeniable. Care quality, clinical outcomes, patient satisfaction, and cost containment all will play increasingly larger roles in reimbursement over the next few years. However, the pace at which this change is occurring varies significantly from payer to payer. Not all payers are moving simultaneously.

CMS has taken the lead with initiatives such as the Physician Quality Reporting System, the Value-based Payment Modifier, and the upcoming Merit-based Incentive Payment System (MIPS). While some commercial payers are following CMS closely, others have committed themselves to evolving their own value-based programs.

In the midst of this flux, practices face the difficult task of retaining some focus on volume to remain financially viable while the industry transitions. What this means from a practical perspective is that practices can no longer use past compensation plans as a model for the future. In fact, they can’t expect to nail down a physician compensation plan today that will last for even the next three years; physician compensation models must progress with the industry.

Flexibility is Key

Compensation plans developed today need to allow for flexibility, so they can accommodate current productivity requirements while supporting a changing culture and incentivizing the behaviors necessary for success over the long term. One way to achieve flexibility involves the periodic evaluation of payer progress toward value-based reimbursement.

The degree to which a practice accelerates its value-based physician payment model should mirror the practice’s payer mix. Over time, the percentage of overall compensation tied to value-based incentives should increase to align with the percentage of overall reimbursement tied to value-based programs.

The task now is to prepare for — or align with — those new reimbursement incentives. Practices must start turning away from their historic focus on independence and production, and toward a new focus on collaboration, communication, and overall outcomes and cost. By setting the right foundation, practices can ensure that their provider compensation packages accurately reflect their emerging quality, outcomes, cost, and patient satisfaction goals. It’s a significant opportunity to create compensation models that support the dramatic culture shift necessary to achieve value-based care.

Set a Value-Based Foundation

Practice and health system governance frameworks range widely, and include any number of different employment or contract agreements. While the governance model will affect how a practice implements its value-based physician compensation plan — for example, its physician engagement, design, timeline, and communication strategies — it shouldn’t affect the compensation plan’s basic structure. No matter the governance model, all value-based physician compensation plans must incentivize care quality, patient outcomes, and the patient experience. The reason is simple: These factors lie at the center of value-based care delivery. Primary care providers are also part of the nucleus.

Achieving value-based care requires someone — predominately primary care providers — to coordinate care among patients, internal staff, hospitalists, and specialists. That takes time, which fee-for-service models have seldom reimbursed. In comparison, value-based financial incentives should encourage providers to spend time on those care coordination activities and preventive measures that result in favorable patient outcomes. Typically, this kind of compensation plan is structured as base salary (often determined by years of experience) plus incentives for factors such as:

  • Care quality —Practices can use HEDIS, PQRS, Meaningful Use, and other existing quality metrics to measure and incentivize physician quality. Care coordination is another essential component of quality.
  • Patient access — Ensuring patients are seen in a timely manner helps improve outcomes and reduce costs. Strong access capabilities may also play a role not only in lowering cost, but in satisfying patients.
  • Patient satisfaction — Patient communication, education, and engagement activities can increase satisfaction, as well as improve care plan compliance. (Plus, better compliance could result in improved outcomes and decreased costs.) Practices can use existing satisfaction surveys to measure and incentivize physicians for their patient engagement efforts.
  • Corporate citizenship — Practices can further incentivize physicians to follow evidence-based clinical protocols.
  • Productivity — Productivity will not entirely disappear as an element of compensation plans, but should take a different shape. For example, practices should ensure that physician panel sizes are appropriate to their care coordination and management responsibilities.

Smooth the Transition

Traditionally, most value-based factors have been difficult to manage and control. However, the adoption of EHRs and CMS quality programs such as PQRS and MU have established a means for data capture, decision support, and reporting. Consequently, practices now have a good foundation on which to build physician compensation plans that align with the core tenets of value-based care. Still, it won’t happen overnight. Over the next few years, those practices with the flexibility to evolve alongside their payers are most likely to experience the smoothest — and most rewarding — transitions.

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Brad Boyd is president of Culbert Healthcare Solutions.

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