Executive compensation strategy is changing as providers realign their plans to reflect the impact of value-based care on their organizational goals.
This article first appeared in the November 2016 issue of HealthLeaders magazine.
The shift from fee-for-service to value-based care is impacting executive compensation along several different tracks. Change is occurring along financial and clinical lines, as compensation models evolve to mirror a greater focus on value and quality. Incentives and total compensation are being modified to account for risk-based models and to better align them with organizational strategy. And total compensation is being adjusted modestly upward to ensure that healthcare providers are able to attract executive talent with the types of new skills that value-based care requires.
The good news for the industry is that the majority of providers are embracing the need for executive compensation realignment in light of the fundamental changes engendered by value-based care, and momentum is building. In fact, 51% of respondents in the 2016 HealthLeaders Media Executive Compensation Survey say that they have modified or expect to modify their group or team incentives in consideration of the shift from fee-for-service to pay-for-value, up from 37% in our 2015 survey.
Looking at executive compensation more broadly, it is also encouraging that only 2% of respondents indicate they have made a change regarding both financial or patient care objectives, and say that this change is in the wrong direction. When change has been made, it has generally been on the right track.
Executive compensation strategy
Traditionally, executive compensation discussions usually begin with financial objectives, given that this is a core responsibility of senior leadership. But the changes being wrought by value-based care influence both financial as well as patient care/clinical strategy in important ways, and the two aspects are more closely linked than ever before.