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Shift in Payment Models Alters Physician Compensation

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   April 03, 2014

As physician reimbursement shifts from a fee-for-service model to a value-based structure, expect to see changes in how compensation plans are drafted.

Quality and patient satisfaction benchmarks are not only affecting physician reimbursement levels, but they are also a growing component of physician compensation formulas, multiple and independent studies show.

Hospitals and health systems have already been focused on HCAHPS scores, which attempt to measure patient satisfaction, though there is plenty of conversation about whether the survey is an accurate measure of how a patient is treated during a hospital stay. But there is a growing body of research that indicates physician and healthcare executive compensation is or will be tied to patient satisfaction, too.

Slideshow: Healthcare Leaders on Executive Compensation

A February 2014 study from Sullivan, Cotter and Associates (SullivanCotter), 2013 Physician Compensation and Productivity Survey Report, shows an increase in hospitals and healthcare organizations tying portions of compensation to metrics such as quality and patient satisfaction.

As a percentage of the total compensation package, the average amount that was tied to a quality metric was 5%. The dollar amount varied among primary care physicians and specialists, with specialists receiving more than PCPs, though overall, the report showed a higher overall increase in cash compensation for PCPs.

Kim Mobley, managing principal of SullivanCotter, said in a statement that the firm is also closely watching the correlation between patient satisfaction and compensation. "As reimbursement shifts from fee-for-service to value based, we expect to see some shifts in the balance of the compensation elements that comprise physician compensation plans," she said.

A similar survey of medical practice groups by SullivanCotter for the American Medical Group Association shows the same thing: Patient satisfaction is projected to be a part of a compensation package. The AMGA's 2012 report on compensation included multi-specialty groups, academic medical practices, and non-profit organizations. In other words, the shift in compensation models is not happening only in hospitals, but in academic settings, multi-specialty practices, health systems, and among insurers.

The finding mirrors HealthLeaders Media's research published in our November 2013 Intelligence Report, Restructuring Executive Compensation for the Shift From Volume to Value showing that more pressure is being put on C-suite level executives to meet qualitative benchmarks. For example, 65% of executives surveyed said indicated that patient satisfaction would factor into incentive payments for 2014.

Insurers in the Mix

Tying payment incentives to increases in qualitative benchmarks is nothing new to insurers, though some are aggressively expanding its base of who can participate in incentive payment arrangements.

Cigna last week announced that the collaborative accountable care (CAC) program it launched in 2008 targeting large physician groups that also have a significant primary care component is now available to smaller physician groups, specialists, and hospitals.

Cigna's CAC program financially rewards practices for better care coordination, reducing medical costs, and meeting other quality targets. For this smaller group of practices, the initiative is called Cigna Collaborative Care, and it's currently being piloted at four groups in Texas, New York, Florida, and Connecticut.

Reagan Armata, product director for Cigna, says the large groups consisted of 20, 50, or 100 physicians or more; the smaller group practices that are part of the new Cigna Collaborative Care are "substantially smaller."

The insurer is going after the smaller market because it has found that only 20% of its members with expensive or complex medical conditions were going to the larger medical groups. "By meeting them where they are, we can work with physician groups regardless of their size in a variety of ways," says Armata.

Cigna's overall goal, which it says is on track to meet, is covering 1 million insured through 100 collaborative agreements by the end of 2014.

Tying Incentives to Quality
The aim of handing out incentive payments to hospitals, physicians, and health systems is to ultimately improve quality while also reducing costs. Some studies show a positive relationship between the two, but there is also some tension about rewarding physicians for a patient's satisfaction.

Back in 2011, the popular physician-centric blog,, ran a three-part series on the downsides of paying "popular" doctors more based on a patient's evaluation of the care they received. The series pointed out that doctors who are pressured into pleasing patients doesn't necessarily equate to good patient care.

The healthcare delivery system in this country is undergoing a sea change, with healthcare organizations scrambling to put in supports, carrots, and sticks, in order to respond to declining reimbursements, more patients, and physician shortages—not to mention physician stress.

It's hard to tell which lever will be the most effective at moving the needle closer to the triple aim, and whether it's right or wrong to tie patient satisfaction to compensation and reimbursement. But one thing is certain: The qualitative benchmark is a line in the sand that is here to stay.


Jacqueline Fellows is a contributing writer at HealthLeaders Media.

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