Physician practice executives need the right tools during healthcare sea change

Physician turnover, migration of risk and the looming PCP shortage. Will this triple threat defeat the Triple Aim?

Healthcare's so-called Triple Aim is under triple threat. Physician turnover, the migration of risk, and a looming shortage of primary care providers present formidable challenges to the key performance goals of improving population health, enhancing the care experience and reducing the per-capita cost.

For many Physician-Hospital Organizations, the situation is acute. Consider the following scenario: "Kerry," the CEO of a large group medical practice owned by a major healthcare system, has spent years building a team of 550 employed physicians, an initiative which the system's leader views as mission critical. The entire executive team has come to fully recognize that the physicians are the "feeder system" to hospital inpatient and outpatient services. The hospital and PHO contract together as one in risk-bearing contracts tied to quality and improved outcomes. The PHO physicians also reduce "leakage" outside the system, which was costing the hospital millions per year.

Driven by these factors, Kerry orchestrated a string of acquisitions and has done her best to reward and retain key employees.

There's only one problem, however. Roughly a quarter of these physicians leave her practice within the first few years of employment. Each time a PCP decides to move elsewhere, the group takes a huge financial hit. A 2011 study by national recruitment firm Cejka Search pegged the cost of losing a physician at about $1.2 million, a total that includes lost revenue and costs for recruiting and replacing the departed doctor with another one.

What can group practices in similar situations do to mitigate this enormous financial burden and improve their turnover rate? Unfortunately, a vicious cycle is at work here. When a physician departs, the position must be filled quickly. These regular, hasty hiring decisions can result in a mismatch, leading to disappointment after the fact. It seems there is no time to reinvent the hiring process, so the health system eats this recurring cost, year after year.

In addition to doing a better job of evaluating candidates, group practices need a retention strategy. From the standpoint of base compensation, this can be difficult as the payer world changes from volume to value. Unlike the pendulum swing of the 1990s from fee-for-service to global capitation, there are several new lines on the ruler between these two extremes. Shared savings, alternative quality contracts, bundled payments and other arrangements have created a spectrum of risk sharing between payers and providers.

As physician groups migrate across this new continuum of risk, they end up with some contracts in each "bucket" and experience conflicting motivations. Most physicians across the country have a productivity-based incentive component within their compensation formula based on Relative Value Units, or RVUs. This works great in the traditional fee-for-service model, as it rewards those who see the most patients and by extension order the most tests and drive the most hospital admissions.

But what happens when this approach is paired with bundled payments or global capitation, where quality, patient satisfaction, population health and cost-effective outcomes outweigh productivity? Can a particular group practice afford to abandon RVUs and embrace an entirely new compensation model when many patients remain in fee-for-service contracts? Is it practical, cost-effective or ethical to treat each silo of patients differently?

To address physician turnover combined with migration of risk, group practices need something over and above productivity-based cash compensation to reward performance and tie physicians to the practice for the long term. This incentive plan needs to recognize superior performance in quality and outcomes without ripping up the sidewalk on productivity. A supplemental "non-qualified" plan with elements of deferral and vesting might serve practices well both for current incentives and long range retention concerns. Such a plan can contain "handcuffs" ranging from silk to kryptonite, which can delay or prevent early departures.

By this approach, contributions are made to the plan based on performance measures, which are tied to bonus-generating metrics in risk-based contracts. This might include low readmission rates, high patient satisfaction scores, and high scores on quality measures such as HEDIS and STAR. Claw-backs can be included for backsliding in subsequent fiscal years.

From the physicians' perspective, the plan fills a void. Many currently make enough to be in a high personal income tax bracket, but not enough to save for retirement and children's tuition payments at the same time. Their 403(b) and 457(b) plans provide some opportunity, but are limited in scope and restrict pre-retirement access to funds. A 457(f) supplemental retirement plan places their contributions at risk to hospital creditors, a provision with which they have never quite been comfortable. On the after-tax front, they make too much to qualify for an individual Roth IRA and "Roth options" attached to the above institutional plans fail to sidestep the scope and access issues.

Back to Kerry. Can she avoid the triple threat and realize the Triple Aim? Only if she adapts quickly to changing conditions and aligns her physicians with the new payment models, which are coming at her like the headlight on a freight train. Are you facing the same challenge?

Dennis M. Sexton and Barry N. Koslow, J.D., manage the physician compensation practice at MKA Executive Planners in Woburn, Massachusetts.

Dennis M. Sexton, Senior Vice President - 781-939-6060; dsexton@mkaplanners.com

Barry N. Koslow, JD, President and CEO - 781-939-6050; bkoslow@mkaplanners.com

The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of Becker's Hospital Review/Becker's Healthcare. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.

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