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Insight Report: Three Keys to Solving Physician Compensation Challenges

Analysis  |  By Debra Shute  
   March 16, 2017

Leaders attending the inaugural HealthLeaders Physician Organization Exchange shared their guiding principles for managing the most challenging element of medical practice finances.

How much financial incentive or risk does it take to influence physician behavior? What's the best way to update compensation plans? How do leaders give physicians annual raises in the face of rising inflation and flat reimbursement rates? And how can they expect to retain good physicians without adequate compensation?

These are just some of the questions addressed at HealthLeaders' inaugural Physician Organization Exchange, a gathering of nearly two dozen invited senior executives in La Jolla, CA, in December 2016.

There are no universal answers, but there are some common themes to keep in mind.

1. Create a Quality-focused Culture
The first step in achieving physician alignment with organizational value-based goals isn't immediately tying metrics to incentives, but creating a quality-focused culture.

"If [achieving value] is just dependent on the money, it won't work in the end anyway," said Mitchell Schwartz, MD, chief medical officer and president of Anne Arundel Medical Center's Physician Enterprise, LLC, in Annapolis, MD.

"Money doesn't tell the whole story. It's really about the why. Is this really good care? Why are we doing such and such? Money only opens the door to the discussion," he said.

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When money does inevitably come into play, Schwartz emphasized some keys to making it meaningful. "We're going to have to add a lot more transparency, like we've seen with patient satisfaction," he said. "And if it's going to be just a small amount of money, it won't have an impact."

2. Bind Rewards to Feedback
Furthermore, it's not just the amount of money that helps drive alignment, but also the way it's connected to clear and timely feedback, noted Mark L. Wagar, president of Heritage Medical Systems, a Palm Springs, CA-based affiliate of the Heritage Provider Network.

"The bonuses can't just end up being viewed as tip money. They have to be part of a fundamental change in physician access to and management of funding for their patients that drives their compensation when they do better, not just more," Wagar said.

"These types of incentives can enable practices to be proactive, and make primary care financially viable again. But if an incentive doesn't come for a year or two, or is watered down by confusing and late data, that's what it ends up being—tip money."

3. Strive for Continuous Improvement
Finally, remember that improving healthcare—a common denominator among discrete initiatives—is a continuous process.

"Moving forward, we will continue aligning specialists' quality incentives with both specialty-specific and ACO-level population health metrics," said Chris DeRienzo, MD, MPP, chief quality officer for Mission Health, an integrated health system in Asheville, NC, which includes one of the largest ACOs in the nation.

"It's been a gradual process of alignment, not without bumps in the road, but we've made purposeful shifts in the right direction in 2017," DeRienzo noted.

"At the end of the day, if we're able to generate ROI through pay-for-value programs, then not only do our patients experience better outcomes, but we also take in enough reimbursement to pay out quality incentives in the first place. I anticipate the broader market will similarly move in that direction over time," he said.

More of the discussion from the Physician Organization Exchange sessions can be found in the Physician Organization Exchange Insights Reports.

Debra Shute is the Senior Physicians Editor for HealthLeaders Media.

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