In September of last year, we published a brief guide with tips on preparing provider compensation plans for a value-based environment. Since then, we’ve talked to countless executives about those tips, and more. Here are a few takeaways from these recent experiences.
Compliance, FMV Opinions, & Compensation Gaps
In 2015, multiple hospitals and healthcare systems faced scrutiny from the OIG regarding allegations of Stark violations, resulting in more than $200 million in settlement payments. Furthermore, guidance has indicated the OIG plans to be more aggressive in investigating and pursuing physician compensation violations. For many organizations, this has led to a more conservative approach to determining and maintaining fair market value for provider contracts. As a result, we are noticing an uptick in two trends:
- Annual FMV review from a third party. We are receiving more requests to conduct regular analysis and testing for physician compensation programs. In these cases, we analyze total compensation and productivity for all physicians, using an algorithmic approach to identify physicians with high risk of overpayment. If potential issues are found, in-depth analysis can lead to the issuance of a formal FMV opinion or recommendations for adjusting compensation.
- Restrictions on total compensation. More and more physician contracts contain clauses that cap or restrict total compensation. We recommend creating total compensation thresholds that, if exceeded, trigger a temporary withholding of compensation and a coding and/or compensation review process. This allows for the organization to reduce overpayment risk, but is fair to high producers as they remain eligible for full payment if there are no issues during the review processes.
Organizations are struggling with advanced practitioner compensation and productivity
As patient demand increases and a physician shortage looms, many organizations are hiring advanced practitioners (APs) at a quickening pace. When done correctly, additional APs can enhance patient accesses by extending the clinical capacity of an employed provider network. We’ve compiled three tips based on commonalities from the most successful organizations.
- Focus on the practice model. Simply throwing an AP into a physician-centric practice won’t yield positive results. Instead, you must work with the providers and office staff to design a practice model that clearly delineates clinical duties.
- Rethink productivity measurement. After the practice model is defined, you should have a clear view of exactly how the AP will enhance practice productivity. In some circumstances, the AP may generate independent wRVUs. In others, the AP may perform non-billable duties in order to increase overall practice productivity. In these cases, you may need to retool your productivity measurement approaches to focus on team-based productivity totals rather than individual levels.
- Align incentives. Too often, AP compensation packages do not include incentives, or include incentives that are counterproductive to the goals of the desired practice model. As discussed above, wRVU models are not appropriate for all practice models. Additionally, existing physician incentives may create barriers to effective use of APs and, therefore, may also need to be adjusted to account for team-based production or quality goals.
Generating physician buy-in is the most critical component of any compensation redesign effort. Prior to any such engagement, we must effectively answer one universal question from skeptical physicians- “Why are you messing with my compensation?” The answer, of course, deals with the changing healthcare landscape and the impending transition to value-based payment programs. But we are discovering many physicians are not aware of the scope or timeline of these changes.
It is, therefore, immensely important to provide a proper education program in order to ensure your providers understand the key issues that are driving the transition to value. In our programs, we cover:
- The Merit-Based Incentive Payment System announced by CMS as part of the SGR fix.
- Hospital-based programs such as Value-Based Purchasing, CJR, and penalty programs for readmissions and hospital acquired conditions.
- Voluntary alternative payment models, such as Value-Based Care organizations and bundled payment programs.
Getting into the details of these programs may seem daunting, but doing so will allow your physicians to understand the transition to value is no longer an abstract, far-off concept. This will, in turn, generate understanding around the importance of updating the physician compensation structure.