When Pay for Performance Hits Hospital Employee Paychecks

What happens when pay-for-performance doesn't just apply to physicians and hospital reimbursements, but a hospital's staff as a whole?

A main tenet of the accountable care movement is tying physician and hospital reimbursement to their performance. For instance, in an accountable care organization, providers are often rewarded for meeting certain quality improvement and cost saving goals. Additionally, hospitals can be penalized for poor performance in the form of Medicare reimbursement cuts.

These changes are all to encourage healthcare providers to offer higher quality, more patient-centered care. This challenge often falls squarely on the shoulders of direct patient care workers, like physicians and nurses. However, the entire employee base at a hospital or health system can positively or negatively impact the level of patient care provided at the organization.

For those reasons, Jersey City (N.J) Medical Center started the unique practice of tying employee bonuses to the hospital's performance. It started in 2009, when all nonunion employees, about half of its workforce, were put on a pay-for-performance bonus program. Now, as of this year, seven of the hospital's eight bargaining units have ratified contracts with pay-for-performance bonuses, and members will receive payouts for 2013 performance this year. The remaining bargaining unit's contract expires at the end of 2014.

For Mary Cataudella, PHR, vice president of human resources at JCMC, this performance-based bonus system just makes sense. "It has everyone aligned and focused on the same goals of the organization," she says.

Mark Rabson, corporate director of public affairs at JCMC, agrees. "Our payers are rewarding hospitals for performance, so to have everyone on the same page is a great thing."

And the program has been working. Six years ago, JCMC was in financial trouble and was not performing as well as it wanted to on quality measures and patient satisfaction. The bonus program, coupled with other changes, has helped the hospital become financially stable and earn several recognitions of excellence, including Magnet recognition.

How the program is built

One of the original changes came about six years ago, when JCMC redesigned its mission, vision and values. With the input of the staff, board members and members of the community, the hospital established four cultural pillars: safety, quality, engagement and finance, as well as a new set of values.

Now, the metrics upon which the pay-for-performance program is based are all build around one of those four pillars. A goal could be to improve patient satisfaction, which would fall under engagement, for example. Further, each unit in the hospital has specific goals, making the program more personal and tangible for each employee.

At the end of the fiscal year, an analysis on how the hospital performed on its goals is completed. JCMC met 80 percent of its goals for 2012, for example, so employees received bonuses in 2013. The bonus percentage, therefore, varies year to year, depending on the performance of the organization in the year prior. Employees can earn up to a 5 percent bonus each year. "Employees self-monitor each other because they want to reach their goals," Ms. Cataudella says. "The harder they work, the more money they earn."

Staff reaction

Since the program's inception, the staff has mostly rallied around the pay-for-performance bonus program, especially in recent years. The management and nonunion staff have had bonuses tied to the hospital's performance since 2009 and have shared their positive experiences with the program with JCMC's other employees. Eventually, unionized employees "were embracing it" and wanted to be on the same plan and "reap the benefits," Ms. Cataudella says, which contributed to the newly ratified contracts that include pay-for-performance for nearly all of the hospital's bargaining units.

Tips for success

Implementing a pay-for-performance bonus structure takes time, effort and planning. For hospitals seeking to implement a similar program, Ms. Cataudella and Mr. Rabson recommend the following.

Collaboratively establish values. A large part of why this program has spread at JCMC and been incorporated into union contracts is because employees had a voice in creating the hospital's mission, vision and values upon which the program's goals are based. This fosters buy-in for the bonus program, according to Joseph F. Scott, president and CEO of JCMC, as employees have already bought into the hospital's culture.

Focus goals on government requirements. While basing the goals on a hospital's mission, vision and values, hospitals should also incorporate payers' reimbursement metrics and value-based purchasing requirements in their pay-for-performance plans. That way, any gains made in quality will be translated into financial gains.JCMC Pay for  Performance Poster

Communicate with the workforce. The pay-for-performance plan will not work unless the affected employees know what is expected and how they are advancing toward their goals. At JCMC, employees are updated constantly on how their unit is advancing on their goals through various means. Posters, updated monthly, are displayed in each unit to inform employees on how the unit is advancing toward its goals. In addition, JCMC's CEO sends out a letter to the staff every Friday, sharing areas the hospital is excelling and where room for improvement lies. More in-depth newsletters are sent out quarterly as well. Communicating the message of improvement in a variety of ways is of upmost importance and keeps goals fresh in the minds of every employee.

This unique pay-for-performance bonus structure has been a win-win: the hospital has improved its quality performance, so patients receive better care, and the employees are financially rewarded for their conscientious, performance-minded work.

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