5 Compensation Options for ACO Physicians

A new report from the Commonwealth Fund, "Accountable Care Strategies: Lessons from the Premier Health Care Alliance's Accountable Care Collaborative," explores the various organizational models and compensation options for ACOs.

The report highlights five specific pay models that providers, payors and other ACO participants should discuss with physicians before deciding to start an ACO. "Ultimately, an ACO's compensation model needs to be locally determined, based on the unique makeup of the physician population, the relationship that exists between providers and payors, and other factors," according to the report.  

1. Straight salary. The set income level may include a bonus/incentive or a provision for guaranteed income. One implication of this model is that it provides the assurance of an income level, and without bonuses, it offers little financial incentive to deliver outcomes based on predefined measures.

2. Equal shares. The income level is based on revenue after expenses, and expenses are divided equally among providers. This model rewards lower utilization and may allow less productive physicians to capitalize on the work of their more productive colleagues.

3. Productivity-based compensation. Income is based on the percentage of either billings or collections, or on resource-based relative value scale units assigned to procedures. Overhead costs are allocated among physicians. This model rewards physicians' efforts to deliver outcomes, but also rewards greater utilization and more referrals. Additionally, it is largely affected by patient and payor mix.

4. Incentive-based compensation. A portion of income is tied to providers' performance around the ACO's core goals, such as reduced costs or improved population health as measured by specific metrics. This model rewards physician efficiency and appropriate utilization while also promoting a patient-centered focus in the care delivery process.

5. Capitation. Income is based on a distribution of money from payors, either equally or based on a predetermined formula. The capitation model rewards cost-efficient and effective care but can be influenced by the specific marketplace and providers' skills in contract negotiations.

More Articles on ACOs and Compensation:

Paying Hospital Medical Directors for Performance on the Rise
10 Secrets to Creating a Culture of Accountability and Execution
20 Statistics on Salary Offered to Top Recruited Physician Specialties


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