The leadership of each service line institute, consisting of a medical director from the hospital and the practice's management, is charged with developing strategy and operational plans for the service line's success. Physicians are paid a bonus based 70% on quality and 30% on patient satisfaction for five agreed-on metrics. The percentage of bonus paid to each physician is based on whether the participant reaches a baseline goal, a target goal, or a stretch goal.
"We used an outside [consulting] firm to do the valuation for our incentives, and we worked with the doctors to develop the five metrics being measured so they would be meaningful," explains Ping.
Pitfall #2: The law. There are multiple regulatory and legal issues to watch when it comes to physician-hospital alignment agreements, so get your corporate attorney involved from the beginning.
"There's the Stark law, actually three separate provisions that govern physician self-referral for Medicare and Medicaid patients," says Jensen. And, he says, don't forget to keep an eye on the Physician Payment Sunshine Act—Section 6002 of the Patient Protection and Affordable Care Act—which will require docs to reveal payments from pharmaceutical firms, medical device makers, and other companies.
However, Jensen says the rule that should concern hospitals the most is the federal anti-kickback law and regulatory safe harbors. This can get you in trouble with regulators and possibly sour a deal. That's because the compensation of the physician sellers cannot be in excess of fair market value (FMV). Although the physician sellers may feel they are worth a certain amount—which they might have even earned as an owner—FMV calculations might result in a lower level of compensation.