Benchmarking Physician Performance: Methods and Metrics
Nick Fabrizio, PhDPhysician employment is back—and this time, it may be here to stay, says Nick Fabrizio, PhD, a principal with the Medical Group Management Association (MGMA) Health Care Consulting Group. "I see the employment trend continuing," he says. "Not only because of declining reimbursement, but because of increases in operating expenses every year. Add in the generational differences groups are facing now, including physicians who only want to work 40 hours a week or want to work part time, and it's a recipe for continued employment with a hospital, health system, or large multispecialty group." As physicians continue to seek employment, hospitals are shifting their compensation practices based on lessons learned during the last wave of employment—and that shift includes a stronger emphasis on benchmarking performance. "Hospitals have learned from their mistakes," Fabrizio says. "Instead of a large income guarantee, which we saw in the 1990s, they are increasingly doing productivity-based compensation plans." Private practices are no stranger to benchmarking physician performance, Fabrizio says; most base some percentage of compensation on productivity, and have developed benchmarks as a means of assessing it on a physician-by-physician basis. Hospitals and health systems, on the other hand, are newer to the practice, and face a host of issues when negotiating compensation plans with prospective physicians, from trust to anti-trust. "Who's collecting this data, and for what purpose?" Fabrizio says. "There's always going to be a fear about what your employer is going to do with this kind of information. Most medical groups determine as a group what measures are to be captured, so they don't face the same fear." Easier Electronically Today's approach to benchmarking physician productivity is made easier by information technology, Fabrizio says. "Most hospitals use their practice management system to measure work RVUs and then pay a certain dollar amount per RVU, depending on the specialty," he says. "The dollar amount that they'll pay physicians will vary from place to place—not by much, but it will vary." Wide variations in payment are impossible because of anti-trust regulations, which require that hospitals compensate physicians in a manner that aligns with nationwide standards such as those established by the MGMA. "You're at risk paying someone at the 130th percentile for compensation if their productivity is low," Fabrizio says. "It has to be legally compliant, and that's regardless of the productivity and compensation formula you're using." That formula might base 80% of compensation on productivity (as measured through an IT system), 10% on patient satisfaction (as measured by surveys, such as those performed by firms like Press Ganey), and 10% on quality, Fabrizio says. Quality may represent the most difficult factor to measure: a 2008 study in the American Journal of Managed Care, which analyzed administrative claims and enrollment data from nine health plans, found that evaluations of quality can be unreliable because most physicians do not have adequate numbers of quality events to support measurement.1 "Since your records are contained in the EMR, you get a lot of your quality data that way," Fabrizio says. "But the hardest part is determining what you define as quality." Meanwhile, the use of productivity benchmarks has been criticized because the per-RVU approach makes no provision for non-clinical work—including initiatives to improve quality and patient satisfaction, also increasingly linked to compensation. Yet physicians face pressure to improve quality and outcomes or see reimbursement decline even further. "The business model is not such that, quality being equal, you're going to be able to pay more year after year for the same level of productivity," Fabrizio says. Developing and Leveraging Benchmarks With those issues in mind, Fabrizio recommends that hospitals and physicians coming together to develop a compensation plan establish a committee with representatives from both sides to ensure both perspectives are accommodated. "You start by building trust," Fabrizio says. "Typically, there has not been a lot of trust between these two groups." Productivity, for instance, can be measured by more than RVUs—the MGMA notes that productivity can be benchmarked according to collections, gross charges, encounters, hours worked per week, or weeks worked per year. Beyond productivity, the committee might develop benchmarks for performance such as increasing system referrals, improving denial mitigation, and increasing net collections. "My main concern in any merger or acquisition is that you still deliver high-quality care, and then it's a matter of negotiating reasonable terms of employment, including compensation," Fabrizio says. The original impetus for benchmarking physician performance may be compensation—but this data can also be leveraged for continual improvement. "A piece of advice for every group, employed or not, is to determine what components of your practice you want to benchmark and discuss with the partners why they're important, how you're going to use them, and how to make improvements based on that," Fabrizio notes. This trend will only continue, he predicts. "A number of my clients are adding 10% to 20% a year in physicians—it starts with five, the next year it's 10, and it just continues to snowball," he says. "In the future you're going to see larger single- and multi-specialty groups alongside hospitals and health systems employing a large number of physicians. I don't think it'll be uncommon to see hospitals employing 400 physicians." That means that measuring physician performance, and linking those measurements to compensation, is a practice that will only continue to grow, he says: "It's becoming a trend with hospitals and health systems, by necessity. If you don't measure, you'll never know."Cat Vasko is editor of HealthCXO.
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