Physician Compensation Incentives Shifting

This article appears in the October 2011 issue of HealthLeaders magazine.

Changes in Medicare and Medicaid reimbursement, healthcare reform, and market competition are all driving change not only in how hospitals and health systems approach patient care, but also in how physician compensation models are taking shape, according to a new HealthLeaders Media Intelligence Report, Physician Compensation: Shifting Incentives.

Medicare and Medicaid reimbursement were named by 76% of respondents as the No. 1 influence on their organization’s physician compensation structure. 

“As Medicare goes, so, oftentimes, goes the commercial payer—physician rates generally change not long after. So people will make tweaks to their compensation models to be ready for the future,” says Jeffrey D. Limbocker, lead advisor for the report and CFO for Our Lady of the Lake Regional Medical Center in Baton Rouge, LA, one of the largest private medical centers in the state, with more than 700 licensed beds.

Healthcare reform came in second, cited by 59% of respondents as the major influence on compensation models. Next was market competition, noted by 49%. The local economy remains a factor, with 38% of respondents noting it influences their compensation models; region is frequently cited in national physician compensation surveys as an explanation for compensation disparities. And, although accountable care organizations and the medical home fall under the healthcare reform umbrella, 38% and 27% of respondents, respectively, broke them out separately as having an effect on their models.

Perhaps due to the influence of government mandates, healthcare sources say, compensation models are also under review more frequently. Forty-one percent of respondents are changing their models every year or two, while 38% are adjusting it every 3–5 years. Just 21% of respondents maintain models for more than five years.