The Dean Clinic has navigated through tough waters toward a value-based physician compensation model. It is an outlier. More commonly, physician and hospital contracts are top-heavy with volume, not value, a physician recruiter says.
Although we are supposedly moving toward a value-based provider compensation model, many hospitals are struggling toward developing such programs, while others continue to develop contracts with physicians relying heavily on how much volume the doctors are generating.
That's not the way it is supposed to be.
"We need to get past the schizophrenia and need to take a leap," says Craig Samitt, MD, MBA, president and CEO of the Madison, Wisconsin-based Dean Clinic discussing the trials and tribulations of establishing a compensation model for physicians based on value, rather than fee for service.
Last month, Samitt, who heads one of the largest integrated delivery models in the Midwest, spoke at the National Accountable Care Organization Summit in Washington D.C., and noted that physicians often are not truly engaged in developing these compensation models. As hospitals and doctors evaluate data for compensation, it is "like going through the grieving process," Samitt said. That includes denial ("My patients love me. The data must be wrong") to depression ("My patients hate me") to acceptance ("OK.")
Sometimes, he says, hospital leaders themselves feel like grieving.
Samitt recalled how, years ago when he was COO of the Fallon Clinic, there was a physician rebellion at the prospect of cultural and organizational changes. "A group of doctors told me, 'if you don't stop this, we will fire you as the chief operating officer of our organization,'" he recalls.
Samitt eventually moved on to Dean, where the CEO concedes that the health system uses tough negotiating tactics with physicians, in the move toward a quality-based world. Dean told its physicians, "If you continue to churn out volume, (we'll) reduce your compensation by 5% next year. Every year you just continue to churn out volume, you will continue to reduce compensation by 5%."
As outlined in a HealthLeaders Media case study this year, the Dean Clinic leadership believed they were not getting the kind of quality and experience they wanted from primary care physicians. At that time, the Dean primary care network was not unlike others across the country—somewhat fractured—with difficulty in recruiting physicians and keeping patients happy. Five years ago, Dean's PCPs were compensated using the industry standard relative value unit (RVU) formula, in which a standardized dollar amount is given for each encounter or procedure.
The Dean Clinic then "totally revamped "its primary care compensation plan, using quality incentives, and it has been successful, Samitt says. The revised compensation formula was meant to align physician performance with the value-based care goals.
It included 60% compensation that was still RVU-based; but other areas were based on age/gender-adjusted panel size and incentives for services, financial performance, clinical quality and growth. The formula eventually totaled 115%, which allowed the doctors to earn above market compensation.
"We wanted (physicians) to pick that up, with service, quality, and efficiency, and 100% of the physicians chose that," Samitt says. "In a single year we made a significant move from volume to value-based incentives."
As Samitt sees it, Dean is getting past the schizophrenia.
Not everybody is. While Dean found a way, especially through tough negotiations, to move toward value-based care and compensations, that certainly doesn't seem to be the case everywhere around the nation, according to Steve Marsh, owner and managing partner of The Medicus Firm, a national physician recruiting company based in Dallas, TX and Atlanta, GA.
He told me that most physician compensation models he's worked on involve volume of care, which certainly undercuts, or at least slows, the country's move toward value-based care.
"At the end of the day, physicians are going to do more volume to maintain their income levels. No way around it," Marsh says. "At least on my radar screen, I don't see a system completely based on value, I don't think that will happen." Physicians, especially, will be involved in programs that will demand both quality and volume, especially in receiving bonus awards under contracts he's seen, Marsh says.
What about the much-ballyhooed moves toward quality, which is virtually demanded by the government, through incentives and disincentives, such as the form of 30-day readmission penalties? Marsh contends healthcare contracts for physicians are moving in that direction, but only slowly.
"We are seeing components of that," he adds. "Certainly hospitals are being incentivized to do that, when you look at hospital readmission rate data. It's a great thing. I can tell you, though, looking at a ton of hospital employment contracts, you will see value over volume making up to 5%, 10%, or 15% of somebody's income, and the rest is normally based on volume. I think the percentage of income may go up to 20%, but I always believe that physicians will be seeing more patients and doing more procedures to increase their income."
"There's only so much physicians can do to cut their overhead and so much hospitals can do, and run a quality organization. Physicians are getting squeezed from both directions," Marsh says.
The employment contracts leaning toward volume are repeatedly being written as physicians continue to be smitten with hospital employment. The Medicus Firm's latest survey on physician compensation shows that more than half—54%—of new physicians in training indicated a preference for hospital employment.
The research was included in the firm's annual poll of over 2,500 doctors in a report entitled the "2013 Physician Practice Preference and Relocation Survey," which focused on workforce trends and practice preferences.
Whether they are entering volume or value-based contracts, hospital negotiations with physicians are likely to be tense. Generally, physicians remain dissatisfied with their income levels, based on 2012 salaries, and blame declining reimbursements and "administrative hassles" for stagnant compensation, according to Medicus.
As Dean Clinic continues its value-based journey, Samitt concedes most organizations still work in the volume world. Yet, "one of the early things we found in our journey is that you can't pay your physicians for volume in a value-based world." He added that the hospital system did have the proverbial "one-foot in the boat and one in the canoe. You are going against the grain (volume) and we took on a very bold endeavor within our organization to redesign our compensation models."
From his perspective, "the world is evolving from volume to value," Samitt says. Generally, though, "it's in a bit of a schizophrenic place."
Dean itself moved from such a place, and has landed nicely, but not without difficulties, Samitt says. He emphasized the importance of technology and capturing the data. "We shouldn't incent what we can't change and can't measure what we can't capture. We can't capture with antiquated technology," he says.
"It's really about whether we are focusing on the right thing," Samitt says. "It's a marathon, not a sprint."
Joe Cantlupe is a senior editor with HealthLeaders Media Online.
