The Payment Revolution: Volume- to Value-based Physician Compensation
The migration from volume- to value-based reimbursement in physician-compensation plans will have an impact on all health-care providers in the near future. All practice models, including small and large physician practices, as well as hospitals that employ physicians, will be compelled to reconsider physician compensation plans to account for costs, quality, and patient satisfaction. The hard questions are when to make the move toward value and how to prepare for this change.
The challenges are not small: Combining production data, benchmarks, bonus structures, and incentives can translate into a viable physicians-compensation model, but it is often difficult to measure which physicians are responsible for what happens in a group. Some important things to think about are developing a long-term strategy, learning how to evaluate the latest compensation methodologies, figuring out the best equation for your group, and determining how you will access the necessary data.
Todd Evenson, MBA, vice president of consulting services and data solutions for the Medical Group Management Association and American College of Medical Practice Executives (MGMA–ACMPE), and Jeffrey B. Millburn, MBA, shared their suggestions in identifying quality and cost benchmarks for determining change and exploring value-based compensation methodologies. Their session, entitled “The Evolution of the Physician Compensation Plan: Volume to Value,” was held on October 7, 2013, at the MGMA 2013 Annual Conference in San Diego, California.
Volume Versus Value Traditionally, two of the most prominent ways of calculating physician productivity and compensation were volume-based measurements attached to the number of patients that physicians see and the dollar amounts that they bill for (or collect). Thinking more strategically about compensation methodologies is serious business because it’s clear that the reimbursement models are going to change, Evenson says. Starting in 1991, as time passed, more compensation plans were built around RVU production, a method for calculating the volume of work or effort expended by a physician in treating patients. Something completely different is starting to happen today, Evenson says. “The types of compensation plans you should be considering should move past the fee-for-service model into a more value-based equation,” he says. Consider models that enhance value by improving quality and reducing cost, with a focus on three key quality arenas: clinical quality, patient experience, and outcomes. While practices—and hospitals—are taking initial steps on the road to value, hospitals continue to track RVU production. “About half of the hospital systems I’ve seen track RVUs,” Millburn says. According to Milburn, the measurements used are 100% production or salary plus production (which covers RVUs, clinical time, encounters, and administrative time). He is beginning to see, however, traditional physician compensation plans being supplemented with add-ons; in these stacked compensation systems, production, patient satisfaction, and clinical quality are built into the plan. “It looks like a multilayered sandwich,” he says. When devising a plan, practices need to consider the different types of reimbursement coming into the group, such as fee-for-service payment, incentives, bundling, and sharing. Decisions must be made concerning the percentage of income to keep at the group and physician levels—and who will make those determinations. The answers are driven by the culture of the physicians, but it’s not going to be easy. “When we are doing compensation plans with groups, we can’t keep it simple anymore,” he notes. Finding Quality Benchmarks For a number of years, many groups have been measuring the quality of patient experience or satisfaction, providing an indicator besides RVUs by which to measure physicians’ performance. An incentive plan usually sits up on top of a compensation plan, Milburn says, and the amount must be meaningful: For $5,000, a primary-care physician might pay attention, but a cardiac surgeon might not take notice. “I like to see multiple metrics, so if a physician doesn’t score on one, there’s a good chance to get two or three others,” Milburn says. He suggests that additional measures that are easier to meet should be included to make it possible for physicians to reach their incentive goals. Clinical quality is also being seen as add-on compensation today, usually among hospital physicians. Indicators commonly used include CMS Physician Quality Reporting System measures. Sources of physician-quality ratings (such as Angie’s List and HealthGrades) are multiplying and can be found in the consumer and payor arenas. In addition, CMS has added physician-quality measurements to its Hospital Compare website through quality and resource-use reports. Aetna Aexcel®, Cigna’s Provider Excellence Recognition Directory, and the UnitedHealth Premium® physician-designation program all rate physicians based on designated quality measures. “One way or another, you want to keep quality high and keep cost down,” Milburn says. “The best way to keep cost down is managerial utilization.” Before introducing any benchmark into your group’s model, take a hard look at how the data are gathered and reported, Milburn advises. Are your data being tracked correctly? Do you understand the measurements being used to rate the quality of a physician or medical group? Groups can ask to audit payors’ data to ensure that accurate information is being reported. Payors have made mistakes, such as attributing patients incorrectly to a group, Milburn reports. The National Committee for Quality Assurance’s Physician Practice Connections® recognizes practices that use systematic processes and IT to enhance the quality of patient care. There are nine standards and three levels of recognition, and practices seeking recognition complete a Web-based data-collection process. Using this tool might be a good shortcut, instead of calculating benchmarks from six different payors, because everything comes from one place, Milburn suggests. The Data Linchpin Whichever behaviors you decide to compensate, be sure that performance measurement is based on solid data. “Data are extremely important as you make these decisions,” Evenson says. Consider how to use data in addressing and assessing the current levels of compensation within your organization, and the more data, the better, Evenson says. A variety of different tools are available across the industry, including MGMA worksheets and workbooks downloadable from the group’s website (www.mgma.com) and the MGMA DataDive, also available to members on the MGMA website. “If you are in a small group and you currently aren’t collecting quality or satisfaction data, you need to be thinking about how to fund that activity,” Evenson says. In the meantime, work with your practice’s members to designate a quality measurement that you can define and agree upon—as a group. “That's a challenge, in and of itself,” Evenson says. After the quality measurement has been defined, let it remain in the workplace for a while until the group dynamic starts to change. If the desired effect does not occur, tweak (instead of dumping) the measurement. “If you are in the space today of measuring satisfaction, the Clinician and Group Consumer Assessment of Healthcare Providers and Systems (CGCAHPS) survey is an excellent methodology for looking toward measuring patients’ experience,” Evenson says. CGCAHPS is a standardized tool used to measure patients’ perceptions of the care provided by physicians in an office setting. Time of Transition The medical industry will be dealing with production-based measurements for years to come, Evenson and Milburn agree. Currently, some groups are basing 30% to 40% of their compensation on a production measurement, with quality and patient satisfaction accounting for 10% to 20% of compensation. “Many groups and statisticians will say you probably will have to get 20% to 25% of compensation at risk before you’ll change behaviors,” Evenson says. Planning for a value-based future does not necessarily mean that every practice should eliminate its fee-for-service compensation plan immediately. “I would advise smaller or midsized groups to tie your compensation plans, at some level, to your reimbursement methodology. If you are still predominantly receiving fee-for-service payment, it makes a lot of sense to stay in that vein,” Evenson explains. He still suggests, however, that quality and satisfaction should be included as small components. As we look more toward patients’ experiences, you might be measured by your waiting time or how your parking lot looks. Does that affect the clinical quality of care? It doesn’t, but patients’ experiences are going to be measured, and all factors that are part of the business side of a practice will be considered, Evenson says. Some observers believe that in time, all care will be paid for based on value. “I’m not quite convinced of that. I think we will continue to have fee-for-service payment,” Milburn concludes, along with methods for tracking value. Deborah Hauss is a contributing writer for Health CXO.
| Production Today | Value Tomorrow |
|---|---|
| •100% Production | Quality + cost = value |
| -RVUs | -Bonus structure |
| -Clinical time | -Carrot and stick |
| -Encounters/td> | -Team goal rewards |
| -Administrative time | -Citizenship credit |
| •Salary plus production | -Cost efficiency and QRUR scores |
Volume Versus Value Traditionally, two of the most prominent ways of calculating physician productivity and compensation were volume-based measurements attached to the number of patients that physicians see and the dollar amounts that they bill for (or collect). Thinking more strategically about compensation methodologies is serious business because it’s clear that the reimbursement models are going to change, Evenson says. Starting in 1991, as time passed, more compensation plans were built around RVU production, a method for calculating the volume of work or effort expended by a physician in treating patients. Something completely different is starting to happen today, Evenson says. “The types of compensation plans you should be considering should move past the fee-for-service model into a more value-based equation,” he says. Consider models that enhance value by improving quality and reducing cost, with a focus on three key quality arenas: clinical quality, patient experience, and outcomes. While practices—and hospitals—are taking initial steps on the road to value, hospitals continue to track RVU production. “About half of the hospital systems I’ve seen track RVUs,” Millburn says. According to Milburn, the measurements used are 100% production or salary plus production (which covers RVUs, clinical time, encounters, and administrative time). He is beginning to see, however, traditional physician compensation plans being supplemented with add-ons; in these stacked compensation systems, production, patient satisfaction, and clinical quality are built into the plan. “It looks like a multilayered sandwich,” he says. When devising a plan, practices need to consider the different types of reimbursement coming into the group, such as fee-for-service payment, incentives, bundling, and sharing. Decisions must be made concerning the percentage of income to keep at the group and physician levels—and who will make those determinations. The answers are driven by the culture of the physicians, but it’s not going to be easy. “When we are doing compensation plans with groups, we can’t keep it simple anymore,” he notes. Finding Quality Benchmarks For a number of years, many groups have been measuring the quality of patient experience or satisfaction, providing an indicator besides RVUs by which to measure physicians’ performance. An incentive plan usually sits up on top of a compensation plan, Milburn says, and the amount must be meaningful: For $5,000, a primary-care physician might pay attention, but a cardiac surgeon might not take notice. “I like to see multiple metrics, so if a physician doesn’t score on one, there’s a good chance to get two or three others,” Milburn says. He suggests that additional measures that are easier to meet should be included to make it possible for physicians to reach their incentive goals. Clinical quality is also being seen as add-on compensation today, usually among hospital physicians. Indicators commonly used include CMS Physician Quality Reporting System measures. Sources of physician-quality ratings (such as Angie’s List and HealthGrades) are multiplying and can be found in the consumer and payor arenas. In addition, CMS has added physician-quality measurements to its Hospital Compare website through quality and resource-use reports. Aetna Aexcel®, Cigna’s Provider Excellence Recognition Directory, and the UnitedHealth Premium® physician-designation program all rate physicians based on designated quality measures. “One way or another, you want to keep quality high and keep cost down,” Milburn says. “The best way to keep cost down is managerial utilization.” Before introducing any benchmark into your group’s model, take a hard look at how the data are gathered and reported, Milburn advises. Are your data being tracked correctly? Do you understand the measurements being used to rate the quality of a physician or medical group? Groups can ask to audit payors’ data to ensure that accurate information is being reported. Payors have made mistakes, such as attributing patients incorrectly to a group, Milburn reports. The National Committee for Quality Assurance’s Physician Practice Connections® recognizes practices that use systematic processes and IT to enhance the quality of patient care. There are nine standards and three levels of recognition, and practices seeking recognition complete a Web-based data-collection process. Using this tool might be a good shortcut, instead of calculating benchmarks from six different payors, because everything comes from one place, Milburn suggests. The Data Linchpin Whichever behaviors you decide to compensate, be sure that performance measurement is based on solid data. “Data are extremely important as you make these decisions,” Evenson says. Consider how to use data in addressing and assessing the current levels of compensation within your organization, and the more data, the better, Evenson says. A variety of different tools are available across the industry, including MGMA worksheets and workbooks downloadable from the group’s website (www.mgma.com) and the MGMA DataDive, also available to members on the MGMA website. “If you are in a small group and you currently aren’t collecting quality or satisfaction data, you need to be thinking about how to fund that activity,” Evenson says. In the meantime, work with your practice’s members to designate a quality measurement that you can define and agree upon—as a group. “That's a challenge, in and of itself,” Evenson says. After the quality measurement has been defined, let it remain in the workplace for a while until the group dynamic starts to change. If the desired effect does not occur, tweak (instead of dumping) the measurement. “If you are in the space today of measuring satisfaction, the Clinician and Group Consumer Assessment of Healthcare Providers and Systems (CGCAHPS) survey is an excellent methodology for looking toward measuring patients’ experience,” Evenson says. CGCAHPS is a standardized tool used to measure patients’ perceptions of the care provided by physicians in an office setting. Time of Transition The medical industry will be dealing with production-based measurements for years to come, Evenson and Milburn agree. Currently, some groups are basing 30% to 40% of their compensation on a production measurement, with quality and patient satisfaction accounting for 10% to 20% of compensation. “Many groups and statisticians will say you probably will have to get 20% to 25% of compensation at risk before you’ll change behaviors,” Evenson says. Planning for a value-based future does not necessarily mean that every practice should eliminate its fee-for-service compensation plan immediately. “I would advise smaller or midsized groups to tie your compensation plans, at some level, to your reimbursement methodology. If you are still predominantly receiving fee-for-service payment, it makes a lot of sense to stay in that vein,” Evenson explains. He still suggests, however, that quality and satisfaction should be included as small components. As we look more toward patients’ experiences, you might be measured by your waiting time or how your parking lot looks. Does that affect the clinical quality of care? It doesn’t, but patients’ experiences are going to be measured, and all factors that are part of the business side of a practice will be considered, Evenson says. Some observers believe that in time, all care will be paid for based on value. “I’m not quite convinced of that. I think we will continue to have fee-for-service payment,” Milburn concludes, along with methods for tracking value. Deborah Hauss is a contributing writer for Health CXO.