Financial sustainability is a growing challenge for health systems, as they feel squeezed between an increasingly complicated payer environment and unrelenting upward pressure on costs (e.g., staff and physician compensation).
Against this backdrop, ECG Management Consultants sought to understand howorganizations assess the health of their physician enterprise so as to identify opportunities for alignment between revenue generation, operating costs, and provider compensation.
During Becker’s 13th Annual CEO + CFO Roundtable, ECG’s Clark Bosslet, Tony Kouba, and Brian Barnthouse talked with healthcare leaders from across the country about challenges and solutions around these topics.
Three key takeaways:
- Physician empowerment and a clear structure for practice operations are fundamental. As hospitals and health systems consider improvements to organizational design and effectiveness in order to grow revenues, physician participation is key.
“You have to empower physicians in some of the decision-making because a lot of times they feel as though they’re being dictated to as to how operations are going to go,” the vice president for physician network development at a West Coast hospital said. Mr. Kouba concurred. “The very untapped resource is how you empower your physicians to help you make decisions,” he said. “Because then you’re going to see the results that you want.”
For physician involvement to be effective, it should be coupled with clarity around the structure of new or redesigned practice operations that physicians are expected to follow as part of improvement projects.
- Revenue generation has become more difficult due to several factors. At hospitals and health systems nationwide, the revenue per work unit is decreasing year over year. This is due, on one hand, to payers denying more reimbursement claims than ever (often helped by sophisticated AI automation technologies) and on the other, to labor costs continuing to rise. For example, the median investment per employed physician has increased from a range of $289K to $303K in 2023 to more than $415K in 2025, according to different industry benchmarks.
- Physician compensation must be aligned with revenue generation and other system goals. To make the growing rate of physician compensation sustainable, physician incentives must be aligned with organizations’ pathways for revenue generation. For example, physicians providing care in community settings most likely need to be incentivized differently than physicians working in tertiary care facilities or academic medical centers (AMC).
Having a centralized, enterprise-wide physician compensation model rather than different compensation plans for each clinical department can support such alignment. A large AMC in the Midwest recently adopted this philosophy and asked each of its 14 departments to design an individual compensation plan within a set of shared parameters and, in the interest of accountability, present it to the chairs of the other departments.
The health system is still working toward the final form of its centralized model but has a vision of what it aspires to achieve. “Ideally, we would have some kind of a dashboard that would link enterprise metrics with incentives, so that in real time physicians could see, ‘I saw this many patients last month, this is what it’s going to mean for my incentive at the end,'” the chief administrative officer of the organization said.
At the Becker's 11th Annual IT + Revenue Cycle Conference: The Future of AI & Digital Health, taking place September 14–17 in Chicago, healthcare executives and digital leaders from across the country will come together to explore how AI, interoperability, cybersecurity, and revenue cycle innovation are transforming care delivery, strengthening financial performance, and driving the next era of digital health. Apply for complimentary registration now.
