Physician Employment Current Compensation Trends and Considerations for Establishing FMV

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1 Physician Employment Current Compensation Trends and Considerations for Establishing FMV Presented By Jim Carr, ASA, MBA Partner Becker s Hospital Review 7 th Annual Meeting April 29, 2016

2 Physician Employment Landscape Massive number of private practice physicians moved into hospital affiliated practices over the past six years Some of the reported drivers of this trend include: Reimbursement cuts Lifestyle/focus on medicine Hospital physician alignment and formation of ACOs Fear Many major specialties stabilizing; hold outs continue to move Trend resulted in significant changes in physician comp models Enforcement activity related to employed physicians increasing Appraisers continue to refine methods to establish FMV in light of these changes April 29, 2016 Physician Employment 2

3 Private Practice Exodus MGMA Respondent Base 80.00% % % Data extracted from MGMA Physician Compensation and Production Report Percentage of Respondents 50.00% 40.00% 30.00% 20.00% 10.00% Average Practice Size 0.00% Physicians 51.14% 45.96% 40.70% 41.05% 38.96% 33.54% 27.66% Hospital/IDS 34.42% 43.06% 47.11% 49.17% 54.26% 63.36% 68.81% Other 14.44% 10.98% 12.19% 9.78% 6.78% 3.10% 3.53% Average MDs/Practice

4 Private Practice Exodus 80.0% Shifts in Major Specialties Percentage of Respondents in Hospital/IDS Practices 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% OB/GYN Neurology Hem Onc Cardiology Ortho Urology Int Med Pediatrics Radiology GI Anesthesiology 0.0% Data extracted from MGMA Physician Compensation and Production Report 4

5 Who s Still Moving?

6 Critical Care - Intensivist $450,000 $400,000 $350, % 90.0% 80.0% Data extracted from MGMA Physician Compensation and Production Report Median Compensation/Collections $300,000 $250,000 $200,000 $150,000 $100,000 $50, % 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% % Hospital Owned Respondents $ Median Comp Hospital Practices $281,773 $308,591 $326,587 $338,240 $349,932 $368,442 Median Comp Non hospital Practices $254,296 $305,464 $378,172 $399,691 $402,778 $403,500 Median Prof Collections/FTE $295,000 $331,000 $293,000 $298,145 $191,102 $244,843 Hospital Owned Respondent % 56.5% 64.6% 74.8% 66.4% 80.0% 88.2% 0.0% 6

7 Emergency Medicine $400,000 $350, % 90.0% Data extracted from MGMA Physician Compensation and Production Report Median Compensation/Collections $300,000 $250,000 $200,000 $150,000 $100,000 $50, % 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% % Hospital Owned Respondents $ Median Comp Hospital Practices $258,461 $282,171 $283,267 $302,497 $318,851 $309,048 Median Comp Non hospital Practices $272,274 $267,500 $317,053 $304,988 $323,811 $365,230 Median Prof Collections/FTE $311,000 $279,000 $317,000 $297,946 $337,424 $348,316 Hospital Owned Respondent % 48.0% 50.2% 56.6% 67.5% 64.0% 81.7% 0.0% 7

8 Medical Oncology $500,000 $450,000 $400, % 90.0% 80.0% Data extracted from MGMA Physician Compensation and Production Report Median Compensation/Collections $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50, % 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% % Hospital Owned Respondents $ Median Comp Hospital Practices $317,543 $375,000 $401,508 $425,006 $421,093 $429,771 Median Comp Non hospital Practices $401,125 $404,412 $443,996 $435,495 $423,515 $451,002 Median Prof Collections/FTE $446,050 $397,196 $464,481 $423,448 $368,395 $357,281 Hospital Owned Respondent % 39.1% 46.2% 48.9% 55.7% 65.4% 72.3% 0.0% 8

9 Neurology $450,000 $400,000 $350, % 90.0% 80.0% Data extracted from MGMA Physician Compensation and Production Report Median Compensation/Collections $300,000 $250,000 $200,000 $150,000 $100,000 $50, % 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% % Hospital Owned Respondents $ Median Comp Hospital Practices $240,899 $250,075 $257,486 $264,863 $264,140 $269,936 Median Comp Non hospital Practices $234,653 $247,384 $263,805 $284,170 $289,613 $274,000 Median Prof Collections/FTE $409,206 $370,085 $397,594 $394,960 $352,002 $399,976 Hospital Owned Respondent % 42.9% 51.2% 51.8% 60.5% 67.7% 72.5% 0.0% April 29, 2016 Physician Employment 9

10 Orthopedic Surgery: General $900,000 $800,000 $700, % 90.0% 80.0% Data extracted from MGMA Physician Compensation and Production Report Median Compensation/Collections $600,000 $500,000 $400,000 $300,000 $200,000 $100, % 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% % Hospital Owned Respondents $ Median Comp Hospital Practices $516,413 $526,398 $544,579 $529,360 $554,600 $567,596 Median Comp Non hospital Practices $452,128 $482,928 $493,095 $546,671 $563,568 $562,533 Median Prof Collections/FTE $775,017 $784,985 $799,302 $795,395 $810,328 $769,838 Hospital Owned Respondent % 31.0% 38.5% 42.9% 48.1% 51.2% 55.4% 0.0% 10

11 Plastic & Reconstructive Surgery $1,000,000 $900,000 $800, % 90.0% 80.0% Data extracted from MGMA Physician Compensation and Production Report Median Compensation/Collections $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100, % 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% % Hospital Owned Respondents $ Median Comp Hospital Practices $360,033 $374,512 $413,470 $449,106 $417,473 $404,243 Median Comp Non hospital Practices $413,548 $391,733 $451,779 $465,626 $437,048 $527,029 Median Prof Collections/FTE $648,938 $730,114 $703,194 $865,168 $771,486 $715,759 Hospital Owned Respondent % 38.9% 42.8% 50.0% 42.7% 52.7% 58.0% 0.0% 11

12 Compensation Model Trends

13 Recent Compensation Trends I m fed up with wrvus Higher guaranteed bases or longer guarantee periods Larger portion of total compensation being shifted to quality bonus Compensation requested for previously uncompensated activities Midlevel supervision Windshield time Resident oversight Committee participation 13

14 Recent Compensation Trends Quality Incentives Typically represents 5% 20% of total income potential Quality generally represents only a fraction Patient Satisfaction Citizenship Outcomes Many employers still appear to be struggling how to define and measure quality Core measures and HEDIS are common benchmarks 14

15 Recent Compensation Trends Increasing use of One Time Payments Signing, commencement, and retention bonuses Student loan repayments Relocation stipends (not reimbursement of expenses) Models based primarily on collections or EBIT continue to decline Tiered wrvu models continue to survive 15

16 Related Enforcement Activity

17 Enforcement Activity Along with the rise of physician employment, there has been a corresponding increase in qui tam cases related to employed physicians Notable 2015 settlements included: United States ex rel. Barker v. Columbus Regional System ($35 million) United States ex rel. Reilly v. North Broward Hospital District ($69.5 million) United States ex rel. Payne v. Adventist Health System/Sunbelt, Inc. and United States ex rel. Dorsey v. Adventist Health System Sunbelt Healthcare Corp. ($115 million) All complaints included allegations that the practice of the employed physician(s) incurred substantial losses DOJ seems to be advocating that compensation cannot be FMV or an agreement cannot be commercially reasonable if a practice loses money Courts seem to be willing to hear that argument 17

18 Practice Losses $0 Median Practice "Income" per FTE Physician Primary Care Medical Specialty Surgical Specialty Multispecialty $50,000 $100,000 $150,000 1,267 Groups 256 Groups $200, Groups $250, Groups $300,000 Data extracted from MGMA 2015 Cost and Revenue Report: Based on 2014 Survey Data 18

19 FMV Considerations

20 Recurring Themes Regarding FMV Stacking issues Productivity v. production compensation Shouldn t my 90 th P producer should earn 90 th P comp per wrvu? Shouldn t quality pay be added on top of FMV comp? Doesn t the survey really set the market? Opportunity cost Annual inflation factors 20

21 Impact of Stacking 21

22 Comp/wRVU vs Production $ $90.00 $80.00 $70.00 $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 1Q 2Q 3Q 4Q Radiology: Interventional Hospitalist: Internal Medicine Surgery: Cardiovascular Cardiology: Invasive Cardiology: Noninvasive Neurology Cardiology: Invasive Interventional Emergency Medicine Cardiology: Electrophysiology Surgery: General Data extracted from MGMA 2015 Physician Compensation and Production Report 22

23 Quality Compensation 10.00% Median Quality Incentives (% of TCC) 9.00% 8.00% 7.00% 6.00% Axis Title 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Staff Physician Program or Medical Director Chief or Department Chair Division Chair or Section Head Data from Sullivan Cotter & Associates 2015 Physician Compensation and Productivity Survey Report 23

24 Physician Employment Current Compensation Trends and Considerations for Establishing FMV Presented By Jim Carr, ASA, MBA Partner Becker s Hospital Review 7 th Annual Meeting April 29, 2016