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As an increasing number of physicians opt for the relative stability of employed positions over private practice, hospitals and health systems nationwide face a challenge in creating physician compensation plans that are both sustainable and competitive.
The structure and ongoing management of physician compensation are critical to successful physician engagement and overall organizational financial performance. Unfortunately, most compensation models commonly used today are ill suited to address the rapid and significant changes under way and on the horizon in the U.S. healthcare market. Salary-based models, for example, underperform as declining utilization and reimbursement leave organizations with less income to cover fixed compensation costs.
Compensation plans based on net income are better able to negotiate shifts in payment, but are not easily adaptable to value-based payment models. According to recent data from the Medical Group Management Association, organizations lose an average of $176,000 per year for every physician they employ—a figure that has trended upward in recent years and likely will continue to increase. As organizations struggle with these mounting losses, the importance of effective physician compensation grows exponentially.
To reverse this trend and strike an appropriate balance, healthcare leaders developing physician compensation models must:
For most hospitals and health systems, physician employment is an 'investment' that loses money on a direct basis, but is necessary to the ongoing business and go-forward strategy. Understanding the current and future costs of the physician enterprise is essential. Organizations should both develop a thorough financial projection and define thresholds for physician investment to guide efforts to establish a compensation plan structure and manage the plan going forward.
Productivity-based compensation models are beneficial in ensuring patient access and helping to align physician compensation with revenues. Such models often measure productivity using work relative-value units (wRVUs), which are set by Medicare and are easy to measure and benchmark. Although these metrics were sufficient on their own under a fee-for-service business model, they now are better paired with non-productivity metrics.
Plans that incorporate both types of metrics should begin as largely productivity based and then increase the proportion of compensation tied to non-productivity metrics over time. As organizations see greater portions of their revenue derived from value-based arrangements, the compensation approach should evolve accordingly. Having 10 percent of physician compensation tied to non-productivity elements provides a good starting point for most organizations and markets—we have observed that allocations lower than 10 percent struggle to be material enough to influence physician behavior.
A strong compensation model also requires the ability to adapt physician compensation levels and structure as the market evolves. This does not mean that compensation can be changed without solid reason, but that reasonable triggers and timeframes are built in to balance the organization’s financial responsibility with the physician's need for clarity and stability. An example may be allowing for adjustments if physician losses exceed a certain dollar amount or if Medicare payment changes by more than 5 percent.
The question of how to effectively employ and manage physicians always has posed challenges for hospitals and health systems. Those challenges are compounded by health care's transition to the new value-based business model. Even so, organizations that adhere to the key elements outlined here can develop successful and sustainable physician compensation models that benefit both health systems and employed physicians.
Todd Fitz is a vice president in the strategy practice at Kaufman, Hall & Associates Inc., Skokie, Ill.
Publication Date: Monday, September 23, 2013
A leader from McKesson discusses how healthcare reform is forcing hospitals and health systems to take a different approach to capacity management and patient flow.
Patient financial engagement is more challenging than ever – and more critical. With patient responsibility as a percentage of revenue on the rise, providers have seen their billing-related costs and accounts receivable levels increase. If increasing collection yield and reducing costs are a priority for your organization, the metrics outlined in this presentation will provide the framework you need to understand what’s working and what’s not, in order to guide your overall patient financial engagement initiatives and optimize results.
Emad Rizk, MD, president and CEO of Accretive Health, discusses the uncertainty facing hospitals and the transitions affecting revenue cycle management.
No two patients are the same. Each has a very personal healthcare experience, and each has distinct financial needs and preferences that have an impact on how, when and if they chose to pay their healthcare bill. It’s no longer effective to apply static billing techniques to solve the complex challenge of collecting balances from patients. The need to tailor financial conversations and payment options to individual needs and preferences is critical. This presentation provides 10 recommendations that will not only help you improve payment performance through a more tailored approach, but take control of rising collection costs.
Jim Bohnsack, vice president, solution & corporate development for Conifer Health Solutions, explains how the company helps healthcare providers leverage data to deliver better outcomes while optimizing reimbursement for all payment arrangements.
This white paper, written by Apex Vice President of Solutions and Services, Carrie Romandine, discusses the importance of patient segmentation and messaging specifically related to the patient revenue cycle. Applying strategic messaging that is tailored to each patient type will not only better educate consumers on payment options specific to their billing needs, but it will maximize the amount collected before sending to collections. Further, targeted messaging should be applied across all points of patient interaction (i.e. point of service, customer service, patient statements) and analyzed regularly for maximized results.
Steve Scibetta, senior director of channel sales for Ontario Systems' healthcare product line, shares insights into effectively managing receivables.
This white paper, written by Apex President Patrick Maurer, discusses methods to increase patient adoption of online payments. Providers are now seeking ways to incrementally collect more payments due from patients as well as speeding up the rate of collections. This white paper shows why patient-centric approaches to online payment portals are important complements to traditional provider-centric approaches.
Elena White, vice president of risk, quality, and network solutions for Optum, discusses how healthcare providers can leverage data and technology as they enable risk in their organization.
Increased electronic engagement between healthcare providers and patients provides significant opportunities for improving revenue cycle metrics and encouraging patients to access EHRs. This article, written by Apex Founder and CEO Brian Kueppers, explores a number of strategies to create synergy between patient billing, online payment portals and electronic health record (EHR) software to realize a high ROI in speed to payment, patient satisfaction and portal adoption for meaningful use.
Somnia President and CEO Marc Koch, MD, MBA, explains how hospitals can drive transformative change in the perioperative experience for outstanding clinical and financial outcomes.
Faced with a rising tide of bad debt, a large Southeastern healthcare system was seeing a sharp decline in net patient revenues. The need to improve collections was dire. By integrating critical tools and processes, the health system was able to increase online payments and improve its financial position. Taking a holistic approach increased overall collection yield by 10% while costs came down because the number of statements sent to patients fell by 10%, which equated to a $1.3M annualized improvement in patient cash over a six-month period. This case study explains how.
PMMC President Roger L. Shaul discusses the effects of healthcare reform on revenue cycle management and how PMMC's products help clients adapt to a changing financial environment.
With the ICD10 deadline quickly approaching and daily responsibilities not slowing down, final preparations for October 1 require strategic prioritization and laser focus.
Greg Burgess, Founder and Chief Product Officer at Burgess Group shares insights and opportunities for payment integrity in the rapidly changing healthcare IT landscape.
Read how Gwinnett Medical Center provides clear connections to financial information, offers multiple payment options for patients, and gives onsite staff the ability to collect payments at multiple points throughout the care process.
Read how Orlando Health was able to perform deeper dives into claims data to help the health system see claim rejections more quickly–even on the front end–and reduce A/R days.
To maintain fiscal fitness and boost patient satisfaction and loyalty, healthcare providers need visibility into when and how much they will be paid–by whom–and the ability to better navigate obstacles to payment. They need payment clarity. This whitepaper illuminates this concept that is winning fans at forward-thinking hospitals.
Financial services staff are always looking for ways to improve the verification, billing and collections processes, and Munson Healthcare is no different. Read about how they streamlined the billing process to produce cleaner bills on the front end and helped financial services staff collect more than $1 million in additional upfront annual revenue in one year.
Effective revenue cycle management can be a challenge for any hospital, but for smaller providers it is even tougher. Read how Wallace Thomson identified unreimbursed procedures, streamlined claims management, and improved its ability to determine charity eligibility.
Before launching an energy-efficiency initiative, it’s important to build a solid business case and understand the funding options and potential incentives that are available. Healthcare leaders should consider taking the steps outlined in the whitepaper to ease the process of gaining approval, piloting, implementing, and supporting sustainability projects. You will find that investing in sustainability and energy efficiency helps hospitals add cash to their bottom line. Discover how hospitals and health systems have various options for funding energy-efficient and renewable-energy initiatives, depending on their current financial structure and strategy.
Health care is a dynamic mergers and acquisitions market with numerous hospitals and health systems contemplating or pursuing formal arrangements with other entities. These relationships often pose a strategic benefit, such as enhancing competencies across the continuum, facilitating economies of scale, or giving the participants a competitive advantage in a crowded market. Underpinning any profitable acquisition is a robust capital planning strategy that ensures an organization reserves sufficient funds and efficiently onboards partners that advance the enterprise mission and values.
The success of healthcare mergers, acquisitions, and other affiliations is predicated in part on available capital, and the need for and sources of funding are considerations present throughout the partnering process, from choosing a partner to evaluating an arrangement’s capital needs to selecting an integration model to finding the right money source to finance the deal. This whitepaper offers several strategies that health system leaders have used to assess and manage capital needs for their growing networks.
Copyright 2016, Healthcare Financial Management Association.
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