Compensation Issues

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4 Critical Success Factors for Building Productivity-Based Compensation Models

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Marc Halley, president and CEO of Halley Consulting, and Will Reiser, vice president of product development for Halley Consulting, presented at the Becker's Hospital Review Annual Meeting on May 17 in Chicago and shared vital components for hospitals to include in the planning of their physician compensation models.

There are several reasons why a hospital and its physician may want to review their compensation strategies, but the most important of them all revolves around the inevitable reimbursement decreases from Medicare, Medicaid and other payors. "The real issue is: Which way is reimbursement going? Obama, Romney, the Supreme Court [decision], it doesn't matter," Mr. Halley said. "Regardless of what goes on, we have to make decisions in the context that reimbursement is going down."

There are several other influences that drive a review of physician compensation, such as budget pressures and physician angst, and Mr. Reiser said there are many important steps to reach a better productivity-based compensation model.

1. Have a compensation committee with engaged physicians. A compensation committee has to have two to four physicians within its core who are respected opinion leaders and, more likely than not, have high productivity marks, Mr. Reiser said. Including physicians in the important process of designing their compensation shows everyone their input is valuable.

2. Simplify the model. "It's very easy to complicate a compensation model," Mr. Reiser said. Instead, hospitals and physicians should focus on universal compensation aspects, such as a timely payout, bottom line accountability and the ability for physician to control some of their incentive factors.

3. Create a smooth transition to the new compensation model. Most hospitals cannot turn their employed physicians onto a new productivity-based compensation model overnight. Instead, the compensation committee needs to work together to ensure there a seamless process to reach the end goal, which ultimately is a better way to compensate physicians. "It's the transition that makes or breaks the implementation of the compensation model," Mr. Reiser said.

4. Know what a compensation redesign is not. Mr. Reiser gave a brief list of things that a compensation redesign is not. For example, restructured physician compensation models are not a substitute for active management, are not a renegotiation of individual compensation and are not an immediate improvement to a hospital's bottom line. "Compensation redesigns take time, and it may cost money in the short term," Mr. Reiser said. "But it is an opportunity to ensure equity among providers."

More Articles on the Becker's Hospital Review Annual Meeting:

Budgeting in Times of Uncertainty: Insight From 3 Hospital CFOs

4 Managed Care Negotiation Strategies for 2012

Healthcare Leaders Discuss Key Concepts to Police, Improve and Measure Quality

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