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Reassessing Executive Compensation

By Michael Zeis  
   November 13, 2013

As Pepe suggests, operating margin, a longstanding compensation stalwart, is mentioned by 67% as a basis for incentive compensation. Virtually the same percentage say that their incentive payments are based on patient satisfaction (64%) and clinical performance targets (63%). This combination of financial performance and clinical performance at the top of the chart of incentives is virtually identical to the responses provided last year. These same items top the list of incentives for what leaders expect next year, too, with nearly identical percentages.

Although only 20% of respondents say that the transition to value-based reimbursement metrics is part of their incentive program, Pepe, who serves as lead advisor for this report, sees broad support for value-based metrics among both current and future incentives, especially when considering the popularity of metrics such as patient satisfaction and clinical performance.

"Incentives are slowly moving to the value world," Pepe says, "and I think over the years to come that gap will close, and you'll see the value metrics surpassing volume metrics." One-quarter of survey respondents (25%) say that the transition to value-based metrics will be part of their incentive program next year.

New structures, new incentives

Akram Boutros, MD, FACHE, CEO of the MetroHealth System, a 731-licensed-bed health system based in Cleveland, approaches a complex long-term objective by breaking it into manageable short-term steps. He explains, "You know, everybody wants to do population health management. But population health management is so overwhelming that many people have decided not to do it. So we work it back. We want to do population health management three or four years from now. We ask ourselves what we have to do to get that. And then we walk it back from our future goal to today, and we develop the steps."

MetroHealth expects to become an ACO starting in 2014, a step toward population health management. Boutros, an advisor for this report, explains that performance-based compensation specifically related to collaborative care will likely be folded into other metrics, especially early on. "While collaboration along the care continuum will be strategic to us, it could be baked into the financial results of the organization, or could be baked into the quality quadrant. For us right now, it is not one of our metrics. Do I see it as a critical part for success in the future, or do I see it as a metric in 2014 or at 2015? Absolutely."

As MetroHealth makes the change from volume to value, Boutros also expects to track the proportion of outpatient to inpatient services, "so that we're rewarding the transition at the pace that we've determined that's best for that institution."

Michael Zeis is a research analyst for HealthLeaders Media.

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