View
0
Download
0
Category
Preview:
Citation preview
4/20/2015
1
Exclusive to Healthcare. Dedicated to People. SM
Copyright 2013, INTEGRATED Healthcare Strategies. All rights reserved.
Developing an Effective, Relevant and Compliant
Physician Compensation Model in Today’s Challenging Market
Presented to:
Becker’s Roundtable
May 2015
Exclusive to Healthcare. Dedicated to People. SM
Agenda
• About Integrated
• Relevant Effective Physician Compensation Plans
• Healthcare Trends Generally
• Physician Compensation Trends
• Compliant Physician Compensation Plans
• Compensation Philosophy
• Compensation Benchmarking
• Compensation Governance
• Compensation Administration
• Appendix
1
Exclusive to Healthcare. Dedicated to People. SM
ABOUT INTEGRATED
2
4/20/2015
2
Exclusive to Healthcare. Dedicated to People. SM
Who We Are
INTEGRATED provides a range of interconnected solutions – compensation, employee, and physician engagement, labor, governance, physician services, and executive placement – that together help you align people, pay, and performance throughout your organization
3
PHYSICIAN SERVICESMaximize performance and
physician affiliations
TOTAL COMPENSATION & REWARDSEnhance your organization’s success with complete compensation solutions
GOVERNANCE & LEADERSHIPGain confidence with the complexities of
healthcare governance
HR CONSULTINGEnhance the power of the people-
side of your business
MSA EXECUTIVE SEARCHConnect with the firm that specializes in
healthcare leadership placement
ENGAGEMENT SURVEYSQuantify and improve engagement
to drive business performance
MERGER & ACQUISITION ADVISORYMaximize your operational and
financial performance
ONE Source,YOUR Solutions
Exclusive to Healthcare. Dedicated to People. SM
• We are the leading national physician compensation authority for healthcare organizations
– Clients in all 50 states that encompass the full spectrum of healthcare organizations from large integrated health systems to small rural community hospitals
– Largest client base of not-for-profit healthcare organizations including more than 350 major healthcare organizations with a total of more than 900 hospitals and over 500 physician groups
• We provide consulting services in many areas around physician practices:
– Cash compensation model design and implementation
– Conducting fair market value and commercial reasonableness assessments
– Development and review of various physician affiliation arrangements
– Conducting physician practice operations assessments
– Development and review of physician leadership/administrative positions
– Assisting in the development of physician governance and leadership structures
• Over the last 20 years, we have conducted over 35,000 assessments covering almost every medical specialty and in all types of practice settings; we have conducted more fair market value opinion assessments than any other firm in the country
Physician Services Overview
4
Exclusive to Healthcare. Dedicated to People. SM
HEALTHCARE TRENDS IMPACTING PHYSICIAN COMPENSATION
5
4/20/2015
3
Exclusive to Healthcare. Dedicated to People. SM
Heath System’s Bottom
Line
Heath System’s Bottom
Line
Increase in self insured benefit
plan costs
Increase in self insured benefit
plan costs
Competitors participating in
ACOs and other shared savings
models
Competitors participating in
ACOs and other shared savings
models
Payers buying PCP groups
Payers buying PCP groups
Competitors buying PCP
groups
Competitors buying PCP
groups
Shift in payor mix – more
Medicare and Medicaid
Shift in payor mix – more
Medicare and Medicaid
Competitors advertising as low cost/high
quality alternative
Competitors advertising as low cost/high
quality alternative
Payers driving patients to a lower cost alternative
Payers driving patients to a lower cost alternative
Patients with high deductibles
and more access to
information
Patients with high deductibles
and more access to
information
Pressures on Health Systems
6
Healthcare Trends
Exclusive to Healthcare. Dedicated to People. SM
Physician Shortfall Across Specialties• An Association of American Medical Colleges analysis shows a “critical shortfall” in the number of
physicians across all specialties, including primary care. This isn’t just due to coverage expansion under health reform, but also retirements and specialty choice.
Healthcare Trends
916,000
851,300
798,500
723,400
785,400
759,800
735,600
709,700
0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000
2025
2020
2015
2010
Total
Shortage
91,500
Total
Shortage
130,600
Supply (All Specialties)
Demand (All Specialties)
Supply (All Specialties)
Demand (All Specialties)
Supply (All Specialties)
Demand (All Specialties)
TotalShortage
13,700
TotalShortage
62,900
Demand (All Specialties)
Supply (All Specialties)
Source: “Healthcare Trends and Issues Driven by Health Reform”, C-Suite Resources
7
Exclusive to Healthcare. Dedicated to People. SM
Increasing Demand for Advanced Practice Clinicians (“APCs”)
8
With the shift to a value-based payment model, healthcare organizations will need to focus on efficiency, evidence-based treatment protocols, and coordination of care
Using more APCs to treat patients will allow for more physician time for patients with chronic illnesses (even with the physician’s supervision responsibilities) and encourage patient-centered coordination of care
Most hospitals have increased the size of their APC workforce in the past year, are planning to increase the number in the future and recruiting APC’s has become one of the biggest areas for recruitment firms
Healthcare Trends
4/20/2015
4
Exclusive to Healthcare. Dedicated to People. SM
Healthcare Trends
Healthcare Reform Eventually Impacts Physician Compensation
• Financial pressure from reform significant:
– Patient responsibility for payment has increased from 9% in 2007 to 30% in 2012 and expected to increase to almost 40% with increase in high deductable plans and insurance exchanges
• This will make self pay the #3 payer behind Medicare and Medicaid
– Medicare and Medicaid reimbursement down estimated 1% per year for next 5 years with shift from volume to value
– Hospitals losing best customers (baby boomers) to Medicare
• 5,000 to 10,000 people move from commercial insurance rates to Medicare rates every day
• Restructuring healthcare delivery model through ACOs will place a greater emphasis on:
– Accountability
– Quality of care
– Effective cost management
– Reliable performance measures
9
Exclusive to Healthcare. Dedicated to People. SM
A Shift From Volume to Value
Healthcare Delivery is Moving from Volume to Value-Based Care:1
• Many payers and providers expect value-based reimbursement to overtake fee-for-service by 2020
• Seven current trends to value-based reimbursement:
10
Reimbursement landscape changing faster than anticipated
• Roughly 90% of payers and 80% of providers already using some mix of value-based and FFS
Collaborative regions are more aligned with value-based reimbursement
• Regions where one or two payers stand out are more aligned than regions with multiple payers
Alignment with value-based reimbursement is influenced by the care delivery model
• ACOs are significantly closer to value-based reimbursement than non-ACOs
Pay-for-Performance Leads the Pack
• Of existing value-based models, the proportion of business aligned with P4P is projected to grow the most
Existing Healthcare IT Systems are Not Aligned with Value-Based Reimbursement
• Payers and providers characterize P4P as very difficult or extremely difficult to implement
• Additionally, they rate episode of care/bundled payment and others (e.g., shared savings) similarly
Primary Obstacles Needed to Address for Value-Based Reimbursement are Tech-Related
• Led by a need to integrate internal, vendor, and collaborative IT systems, as well as data collection, access, and analytics
Technology to Catalyze Clinician Engagement Will be Crucial to Value-Based Success
• Number one challenge to the success of value-based reimbursement is a lack of clinician buy-in and engagement with value-based reimbursement
1 McKesson Corporation, The State of Value-Based Reimbursement and the Transition from Volume to Value in 2014 (2014)
Exclusive to Healthcare. Dedicated to People. SM
A Shift From Volume to Value
Why Isn’t Change Coming Faster?
• Most organizations don’t have the capabilities to manage population health or insurance risk
– Large provider organizations don’t have the infrastructure, and aren’t willing to invest in it
– Small organizations don’t have the capital to invest in it
– Change requires both the appropriate business units and culture change
• A payer cannot by itself manage population health
– Payers have good databases on members’ health, but have no ability to intervene to treat a condition or prevent it from becoming worse
– Payers focus is on cost management versus true population health management
11
4/20/2015
5
Exclusive to Healthcare. Dedicated to People. SM
A Shift From Volume to Value
What Is Being Done
• Most organizations haven’t yet implemented population health management techniques and strategies, but many are taking this time to learn how to do it
– This will allow forward thinking organizations to adapt quickly when reimbursement methodologies change
• Employing physicians - particularly primary care physicians
• Implementing electronic health records
• Using self-insured medical plans as a proving ground for population health management techniques
12
Exclusive to Healthcare. Dedicated to People. SM
TRENDS IN PHYSICIAN COMPENSATION
13
Exclusive to Healthcare. Dedicated to People. SM
Trends in Physician Compensation
• Pay for Performance is critical:
– According to the 2014 Physician Compensation and Production Survey put out by the Medical Group Management Association (“MGMA”), approximately 40% of all medical practices reported in the survey compensate their physicians based on 100% productivity models
• Work relative value units (“wRVUs”) still dominant – although many organizations shifting to net professional collections or a “market” wRVU rate that is benched to professional collections
– “Quality” becoming a much bigger component of compensation as organizations move from volume to value
– Other incentives (e.g., expense management, network / system based incentives, service line incentives, etc.) becoming more prevalent
• Definition of “Performance” is changing:
– “Quality” compensation, bundled payments, etc., becoming more important and require performance in new areas including:
• Improved health status for the defined population being served
• Percentage of patient care delivered within accepted clinical care protocols
• Patient satisfaction scores
• Physician satisfaction scores
• Reduction in readmissions
• Volume measures – panel size / p
14
4/20/2015
6
Exclusive to Healthcare. Dedicated to People. SM
• Focus on a few key performance areas with multiple metrics
• Typically range from 5% to 10% of a physician’s compensation
– Most organizations “phase in” and start with smaller amounts (e.g., $15,000 to $40,000 per physician for surgeons) and gradually increase amount over time
• These incentives are generally not additive, and must be “covered” (at least in part) with physician productivity, and/or are only paid if group financial triggers are obtained
• These incentives can be “goal” oriented (e.g., only paid if goal is achieved, or process oriented)
• Data and measurement systems will be critical to plan success
Must be a material part of
physician compensation
plan & equitable across system
Must be a material part of
physician compensation
plan & equitable across system
Must be “real” ,
actionable, and
measurable
Must be “real” ,
actionable, and
measurable
The incentives must be
developed with input by
physicians
The incentives must be
developed with input by
physicians
Quality Incentive Key Criteria:
15
Trends in Physician Compensation
Exclusive to Healthcare. Dedicated to People. SM 16
Quality / Citizenship
Production Incentive
Overhead
PhysicianTargeted
Compensation
Patient Satisfaction
Other (e.g., org.
needs)
CodingClinical Outcomes/Quality
Typically wRVUs
Based on market
Base Salary
“Typical” Compensation Model
Recognize the value of “non-productive” factors such as quality outcomes and patient satisfaction
Exclusive to Healthcare. Dedicated to People. SM
• Reimbursement Issues Impacting Physician Income
– Reduced reimbursement for physician services pushing more physicians to employment
– Payments shifting to “qualitative” areas and requires physicians to pursue new sources of revenue (e.g., Meaningful Use Funds, payer quality incentives, etc.)
– More healthcare organizations are reviewing their “investment” per physician and are basing compensation on their ability to pay competitively and what is best for the long term viability of the network
• Compensation Models Becoming More Complex/Have More Components:
– Clinical, administrative / medical directorship, call, teaching, research, APC supervision, recruitment, etc. typical in many models today
– Co-Management, shared savings, PCMH, bundled payments, etc. becoming more prevalent
– While this may be appropriate, “multiple” contracts/payments for services has increased compliance / fair market value issues e.g. “Stacking Compensation”
• This is a major area for outside regulators
17
Trends in Physician Compensation
4/20/2015
7
Exclusive to Healthcare. Dedicated to People. SM
Trends in Physician Compensation
Some have simplified their models such as Geisinger which utilizes the following primary care and specialty care compensation models:1
18
1 Health Affairs, How Geisinger Structures Its Physicians’ Compensation to Support Improvements in Quality, Efficiency, and Volume (2012)
80.0%
78.5% 8.0%
20.0%
13.5%
Specialist Compensation
Primary Care Compensation
Base Salary Participation in PCMH Incentive Bonus
Primary Care Compensation Model:
• Base Salary determined based on:
� Experience
� Specialty market rate
� Whether past performance is consistently above or below expected wRVU productivity
• Participation in PCMH paid on the basis of active participation in the hospital’s medical home model of care delivery
• Incentive Bonus determined based on:
� Quality (60%)
� Citizenship (6%)
� Financial performance (34%)
Specialist Compensation Model:
• Base Salary defined based on expected work effort including:
� Teaching
� Research
� Administrative services
� wRVU productivity
• Incentive Bonus determined based on:
� Quality (40%)
� Innovation (10%)
� Legacy: education and research missions (10%)
� Growth: increasing population hospital serves (15%)
� Financial (25%)
Exclusive to Healthcare. Dedicated to People. SM
Challenges in Shifting To “New” /Future Compensation Models
• Strategically it is difficult to manage the “straddle” between volume and value based payment. Misaligned physician compensation (e.g., wRVU based compensation) is a key component that inhibits change
19
Today’s Culture Tomorrow’s Strategy
Exclusive to Healthcare. Dedicated to People. SM
Challenges in Shifting To “New” /Future Compensation Models
1. Reimbursement - In most locales, reimbursement patterns haven’t changed enough to matter. The amount of revenue from risk-based contracts amounts to only 2.4% for the median hospital
2. Risk Adverse - Many hospitals and systems have chosen to wait and watch, rather than experiment. They have decided that they will be able to learn from others’ experience what works best, without having to invest or risk much in the early stages of learning
3. Infrastructure - Most hospitals and systems don’t have the information systems or data bases they need to measure or manage risk. Some are developing systems and data bases but not yet using them for measuring performance, others are acquiring or merging with health plans (or other non-traditional partners), or experimenting with their self-insured populations
4. Cost - Many hospitals and systems don’t have the resources needed to make the changes necessary to manage population health. Many can’t afford the information systems they would need and are exploring other alternatives—mergers, sales, affiliations instead.
20
4/20/2015
8
Exclusive to Healthcare. Dedicated to People. SM
Challenges in Shifting To “New” /Future Compensation Models
Practical Steps Organizations Have Used to Get Started
• Begin tying physician compensation to new metrics that work as well under pay-for-volume as under pay-for-value
– Define productivity as caring for more patients, not doing as much work as possible on fewer patients
– Physician compensation must reflect reimbursement patterns
– Link compensation to improving the health of the community
• Begin introducing advanced practice clinicians or expanding their use in primary care practices
• Introduce patient centered medical homes staffed to manage care of people with chronic diseases
• Develop IT capabilities for pinpointing care needs and begin tying physician pay to use of electronic health records
• Introduce access to care as a metric for primary care compensation
21
Exclusive to Healthcare. Dedicated to People. SM
PHYSICIAN COMPENSATION PHILOSOPHY DEVELOPMENT
22
Exclusive to Healthcare. Dedicated to People. SM
Development of a Compensation Philosophy
23
• The process used to transform an organization’s compensation program is as important to the success of the plan as the plan design
• Peer group market data must be reflective of the physicians being measured
The compensation philosophy should:
Comp Philosophy
Guide all compensation
planning decisions
Guide selection of an
appropriate peer group
Be consistent with the
organization’s mission and
strategy
4/20/2015
9
Exclusive to Healthcare. Dedicated to People. SM
Elements of a Well-Defined Philosophy:
• Roles of the Board/Committee and management
• Definition of peer group(s)
• Statement of principles underlying the compensation philosophy
– Support charitable mission, ensure rebuttable presumption, etc.
• Competitive positioning of total compensation compared to peer organizations
• Positioning and mix of individual compensation components:
24
Development of a Compensation Philosophy
Exclusive to Healthcare. Dedicated to People. SM
Development of a Compensation Philosophy
Who are the peer group(s)? Should the rate of pay continue to be linked to survey data and/or based on local market factors?
• National, regional, state comparisons
• Specialty groupings
How competitive is the compensation program relative to peers? Consider:
• Hospital strategic and operational challenges
• Organizational culture
• Recruiting and retention requirements
• Costs
Given variations in specific physicians’ contributions, to what degree should individual versus group performance drive compensation strategy?
25
Group PerformanceIndividual
Performance
Exclusive to Healthcare. Dedicated to People. SM
Development of a Compensation Philosophy
What specific goals should be included ?
• Ensure external competitiveness
– Enhance recruiting ability
– Assist in retention of talented individuals
• Ensure internal equity
• Maintain financial affordability
• Align compensation with organization’s business strategy, mission, and culture
• Achieve the appropriate balance between each element of total compensation (e.g., salary, incentives, benefits, etc.)
• Provide the foundation for compensation decisions
• Ensure compliance with legal and regulatory guidelines
• Reward top performance
• Statement of principles underlying the compensation philosophy
– Support charitable mission, ensure rebuttable presumption, other goals, etc.
26
4/20/2015
10
Exclusive to Healthcare. Dedicated to People. SM
Development of a Compensation Philosophy
Total Compensation Philosophy Drives Compensation Plan Design
• The “mix” of goals, and what an organization values, greatly impacts the structure of the compensation program
– Some clients very focused on productivity/collections
• Models almost exclusively based upon individual physician productivity and found in FFS environments
– Some focused on “quality” and outcomes
• Models tend to be found in more “managed” markets and in larger integrated health systems
– Some clients don’t use compensation models to be main driver of physician behavior but rather have a culture that drives physician behavior
• e.g., Cleveland Clinic, Mayo, Kaiser, etc. less likely to use incentives to drive performance. They have well defined “expectations” to support physician compensation (which generally is lower than other hospitals)
Physician Compensation Caps
• Many organizations place a cap on physician compensation to ensure compliance and appropriate alignment with incentives
• In many instances, the compensation cap does not limit cash compensation but instead triggers a review of cash compensation and productivity by the Board
27
Exclusive to Healthcare. Dedicated to People. SM 28
PHYSICIAN COMPENSATION BENCHMARKING
Exclusive to Healthcare. Dedicated to People. SM
Regulatory Framework and Fair Market Value Reviews
• Current legislation (Stark, Anti-kickback, Private Inurement) calls into question practically all physician/hospital financial arrangements
– FMV is a fundamental requirement under all of this legislation
• FMV is always a “facts and circumstances” situation
– Just because a competing health system “supposedly” offered the same deal does not make it fair market value
• IRS Section 162 provides guidance to include:
– Nature of the individual’s duties
– Individual’s expertise and background
– The size of the business
– Time devoted by the individual to the business
– The amount paid by similar sized businesses in the same area to equally qualified employees for similar services
29
4/20/2015
11
Exclusive to Healthcare. Dedicated to People. SM
“Fair Market Value” is defined as the
value in arms-length transactions consistent with the general market value. General market value means the price an asset would bring as a result of bona fide bargaining between well-informed buyers and sellers who are not otherwise in a position to generate business for the other party, or the compensation that would be included in a service agreement as the result of bona fide bargaining between well-informed parties to the agreement who are not otherwise in a position to generate business for the other party on the date of acquisition of the asset or at the time of the service agreement. Usually the fair market value is the compensation that has been included in bona fide service agreements with comparable terms at the time of the agreement, where the price or compensation has not been determined in any manner that takes into account
the volume or value of anticipated or
actual referrals 25th 50th 75th 90th
25th
50th
75th
90th
Productivity (Per FTE) Percentile
Co
mp
en
sati
on
(P
er
FT
E)
Perc
en
tile
30
Factors that influence FMV:
• National/regional market data
• Productivity
• Overhead
• Payor mix
• Reimbursement
• Quality/Performance
Regulatory Framework and Fair Market Value Reviews
Exclusive to Healthcare. Dedicated to People. SM
“Commercial Reasonableness”is defined as an arrangement that would make commercial sense if entered into by a reasonable entity of similar type and size and a reasonable physician of similar scope and specialty, even if there were no
potential designated health services
referrals
“Reasonable Compensation”
as described in Section 162 of the Internal Revenue Service (“IRS”), reasonable compensation is generally considered to be "...only
such amount as would ordinarily be
paid for like services by like enterprises under like
circumstances."
Productivity (Per FTE) Percentile
Co
mp
en
sati
on
(P
er
FT
E)
Perc
en
tile
25th 50th 75th 90th
25th
50th
75th
90th
Factors that influence commercial reasonableness:
� Duties of physician
� Practice profitability
� Community need
� Market competitiveness
� Training
� Experience
31
Regulatory Framework and Fair Market Value Reviews
Exclusive to Healthcare. Dedicated to People. SM
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
$300.0
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
wRVUs
Cas
h C
om
pen
sa
tio
n (0
00
s)
New Physician
Lower than Expected
Compensation
Lower than Expected
Compensation
P50 = $194.3
P25 = $162.0
P75 = $238.5
P90 = $295.1
P25 = 4,059 P50 = 4,882 P75 = 5,852 P90 = 6,980
Higher than Expected
Compensation
Higher than Expected
Compensation
32
Physician Benchmarking Example
4/20/2015
12
Exclusive to Healthcare. Dedicated to People. SM
Fair Market Value Reviews
INTEGRATED’s FMV Philosophy:
• FMV is not a single number but a range of values and, for physician compensation, is generally considered to include:
– How the physician is paid (compensation model structure)
– The process that is followed to determine physician compensation
– What the physician is paid (compared to similar physicians)
– On-going management of the contract (e.g., documentation, benchmarking future compensation to market, incentive payments, etc.)
• FMV is primarily considered to be based upon comparisons to survey data – more data driven
• Commercial reasonableness relies more heavily on “facts and circumstances” and factors impacting determination of reasonableness include:
– Market competitiveness – other offers; history of recruiting/retaining physicians; competitive environment
– Community need – staffing requirements; rural access
– Supply and demand for particular specialty
• FMV and commercial reasonableness are intertwined
33
Exclusive to Healthcare. Dedicated to People. SM
PHYSICIAN COMPENSATION GOVERNANCE
34
Exclusive to Healthcare. Dedicated to People. SM
Role of the Board
• Best practice to establish a separate and entirely independent compensation committee (typically the same committee that oversees executive compensation)
– Charged to oversee compensation for disqualified individuals (i.e., employed physician leaders, but not all physicians) and those agreements that are outside of the policy
– Charged to develop and oversee a physician compensation philosophy for those that are not disqualified
– Required to meet at least two or more times a year
– Required to report periodically to the whole board
• Oversight of the organization’s physician compensation program
– Ensure regulatory compliance (i.e., compensation model design, review outliers and highly compensated individuals)
– Ensure adequate linkage between the program’s objectives and the mission, vision and values of the system
– Ensure appropriate administration of the physician compensation program
35
4/20/2015
13
Exclusive to Healthcare. Dedicated to People. SM
Board Governance Best Practice
• Establish a clear and explicit Physician Compensation Philosophy and policy statement to be followed in overseeing compensation and to guide decision making
– Document rationale for exceptions to policy
• Develop and maintain a physician compensation program consistent with Hospital’s compensation philosophy and policies, prevailing market conditions, and ensure physician compensation provided is at fair market value and commercially reasonable
– Conduct regular audits to ensure processes are consistent with organizational policy
– Typically focus on highly productive physicians and physician leaders
• Develop policy guiding physician compensation program
• Charge the Committee with establishing a rebuttable presumption of reasonableness for all disqualified individuals
– Identify all disqualified physicians
– Review all items submitted on the Form 990, and understand what they are
36
Exclusive to Healthcare. Dedicated to People. SM
Establishing a Presumption of “Reasonableness”
• Ensure that all parties considering the compensation have no conflict of interest with regard to the physicians pay
– Exclude anyone from the process who may have a potential conflict, and document the exclusion
• Obtain and rely upon appropriate comparability data
– Determine whether that comparability data is truly appropriate for the position, and for the circumstances, and document
• Articulate the rationale for the Committee’s compensation decisions, and document
• Consider the long-term impact of the compensation package and positioning, and document
• Determine whether the physician’s compensation is reasonable and within FMV and commercially reasonable, and document
37
Exclusive to Healthcare. Dedicated to People. SM
Role of Hospital Management
• Obtain recently published market data
• Update internal market comparisons annually
• Ensure compensation models are competitive
• Identify potential compliance concerns, highly compensated individuals, etc.
– Obtain all relevant background information
• Seek outside review when appropriate
• Facilitate compensation philosophy, model development
• Establish & administer new hire guidelines
• Prepare annual report for the Committee
– Compensation relative to market
– Outlier analysis
– Update on physician program issues/changes
38
4/20/2015
14
Exclusive to Healthcare. Dedicated to People. SM
Hospital/Management Governance
Hospital/Management Responsibilities:
• Establish a solid, defensible process that relies on documented compensation policies, procedures and philosophies
– Defines review process and when outside evaluation is necessary
• Establish a defined oversight process and committee structure
• Annually review compensation to ensure compensation within FMV
• Document the process and the findings for each physician and pay particular attention to those issues that can create problems including:
– Conflicts of interests
– Internal benchmarking
– Inconsistent application of defined process
– Lack of internal knowledge
– Poorly constructed contracts and/or job descriptions
– Poor read of the “facts and circumstances” involving the Agreement e.g., what is the intent of the contract?
– Ensure there must exist a legitimate business purpose e.g., cannot reward physician referrals
– Watch for “stacking” of economic financial agreements with physicians e.g., pay for clinical, administrative, call coverage, etc.
39
Exclusive to Healthcare. Dedicated to People. SM
Best Practice
Preventative Measures:
• Always ask these key questions before initiating an economic relationship with a physician:
– Why are we entering into this arrangement?
– How was the need determined?
– Did we utilize the defined process in establishing the compensation?
– What is the market position of the proposed compensation?
– Are the duties/services well defined e.g., measureable, actionable and of value?
• Use the established process
• Limit the number of “negotiators” in the process e.g., no side negotiations
• Ensure that all parties understand the reason for the process
• Conduct routine reviews of the value for services versus the payment provided
• Have qualified health care legal counsel and involve them throughout the process
40
Exclusive to Healthcare. Dedicated to People. SM
PHYSICIAN COMPENSATION PLAN ADMINISTRATION
41
4/20/2015
15
Exclusive to Healthcare. Dedicated to People. SM
Physician Compensation Plan Administration
Compensation Review Processes
• Healthcare organizations entering into, modifying, or renewing financial relationships with physicians and other providers must comply with multiple federal and state laws
• INTEGRATED recommends that every organization:
– Conduct an annual audit of their physician compensation to determine any potential compliance risks that may require further review
– Implement a clearly defined process for entering into or modifying physician contracts
42
Exclusive to Healthcare. Dedicated to People. SM 43
YES
YES
YES
YES
NO
NONO
NO
Total cash comp1 is < P50?
No outside review
Productivity clinical payout rate ≤ P75 and other
cash components are at FMV?
Outside review for FMV and commercial
reasonableness
Outside review conducted
within the past 2 years, no change to cash
model and other cash components
Total cash comp is < P90?
Internal audit of practice:1. Chart audit2. CPT coding audit3. Patient satisfaction4. Malpractice claims5. Admin time log audit if
receiving admin stipend
(1) Total cash comp includes all cash components:a) Clinicalb) Administrativec) Teachingd) Researche) Call Payf) Other
1 – with sufficient full time work effort demonstrated via hours, call coverage, productivity, etc.
Physician Compensation Plan Administration
Sample FMV Audit Framework
Exclusive to Healthcare. Dedicated to People. SM
Contract details finalized
(i.e., compensation, term, duties, etc)
Renewal or New contract identified
Accountable Executive takes
contract to appropriate
management committee for
decision
Contract completed and
reviewed by Accountable
Executive
Accountable Executive to obtain
physician(s)signature(s)
Accountable Executive executes contract, distributes originals to physician, Legal & File
and initiates any necessary payrollprocess
Updated / NewContract added
to database
YES
NO
Approved?
Accountable Executive requests
contract from Legal Department
Note: Recommended to develop a master database that tracks all
contracts (i.e., Employment, PSA, Medical Director)
Contract details (Term Sheet or Letter of
Intent) communicated to Internal Resource or External Consultant for Fair Market Value (FMV)
Review
Proposed Compensation represents Fair Market Value?
YES
NO
Note: This is where a Compensation Committee would sign-off on
Economic Relationships per policy
Physician Compensation Plan Administration
Recommended Process for New Contracts or Renewals
44
4/20/2015
16
Exclusive to Healthcare. Dedicated to People. SM
APPENDIX
45
Exclusive to Healthcare. Dedicated to People. SM
Current Physician Clinical Compensation Models
The four models typically found in the market today are defined as follows:
• Access - Access compensation model will apply to physicians whose primary objective is to provide access to care either within a low volume specialty or at outreach locations (e.g., forensics, genetics)
• Hospital Based – Hospital Based compensation model will apply to physicians who are primarily shift based within the hospital (e.g., hospitalists)
• Productivity – Productivity compensation model will apply to physicians whose primary objective is to provide clinical services or surgery/procedures (e.g., orthopedics, cardiology, GI)
• Group Productivity – Group Productivity compensation model will apply to departments whose primary objective is to provide group based services where individual physicians work in a team environment (e.g., neurology, nephrology, Ob/Gyn)
46
Exclusive to Healthcare. Dedicated to People. SM
Model Option 1: Access Physicians
Access - Access compensation model will apply to physicians whose primary objective is to provide access to care either within a low volume specialty or at outreach locations
47
Compensation Model Components Model Characteristics1. Total compensation opportunity is determined by physician
experience/qualifications and market dynamics related to the specialty
a. Base salary is the primary compensation componenti. typically between 40th and 75th percentiles depending
upon level of performance incentive
2. Annual Performance Incentivea. Typically 5% - 10% of base salaryb. Primarily “quality” and “service” goals rather than
production
1. Base Salary
2. Annual Performance Incentive
Total Compensation Opportunity
4/20/2015
17
Exclusive to Healthcare. Dedicated to People. SM
Model Option 2: Hospital Based Physicians
Hospital Based – Hospital Based compensation model will apply to physicians who are primarily shift based within the hospital (e.g., hospitalists)
48
Compensation Model Components Model Characteristics1. Base Salary defined as “X” work = 1.0 FTE
(set by Division Chief and specialty specific). Base salary targeted around market median, but can vary based on experience.
2. Production incentive pool is funded based on group productivity over group threshold, The incentive pool can be allocated by any of the following metrics:
• FTE level/experience• Quality• Production (individual)• Other (night shifts, etc.)
3. Annual Performance Incentive• Typically 5% to 10% of base salary• Typically based upon service line clinical
outcomes, quality and satisfaction
# of FTEs 50th Percentile1. Base
Compensation Pool
Group Work RVUs over Threshold
Conversion Factor
2. Production Incentive
Compensation Pool
Total Compensation Opportunity
3. Annual Performance Incentive
Exclusive to Healthcare. Dedicated to People. SM
Model Option 3: Individual Productivity Physicians
Productivity – Productivity compensation model will apply to physicians who are expected to be clinically productive and have ability/patient volumes to support competitive incomes with productivity
Compensation Model Components Model Characteristics1. Based on individual productivity
• Can be measured on wRVUs, collections, panel size, etc.
• Conversion factor typically targeted around the market median
2. Annual Performance Incentive• Typically 5% to 10% and can be carved out or
additive to conversion factor, but must be examined in total cash
• Typically based upon individual clinical outcomes and satisfaction
Total Compensation Opportunity
Work RVU
Production
Conversion
Factor
1. Production Compensation
2. Annual Performance Incentive
49
Exclusive to Healthcare. Dedicated to People. SM
Model Option 4: Group Productivity Physicians
Group Productivity – Group Productivity compensation model will apply to specialties whose primary objective is to provide group based services where individual physicians work in a team environment
50
Compensation Model Components Model Characteristics1. Based on group productivity
• Can be measured on wRVUs, collections, etc…• Conversion factor typically targeted around the
market median• Production compensation pool is distributed to each
physician based on measures (such as): – FTE level– Production (individual)– Outreach/programmatic initiatives
2. Annual Performance Incentive• Typically 5% to 10% and can be carved out or
additive to conversion factor, but must be examined in total cash
• Typically based upon individual clinical outcomes and satisfaction
Work RVUProduction
Conversion Factor
1. Production Compensation Pool
Total Compensation Opportunity
2. Annual Performance Incentive
Recommended