Aligning physician compensation for value-based care success

The transition from volume- to value-based care is creating new opportunities for both healthcare providers and payers.

Organizations entering into risk-based arrangements, however, often lack the processes and capabilities required to effectively transform the delivery of care. At the same time, they fail to recognize that engaged clinicians are critically important for success in the new world of risk contracts.

Value-based care models require changes to the way care is delivered, which is one reason organizations must make physician engagement a priority. To engage clinicians, organizations must create a comprehensive program that includes a mix of resources, tools, education and ongoing collaboration and technical support. Also essential is a compensation strategy that aligns physician incentives with the organization’s overall goals for cost-effective care and quality outcomes.

An appropriately structured physician compensation program must include sufficient financial rewards to balance program risks and encourage the right behaviors. In addition to meaningful and balanced incentives, performance metrics should be clear, credible, and trackable. The compensation plan must also promote transformation, foster accountability and emphasize fairness.

Meaningful and balanced incentives
When designing provider incentive programs, organizations must make compensation adequate for the level of effort and degree of risk assumed. In our experience with healthcare organizations across the country, a five percent bonus won’t sufficiently drive a change in physician behavior; instead, rewards must equal at least 25 percent of a physician’s compensation to motivate them to engage in value-based care behaviors. As the organization assumes more risk, incentives should evolve over time.

Incentives must also include a balance between cost-of-care goals AND objectives that are tied to improving the quality of care, access to care, citizenship and outcomes. Organizations should simultaneously develop monitoring systems to detect the inappropriate underutilization of services.

Clear and credible metrics that can be tracked
Make sure that physicians understand what is required to earn incentives, and that established goals are attainable. Metrics should be data-driven and based on common standards, such as HEDIS and PQRS, and avoid subjective measurements. Also, incentive programs should not unfairly impact providers in the event of low panel penetration. Organizations should procure tools and information to support performance management and tracking efforts. When tracking performance, monitoring should take place regularly and on an on-going basis.

Promote transformation
To encourage the transformation to value-based behaviors, provider incentives must be tied to value-based contacts, as well as the organization’s overall goals. As transformation continues over time, providers should be rewarded for behaviors that make it possible to assume even greater risk. In addition, higher performing providers should earn higher rewards. To ensure the ongoing adoption of value-based behaviors, organizational leaders should continuously provide physicians with performance feedback and support them with any tools needed for success.

Foster mutual accountability
Driving better outcomes and lowering costs requires the cooperation of all team members. Incentive programs should combine both group and individual metrics and encourage the sharing of information and best practices. Processes should be transparent and the governance structure should further support mutual accountability and collaboration.

Emphasize fairness
Physicians must feel their incentive program is fair and achievable. They must not be measured on metrics that they cannot impact. For individual providers that participate in full-risk agreements, their contracts should include protection from catastrophic losses. As organizations design their value-based programs, physicians should be included in the process to ensure their best interests are considered.

The transition to value-based care requires physicians who are active participants on the journey. To truly change the status quo, physicians must be sufficiently motivated to adapt how they work and treat patients on a daily basis. A smart, strategic physician compensation program with properly aligned incentives is critical to achieving the goals of value-based care—and even more importantly, it is central to the comprehensive program that can drive deeper, more transformative change.

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