Key thoughts on physician compensation in value-based healthcare

The way hospitals approach physician compensation is changing under the value-based healthcare initiatives. At the Becker's Hospital Review 5th Annual CEO+CFO Roundtable on Nov. 9 in Chicago, Steve Rice , area president, physician services of Integrated Healthcare Strategies, and Steve McCamy, president and CEO of Covenant Medical Group, Covenant Health in Lubbock, Texas, discussed physician pay in today's changing market.

Physician compensation contracts must fall within fair market value and support commercially reasonable rates.

Most hospitals are slowly moving toward value-based compensation as they take on more risk and develop new strategies for the changing market. Both primary care physicians as well as surgical and medical specialists maintain primarily productivity-driven compensation with work relative value units. Data from the 2016 Gallagher Integrated Survey showed 83 percent of primary care physicians, 87 percent of medical and 86 percent of surgical physicians report compensation plans that include productivity.

Typically, physician contracts include a base salary with additional compensation based on wRVUs and factors such as patient satisfaction and clinical outcomes. Eighty percent to 85 percent of the survey respondents reported their organization includes some type of quality incentive as well. Almost all — 97 percent — of primary care physicians, 98 percent of medical and 96 percent of surgical physicians report their productivity incentive measures are wRVUs or ASA units.

For hospital-based physicians, 85 percent reported incentive measures were wRVU or ASA units; 24 percent said their incentives were based on worked hours or shifts. Physician compensation breakdown is currently:

1. Primary care physicians

• Base salary: 75 percent
• Production incentive: 15 percent
• Clinical quality/satisfaction: 10 percent

2. Specialists

• Base salary: 60 percent
• Production incentive: 30 percent
• Clinical quality/satisfaction: 10 percent

3. Hospital-based

• Base salary: 80 percent
• Production incentive: 5 percent
• Clinical quality/satisfaction: 15 percent

For specialists, base salary can be determined by teaching, research, administrative services and productivity with incentive bonuses based on quality, innovation, research, education and financial performance as well as increasing the population the hospital serves.

"You have to understand your physicians and the culture of your group," said Mr. McCamy. "The hospital's relationship with the physicians is important for the integrated delivery system."

Mr. McCamy worked with Heartland Health in Missouri to achieve the Baldridge Award before moving to his current position with Covenant in Texas. The change was huge; in Texas, the environment was much more reliant on fee-for-service reimbursement and very little of the quality reporting affects pay. After joining Covenant, the hospital scaled back from 200 physicians to around 130 physicians and reorganized the compensation plans.

"We stopped doing contracts that were getting out of hand. But we had to develop a new culture with the physician group," he said. Covenant now hits Medicare Access and CHIP Reauthorization Act and other quality measurements, which moves it closer to value-based care.

Overall, Mr. Rice reported the most common quality and operational incentives based on the survey data are:

1. Primary care

• Patient satisfaction: 71 percent
• Outcomes/clinical pathways: 89 percent
• Citizenship: 36 percent
• Patient access: 22 percent
• Specialty/practice financials: 25 percent
• Hospital/network financials: 24 percent

2. Medical

• Patient satisfaction: 67 percent
• Outcomes/clinical pathways: 89 percent
• Citizenship: 36 percent
• Patient access: 13 percent
• Specialty/practice financials: 27 percent
• Hospital/network financials: 24 percent

3. Surgical

• Patient satisfaction: 73 percent
• Outcomes/clinical pathways: 90 percent
• Citizenship: 35 percent
• Patient access: 28 percent
• Specialty/practice financials: 29 percent
• Hospital/network financials: 22 percent

4. Hospital-based

• Patient satisfaction: 71 percent
• Outcomes/clinical pathways: 86 percent
• Citizenship: 43 percent
• Patient access: 32 percent
• Specialty/practice financials: 28 percent
• Hospital/network financials: 25 percent

Physician compensation will change with MACRA as organizations can choose the Merit-Based Incentive Payment System or Alternative Payment Models moving forward. The MIPS performance category weighs 50 percent of compensation on quality, 10 percent on resource use, 15 percent on clinical practice improvement activities and 25 percent on advancing care information next year, weighing more heavily toward resource utilization in the future.

For physicians overseeing midlevel providers, Mr. Rice described a stipend-based model delivering $1,000 to $2,000 per person and stepping down the compensation level with each additional person the physician oversees. "We've seen some big numbers for what physicians are paid for [supervision of midlevel providers]," Mr. Rice said. "We think that's a changing area."

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