Physician Compensation in a Value-Based World

Transcription

1 Physician Compensation in a Value-Based World September 25, 2014 Agenda Section Topic I. Introduction III. Implications for Compensation Planning \312748(pptx)-E2 1

2 I. Introduction The Presenters Mr. Jamaal Campbell Senior Manager St. Louis Ms. Maria C. Hayduk Senior Manager St. Louis Mr. Campbell has broad experience in physician performance, physician/hospital alignment strategies, medical group operations, and revenue cycle management. He has particular expertise in physician compensation plan design and implementation and physician group practice operations. Most recently, Jamaal has facilitated several engagements pertaining to the development of comprehensive physician compensation frameworks that align incentive structures with value-based reimbursement mechanisms. He has a master of health administration degree and a graduate certificate in human resources management from Washington University in St. Louis and a bachelor of science degree in psychology from Xavier University of Louisiana.. Ms. Hayduk has extensive experience in physician compensation planning, medical practice development and operations, organizational performance improvement, and academic medicine. At ECG Management Consultants, Inc., she is responsible for the Proprietary Research and Custom Survey practice including directing the conduction of ECG s National Provider Compensation, Production, and Benefits surveys. Previously, Ms. Hayduk worked for Swedish Health Services and Vanderbilt Medical Group. She has a master of business administration degree from the Owen Graduate School of Management at Vanderbilt University and a bachelor of science degree in biomedical engineering and mathematics from Vanderbilt University \312748(pptx)-E2 2 I. Introduction Today s Session During today s presentation, we will attempt to address a number of questions related to the evolution of compensation plans in a value-based world. Given the ongoing transition to value-based reimbursement around the country, how quickly will physician compensation follow suit? What are some potential methods for rewarding physicians for nonproductivity performance metrics? Will productivity-based compensation ever really disappear? How are health systems and medical groups across the country addressing this issue? How should you approach the transition at your organization? 3

3 ECG Survey Geographic Representation and Expansion The data we will review during today s presentation is from ECG s National Provider Compensation, Production, and Benefits surveys Location of Members Adult Pediatric 2014 Select Members Advocate Medical Group. Carilion Clinic. Colorado Permanente Medical Group, P.C. Dupage Medical Group. Group Health Permanente. Medical College of Wisconsin. Palo Alto Medical Foundation. Scott and White Memorial Hospital. SIU Healthcare. Springfield Clinic. Sutter Pacific Medical Foundation. The Everett Clinic. The Iowa Clinic. University of Oklahoma College of Medicine. Vanderbilt University Medical Center. Wake Forest Baptist Health. 4 ECG Survey Members Our 2014 national adult provider survey includes performance data submitted by 86 organizations, encompassing 18,571 providers. Organizational Characteristic National Survey Summary of Member Characteristics 1 Number of Organizations Number of Providers Percentage of Providers Integrated Health System 73 16,200 87% Independent Medical Group 13 2,371 13% Total 86 18, % East 14 3,853 21% Midwest 24 4,017 22% South 13 2,158 12% West 35 8,543 46% Total 86 18, % New N/A 1,627 9% Established N/A 16,944 91% Total 86 18, % NOTE: Figures may not be exact due to rounding. Preliminary 2014 ECG survey data. 1 Figures do not include membership from ECG's National Pediatric Subspecialty Physician Compensation, Production, and Benefits Survey, year 2014 based on 2013 data. Of the providers in the 2014 survey, 90% work within organizations with more than 150 physicians. 5

4 Overview The current compensation planning environment is more challenging than ever, requiring compensation design efforts to be more strategically focused. Environment Trends Health systems incurring increasing financial losses on medical groups; compensation is a contributing factor. Fewer truly independent medical groups exist, and the ones that remain are highperforming. Compensation continuing to rise or remain steady on decreased production (how long can this last?). Reimbursement strategies beginning to focus more on value-based methodologies. Plan Design Trends More organizations are using reduced-risk models for provider compensation, but this may be more of a reflection of the types of specialists being employed. Organizations are attempting to incorporate nonproductivity incentives primarily for nonhospital-based physicians But nonproductivity incentives remain a small portion of total pay. Measuring nonproductivity incentives continues to be a challenge, requiring significant investment and infrastructure in data and reporting capabilities. There is some migration back to modified revenue/expense models or those based on service line performance. Traditional productivity incentives are not going away entirely. 6 Trend #1: Compensation Increasing on a Per Unit Basis Compensation for PCPs increased from 2013 to 2014, while production, as measured by WRVUs, continued to decline. Meanwhile, specialists compensation increased by 1.1% over 2013, with relatively no change in WRVU production. As a result, compensation per unit of work for PCPs and specialists continues to rise. Percentage Change of Key Metrics From 2013 to 2014 ECG Adult Survey Metric PCPs Specialists Compensation 2.5% 1.1% WRVUs -4.2% -0.4% Total RVUs -3.3% -0.3% Net Collections 8.2% 9.0% Compensation Per WRVU 9.6% 3.8% Compensation to Net Collections 4.4% -0.9% Net Collections Per Total RVU 8.2% 9.0% Source: Preliminary ECG 2014 adult provider survey. NOTE: All RVU calculations in the 2014 survey are based on the 2013 Medicare Physician Fee Schedule (PFS) published in October 2013, unless otherwise noted. After leveling off in 2013, PCPs compensation per WRVU increased significantly in Specialists rates per WRVU increased by more than 5% in 2013 and 3.8% in

5 Trend #1: Compensation Increasing on a Per Unit Basis (continued) Since 2008, PCP compensation has increased by 22%. Interestingly, PCP WRVU production is 13% lower within integrated health systems during the same period, while independent physicians are generating 2% fewer WRVUs. Median Primary Care Compensation and WRVU Trends From 2008 to 2014 Source: Preliminary 2014 ECG surveys (ECGVault). NOTE: All RVU calculations in the 2014 surveys are based on the 2013 Medicare PFSpublished in October 2013, unless otherwise noted. Compensation for PCPs within integrated health systems has increased steadily since 2008, while WRVU production continues to decline. 8 Trend #1: Compensation Increasing on a Per Unit Basis (continued) On average, compensation for specialists working within independent medical groups is 18% higher than compensation paid to specialists working within integrated health systems. However, in order to achieve these compensation levels, independent physicians are generating 43% more WRVUs. Median Specialist Compensation and WRVU Trends From 2008 to 2014 Source: Preliminary 2014 ECG surveys (ECGVault). NOTE: All RVU calculations in the 2014 surveys are based on the 2013 Medicare PFSpublished in October 2013, unless otherwise noted. Overall, increases in compensation significantly outpaced changes in WRVU production. 9

6 Trend #1: Compensation Increasing on a Per Unit Basis (continued) On average, adult organizations are being reimbursed at 162% of Medicare for their commercial business, while 189% is the average targeted rate. Commercial Contract Rates as a Percentage of Medicare Source: ECG 2014 surveys. 1929\02\222458(pptx)-E2 10 Trend #1: Compensation Increasing on a Per Unit Basis (continued) Perhaps as a result of rising compensation, health systemsponsored organizations in our national database have reported increased losses in the physician enterprise over the last 4 years. Integrated Health System Investment/(Loss) Per Physician Source: Preliminary ECG 2014 survey data. 11

7 Trend #2: At-Risk Compensation Declining The majority of physicians today are compensated under variable-based compensation plans; however, we have seen a reduction in the utilization of incentives across the board. Percentage of Physicians by Compensation Plan Type Source: Preliminary ECG 2014 survey data. The above data is likely a reflection of many factors, including the onboarding of new physicians with a preference for base salary components and the accelerating employment of hospital-based specialists. 12 Trend #2: At-Risk Compensation Declining (continued) More than 60% of compensation is variable for PCPs, as well as medicine and surgical physicians; however, hospital-based physicians and APCs have less than half of their compensation at risk. Source: Preliminary ECG 2014 survey data. Average Variable Compensation by Specialty Category Specialty Category Percentage of Variable Compensation (Average) Percentage of Variable Compensation Dependent on WRVUs (Average) 1 Percentage of Variable Compensation Dependent on Quality (Average) 1 Primary Care 66% 60% 6% Medicine 61% 49% 7% Surgical 65% 57% 6% Proceduralist 75% 64% 6% Hospital-Based 44% 33% 6% APC 42% 32% 6% 1 Average represents those organizations that utilize the indicator within their compensation plan. WRVUs and quality remain the predominant performance indicators utilized across all specialty categories. 13

8 Trend #2: At-Risk Compensation Declining (continued) Benefit expense as a percentage of compensation for providers increased slightly in 2014 after steadily decreasing since Benefit expense per FTE physician and APC also increased in Physician Benefit Expense Trend APC Benefit Expense Trend Source: ECG 2008 to 2014 surveys. As APC cash compensation increased modestly, benefits, as a percentage of compensation, remained relatively stable. 1929\02\222458(pptx)-E2 14 Trend #3: Productivity Incentive Use Continuing WRVUs are still by far the most popular method of incentivizing compensation across the surveys. Nevertheless, the use of quality metrics is growing. Percentage of Organizations Attribute WRVUs 76% 81% 74% 88% Quality 27% 37% 52% 54% Patient Satisfaction 20% 33% 29% 38% Provider Profitability 14% 23% 26% 13% Net Professional Collections Organization Profitability Compensation Plan Key Performance Indicators 24% 21% 23% 13% 14% 19% 10% 8% Panel Size N/A N/A 10% 4% Source: 2014 ECG survey data. 15

9 Trend #3: Productivity Incentive Use Continuing (continued) 80% Base Component ~80% of Expected Compensation Physicians receive a monthly paycheck that is equivalent to approximately 80% of total expected compensation, based on historical production performance. The organizational goal is for physicians to achieve the 60th percentile of production and compensation. Administrative Activities Research 20% Performance Incentive Component ~20% of Expected Compensation Physicians receive incentive payments twice per year, based on actual performance. Approximately 20% of total compensation is derived from these incentives. Citizenship, 6% Financial, 34% Legacy, 10% Innovation, 10% Growth, 15% Work Effort 80% of Expected Compensation Teaching Production WRVUs Quality, 60% Financial, 25% Quality, 40% PCP Specialist Source: How Geisinger Structures Its Physicians Compensation to Support Improvements in Quality, Efficiency, and Volume, Health Affairs, Trend #4: Interest in Revenue-Oriented Models Growing On average, a majority (82%) of survey members have less than 10% of business, as measured in gross revenue, at risk for utilization, cost, or outcomes, while 12% indicated that they have more than 25% at risk. Percentage of Gross Revenue at Risk None <10% of Gross Revenue 10% to 25% of Gross Revenue 25% to 49% of Gross Revenue >50% of Gross Revenue Percentage of Organizations 47% 35% 6% 6% 6% Payment Program Participation in Risk Payment Programs by Payor Type Percentage Participating >12 Months Percentage Participating <12 Months Percentage Planning to Develop/Apply Percentage Currently Developing Medicare ACO 10% 20% 30% 40% Commercial ACO 8% 8% 38% 46% Commercial PCMH Programs 47% 13% 13% 27% Commercial P4P Programs 29% 29% 21% 21% Source: Preliminary ECG 2014 survey data. More than half of the survey organizations are participating in commercial P4P programs, while more than 70% are planning or currently developing an ACO. 17

10 Trend #4: Interest in Revenue-Oriented Models Growing (continued) To account for non-ffs revenue sources, some organizations are reverting to funds flow models that set physician compensation levels based on calculations of revenues less expenses. Payor Contract 1 Payor Contract 2 Payor Contract 3 P4P Bonuses Shared Savings/ Performance FFS Revenue Capitated Payments Total Revenues Less: Budgeted Expenses Physician Compensation Pool Compensation Plan Production. Patient experience. Other. Individual Physician Compensation 18 Trend #5: Utilization of Nonproductivity Incentives Increasing Quality is being measured by more than half of the survey members to calculate variable compensation. Compensation Plan Key Performance Indicators Percentage of Organizations Attribute WRVUs 76% 81% 74% 88% Quality 27% 37% 52% 54% Patient Satisfaction 20% 33% 29% 38% Provider Profitability 14% 23% 26% 13% Net Professional Collections Organization Profitability 24% 21% 23% 13% 14% 19% 10% 8% Panel Size N/A N/A 10% 4% Source: ECG 2014 survey data. 19

11 Trend #5: Utilization of Nonproductivity Incentives Increasing (continued) Consistently, across all specialty categories, less than 10% of variable compensation is allocated to nonproductivity incentives. Specialty Category Percentage of Variable Compensation Dependent on Quality (Average) 1 Primary Care 6% Medicine 7% Surgical 6% Proceduralist 6% Hospital-Based 6% APC 6% Source: Preliminary ECG 2014 survey data. 1 Median represents those organizations that utilize the indicator within their compensation plan. 20 Trend #5: Utilization of Nonproductivity Incentives Increasing (continued) 52% of organizations indicated that they utilize quality as part of their physician variable compensation plan. Internal clinical protocols are the most commonly referenced measures to determine physician quality. Quality Metrics Utilized to Determine Variable Compensation Quality Metric Percentage of Organizations Utilizing Metric Internal Clinical Protocols 55% HEDIS Measures 36% CMS PQRS Measures 36% External Clinical Protocols 36% Meaningful Use 36% CMS Hospital Core Measures 27% Length of Stay 27% SCIP Measures 18% Care Coordination/Care Management 18% Readmission Rates 18% Other 18% PCMH Certification 0% Source: ECG 2013 survey data. 21

12 Trend #5: Utilization of Nonproductivity Incentives Increasing (continued) Many of our clients are adopting quality metrics for specialists that are also typically used for service line comanagement agreements (and therefore encompass hospital quality). Common Incentive Categories for Select Specialists Cardiology Orthopedics CMS Core Measures (related to hospital quality): door-to-balloon time, AMI mortality, reductions of PCI complications. Cardiac surgery STS ratings. On-time cath lab starts. SCIP measures. On-time OR starts. Patient and referring-physician education. Development of joint camps. Critical Care Treatment processes and outcomes for asthma, chronic obstructive pulmonary disease, and pneumonia. OB/GYN Several measures specified by The Joint Commission for OB/GYN, including elective delivery and cesarean section volume, use of antenatal steroids, bloodstream infections in newborns, and encouragement of breast feeding. Patient satisfaction. In these examples, health systems rely on their medical groups to lead quality improvements in the hospitals. 22 III. Implications for Compensation Planning Compensation Plans in a Value-Based Environment The graphic depicts how a productivity-oriented group might consider embarking on a shift to a nonproductivity performance plan. Example Transition From Productivity-Centric Plan Current Plan Years 1 to 3 Years 3 to 5 Production, 100% Production Nonproductivity Performance Pool Guaranteed Salary Production Incentives Nonproductivity Performance Pool Assumed at 100% production. Major cultural shift required in the transition. Performance measure data collected and tested. Work group created to identify nonproductivity metrics and tie them to compensation pools. Production compensation reduced to 60% to 80% of total. Funding established for nonproduction pools. Nonproduction incentives grow every year; are continuously evaluated and improved. Transition completed. Potential combination of production, nonproduction, panel management, and guaranteed salary components. 23

13 III. Implications for Compensation Planning Phased Evolution We believe that organizations should begin preparing for the transition and developing a model that can accommodate large-scale use of performance metrics, but also can be implemented as the group s culture and reimbursement shifts to support a revised structure. Element Reimbursement Trigger Potential Plan Change Trigger Phase I FFS Contracts The majority of reimbursement comes from FFS contracts. Current state. Implications for Compensation Plan Phase II Shared Savings/Risk Contracts Shared savings/risk contracts proliferate, providing bonuses/ penalties for meeting financial and quality targets. Total revenue from non-ffs work exceeds target. Production Pay 90% to 95%. 75% to 85%. 60% to 70%. Nonproduction Pay Incentive Measures 5% to 10%. 15% to 25%. 30% to 40%. Incentives are defined by internal initiatives, such as the following: Patient satisfaction. Meaningful use. Meeting participation. Incentives parallel targets identified in contracts. Expense control and clinical quality targets are typical. Phase III At-Risk Contracts At-risk (capitated) contracts become more prominent, utilizing PMPM fees and large inpatient/outpatient risk pools. A segregated funds flow between FFS and at-risk contracts is typically administered, which allows for varying incentive measures. The panel size for PCPs would be pertinent. 24 III. Implications for Compensation Planning Potential End-State Models Organizations will require unique models for different groups of specialties that share common principles commensurate with the organization s overall strategies. 100% Panel Management 10% to 25% Patient/Provider Experience: 5% to 10% Production: 5% to 10% 75% Quality/Value Metrics: 15% to 25% Quality/Value Metrics: 20% to 40% Quality/Value Metrics: 25% to 35% 50% 25% Production: 50% to 75% Production: 50% to 75% Salary or Shift-Based Pay: 60% to 75% Primary Care Office-Based Specialists Hospital-Based Specialties 25

14 III. Implications for Compensation Planning Primary Care Leads the Way Panel size will become the new productivity (efficiency) measure for primary care, while panel management will become an imperative under any risk-bearing contracts. Introduce Panel- Size Metrics Adjust Productivity Payment to Allow for Panel Payment Tie Panel Size to Panel Management Capability Develop/adopt attribution methodology. Develop/adopt risk adjustment methodology. Report data to physicians. Can be developed for specific populations (e.g., Medicare Advantage, HMO contract). Determine total funds associated Determine short- and longterm quality measures. with plan. Reduce WRVU or revenue-based Short-term: HEDIS, patient productivity payment to allow for satisfaction, other process panel management payment. measures. Long-term: total cost PMPM, ED costs per 1000, admits per III. Implications for Compensation Planning Brief Case Study #1 The primary care model differentiates funding from distribution and ties compensation to both individual and group performance on a variety of metrics. The purpose of the primary care model is to incentivize individual productivity while supporting the evolution toward a value- and outcome-based care model. Stipends are passed through directly to the individual physician. Productivity and APC funding are combined into one clinical pool for distribution. A portion of the clinical funding is allocated to each distribution pool. The portions may change over time as reimbursement models evolve. Performance relative to the dashboard is paid based on individual and group metrics in the four domains of quality, access, cost, and citizenship. All funds are distributed completely under this model, via an internal point system. Physician Productivity Funding APC Supervision Balanced Dashboard Quality Citizenship Stipends Distribution Pools 5% 15% Individual WRVUs 10% Site WRVUs 70% APP WRVUs Dashboard Access Cost 27

15 III. Implications for Compensation Planning Brief Case Study #1 (continued) In order to pay out all funds, a point system was developed to assign credit for provider performance levels on plan metrics. Area Metric Points Performance Quality Citizenship Cost Access CG-CAHPS: Likelihood to Recommend 3 Payor Incentives 3 Education/Research 1 1 Point: Yes MPIE Up to Date 1 1 Point: Yes PMPP Testing Completed Every 6 Months 1 1 Point: Yes Extended-Hours Participation 1 1 Point: Yes 1 Point: >79th Percentile 2 Points: >85th Percentile 3 Points: >94th Percentile Epic Chart Closure (95% at 5 days) 2 2 Points: Yes Contribution Margin 2 Open to all payors or exceed 125% of the specialty-specific median panel size. 1 Point: >60% of Measures Obtained 2 Points: >69% of Measures Obtained 3 Points: >79% of Measures Obtained 1 Point: Met Budget 2 Points: Exceeded Budget by 5% 3 3 Points: Met One of the Criteria 28 III. Implications for Compensation Planning Brief Case Study #2 In this case study, the proposed compensation plan aligns compensation with organizational objectives. Primary Care Case Study Production Versus Nonproduction Incentives Components of Nonproduction Incentives NOTE: Figures may not add due to rounding. This methodology is designed to reward physicians who are productive, provide high-quality care, and increase panel size. 29

16 III. Implications for Compensation Planning Brief Case Study #2 (continued) In the case study, panel size benchmarks are based on the mean and standard deviation of the reported panel size data by specialty. Threshold Level Panel Size Percentage of Payment Family Practice Below Threshold 1,654 0% Minimum Threshold 1,655 85% Benchmark (Target) Threshold 2, % Internal Medicine: General Primary Care Case Study Below Threshold 1,190 0% Minimum Threshold 1,191 85% Benchmark (Target) Threshold 1, % Because many physicians are currently below the threshold, physicians are also eligible to receive this payment for demonstrating 10% annual growth in panel size. 30 III. Implications for Compensation Planning Potential Plan Principles To develop new plans, health systems and medical groups will need to create a set of principles that will serve as a foundation for the future. Potential principles might include the following: Desired Outcome Continue to Generate WRVUs Increase Panel Size and Access Practice Team-Based Care Integrate APCs Into Practice Model Provide Outstanding Care Description Because the majority of revenues are still based on an FFS model, WRVUs remain critical to financial viability. This structure also incentivizes individual efficiency. A focus on panel size and access is important to support the additional volumes of insured patients, as well as to integrate new patients into the health system. Care coordination, proactive management of chronic conditions, and the need for increased access all require a more team-based approach to care. APCs are effective physician extenders who can provide patients with acute care access, as well as chronic disease management. Quality and service are always a priority. 31

17 III. Implications for Compensation Planning Key Takeaways There will be cultural, administrative, and infrastructure considerations as the compensation plan evolves, which will dictate the speed at which revisions should be implemented. Align With Organizational Strategies Considering the overall strategic priorities and initiatives of the organization will align the goals of physicians and the organization. Phase In Change Efforts to implement rapid/radical changes will likely be met with failure. Instead, organizations should seek to phase in nonproduction metrics over time and consider physician readiness for change. Acknowledge Differences in Specialties It is likely that payment models will evolve at differing rates for primary care versus specialty care and inpatient/outpatient settings. Determining the capacity to offer/manage multiple plans will be an important factor in developing new plans. Leverage Existing Measures Utilizing measures that are already being collected and reported as the foundation for establishing an incentive plan will mitigate physician concern about tying compensation to performance