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Reassessing Executive Compensation

Michael Zeis, for HealthLeaders Media, November 13, 2013

To support his hospital's foray into ACOs, Pepe has put in place near-term goals that will support both care coordination and at-risk payments. "The goal for executives will be that we need to turn over a certain number of practices to a medical home. That will be part of how we get compensated in the future." Also, Pepe has made the effort toward collaborative care institutionwide by switching physicians from volume-based incentives to incentives based on clinical quality measures.

"We changed all the contracts of the primary care physicians from being based purely on RVUs, to incentives based on population health parameters such as quality, preventive measures," Pepe says. Physicians also have metrics related to how well they work with clinical staffers such as physician assistants and nurse practitioners. "That's a good part of their incentive compensation as well, to help us align everyone together."

Advisor Bonnie Bell, executive vice president of people and culture for Texas Health Resources, a Texas-based health system with 25 hospitals and 3,800 licensed beds, summarizes the quandary that compensation committees across the industry are facing as they strive to ensure that their incentive programs are in sync with the strategic directions their organizations are taking. "We are all creating this at the same time, together, as we look at or look away from traditional measures. In terms of looking for appropriate measures, finding benchmarks—they don't exist. And we don't have a common language or nomenclature around measurement yet," she says.

As a result, many early incentives that address, broadly speaking, healthcare reform, depart from outcome measures that have been so important in defining clinical performance recently. "Our new metrics are very process driven," Bell says. "They are not traditional specific outcome metrics, benchmarked to a national database. But they do get us along the way."

Pepe has moved his executive team and physicians off of volume measures altogether. "When you look at what we're incentivizing, it's not just about the bottom line, the operating margin. It is growing the continuum of care, increasing the number of primary care lives, and covering quality aspects like maintaining our 30-day readmission rate below the state's or the nation's.

It's increasing the percent of staff that gets flu vaccines. It is increasing the HCAHPS top-box score for cleanliness of hospital environment, and increasing the CGCAHPS top-box score for giving easy-to-understand instructions. These are all part of our incentives that we never would even consider before. Before, it was all about volume—how many surgeries, how many people need ED, and how many admissions that we were having. None of those are among our goals this year."

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