Compensating Providers for the Value of Their Work

It’s hard to miss news reports discussing the shift in the basis for provider reimbursements from “volume” to “value.” Public (Medicare and Medicaid) and private payers are promoting value-based payment methodologies for physicians and hospitals — including “meaningful use,” “pay-for-performance,” “Accountable Care Organizations,” and “patient-centered medical homes.” So, what does value mean in your practice?

Balance price and product

Value is typically defined as the balance between price and product features. In health care, this appears as a combination of reducing costs and increasing quality. The current value initiatives achieve their goals through compensation plans that include target quality metrics that physicians and practices must meet.

Examples of those metrics include breast and cervical cancer screening, beta-blocker treatment after a heart attack, adult body mass index assessment and controlling high blood pressure. In 2013, around 3% of physician compensation was based on quality.

There are several initial steps that your practice should take to adapt to these value requirements from payers:

It’s critical that everyone agree on the strategies for improvement. When appropriate, coach clinicians on changing their practice behaviors.

In addition, many of the quality metrics used by payers are related to patient satisfaction. You can address them by implementing simple patient feedback and aggressively managing any problems raised by patients. If you haven’t already done so, familiarize yourself with the Medicare Physician Quality Reporting System.

Determine compensation

A critical challenge will be redesigning the methodology by which physicians and other clinicians are compensated. Start by deciding what you want to accomplish through the practice’s compensation plan. For example, what changes do you want to implement? And what goals or objectives do you want to achieve?

The first step is to set up a system to gather productivity and compensation data related to those goals, by physician. Likely data sources are internal financial reports, patient care records and payer analyses. To persuade doctors to accept the results and adjust their behavior accordingly, the data must be current, accurate and reliable.

Once you interpret the data that comes in, compare it to benchmark figures from the practice’s history, practices in the area and the industry in general. Then, identify any problem areas in the practice’s operations — either existing or impending.

The second step is to develop a compensation structure that uses the data to meet practice goals, adheres to legal and regulatory mandates, and aligns provider incentives with payer requirements. If there’s time, propose two or three alternative structures that serve the same purpose.

Keep in mind that the compensation scheme must meet two secondary practice needs: physician retention and recruitment. While reorienting doctors toward more value-based practice behaviors, you need to avoid alienating physicians so much that they leave the practice. The compensation plan must also be tolerable for new physicians joining the practice.

Keep score

Prepare a report on how the proposed plan would impact the practice as it’s presently functioning. Present scorecards to each clinician showing how well he or she is performing on the quality parameters. Then, translate this into potential changes in the compensation that the clinician would receive.

Through the practice’s governance procedures, decide whether to proceed with the plan, as described, or perhaps make adjustments. Make sure your implementation strategy enhances the likelihood of acceptance.

Stay on the right track

As your plan takes effect, monitor its effectiveness. For example, are key quality metrics improving? Are physicians satisfied with their earnings? And, are payers satisfied with the practice’s overall performance? Work with your advisors to ensure you’re on the right track.

© 2015