Value-based compensation models continue to evolve: Some examples

Jason P. Wilson, MD, MBA, FACS
Jason P. Wilson, MD, MBA, FACS

As health care systems and payors continue to move toward value-based health care, payment models also will need to evolve in order to adequately represent the full spectrum of the contributions surgeons make to their patients and communities. During the session Surgeons’ Contributions to Value-based Compensation on Monday morning, October 25, panelists identified the gaps in formulaic compensation models that integrate quality and payment and offered strategies for implementing alternate reimbursement models.

“We have seen a transition of payment from usual, customary, and reasonable fees to the Medicare Physician Fee Schedule or RVU-based compensation,” said Jason P. Wilson, MD, MBA, FACS, medical staff president, Morton Plant North Bay Hospital, Clearwater, FL, and the American College of Surgeons (ACS) Young Fellows Association Liaison to the ACS General Surgery Coding and Reimbursement Committee. “Now, we are seeing a transition from volume-based relative value units (RVU)-based compensation to a more value-based compensation,” he said.

Jayme D. Lieberman, MD, FACS
Jayme D. Lieberman, MD, FACS

Dr. Wilson co-moderated the session with Jayme D. Lieberman, MD, FACS, vice-chair, department of surgery, Lehigh Valley Health Network, Allentown, PA, and a member of the General Surgery Coding and Reimbursement Committee.

Danny R. Robinette, MD, FACS, a general surgeon, described a physician compensation model—including base compensation, bonus, and reimbursement for administrative, nonclinical time—in a community-owned hospital system in Fairbanks, AK. The system includes Fairbanks Memorial Hospital, a 150-bed hospital serving a population base of 115,000; Tanana Valley Clinic, a 60-physician multispecialty clinic; and Denali Center, a 90-bed, long-term and short-term care facility.

According to Dr. Robinette, this hospital system bases compensation on salary guarantee on specialty and not on individual negotiations. “We use a data set from our medical group management association to determine the base salary by specialty. We set our base at 75 percent of the range of specialty compensation from this data set,” he said, noting that the hospital system benchmarks its base salary against the marketplace every three years, although they are working toward an annual reassessment.

Danny R. Robinette, MD, FACS
Danny R. Robinette, MD, FACS

This community-owned hospital network features two components for bonus compensation: physician bonus and productivity bonus. The physician bonus maximum dollar amount is the same for all physicians regardless of specialty and is now tied to an organizational financial target—a minimum financial goal of the organization in order to pay expenses to keep the facility operating, according to Dr. Robinette. “Once this financial goal is achieved, it allows for the bonuses to be paid out,” said Dr. Robinette. During the coronavirus disease (COVID-19) pandemic, offering these bonuses was an issue “due to the decrease in elective procedures and deferral of elective imaging and laboratory testing,” he said; however, the system’s board elected to pay the bonuses anyway.

Individual physician bonus amounts are determined by meeting minimum productivity standards, timely medical record keeping, and patient satisfaction surveys. The largest portion of this amount, approximately 40 percent, is based on reaching quality goals set by each department, he said. “We expect this bonus to be progressively more dependent on quality goals and to encompass a larger portion of physician compensation in the future.”

The productivity bonus, on the other hand, is not tied to the organizational financial targets. “It is based on RVU production in excess of 60 percent of our medical group management association production by specialty. Once you exceed that, it’s a specified dollar amount per RVU, and this can be a significant addition to physician income,” Dr. Robinette said, noting that fee for service remains the main basis for paying physicians in Alaska. “Therefore, RVUs are critical because that is where the money comes from for physician work,” he said.

As for compensation for administrative time, Dr. Robinette asserted that most health care systems “have begun to recognize the significant need for physicians to perform nonclinical duties that do not directly generate revenue, including time spent managing other providers, quality and safety functions, peer review, and credentialing. This is currently paid at a flat hourly rate, regardless of physician specialty, and this needs to change.”

Arick Forrest, MD, MBA
L. Arick Forrest, MD, MBA

L. Arick Forrest, MD, MBA, vice-dean, clinical affairs, and president, The Ohio State University Physicians, Inc., Columbus, described a new compensation model implemented at his institution three years ago. “The guiding principles that led us on our journey included the use of incentives to reward individual and collective contributions that exceed expectations; support of the academic mission of research and teaching; the development of broad incorporation of quality incentives; and the formulaic elimination of bias and inequity,” Dr. Forrest said.

For nonclinical physician time, Dr. Forrest noted that standardizing the process, defining a funding source, and moving from a fixed dollar amount to percentile pay were all essential to creating an adequate and incentivized payment model.

“From the clinical aspect, it is still a productivity-driven model, and that is the primary driver of what your salary is going to be,” he said, noting that benchmarks are updated annually to adjust the salaries to the market.

“You have 10 percent of your bonus determined by the quality metrics that you have, and half of that is what we call the ‘enterprise target,’ and this year, that is patient satisfaction, including HCAHPs [Hospital Consumer Assessment of Healthcare Providers and Systems Survey] and CGCAHPS [Clinician and Groups Consumer Assessment of Healthcare Providers and Systems Survey] scores,” Dr. Forrest said. Each division then comes up with a specific target to improve, such as physician communication, MyChart response rates, and so on.

“Where are we going with all of this?” asked Dr. Forrest. “If you look at the sustainability of health care in the U.S., which is running at $4 trillion a year and approaching 18 percent of the gross domestic product, it’s just not sustainable, so the payors are shifting to value, but it’s not just value-based specifically—it’s value and volume. We think where we’re going is a gradual increase in amount up to 20 percent of the bonus and moving to a funds flow model where physicians share the up and downside risk. So, if the whole system does better, the physicians make more money. If they don’t do as well, then we will have less in that incentive side.”

Most new hires receive a guarantee of one to three years before they enter the compensation plan. Faculty members have the option of entering the plan early, if approved by the chair. For all compensation plan participants, annual review processes have been developed to ensure compensation remains competitive.

This and other Clinical Congress 2021 sessions are available to registered attendees for on-demand viewing for a full year following Congress on the virtual meeting platform.