Implementing a New Compensation Plan How did it go? Progress and Pitfalls J. Michael Scalzone, MD, MHCM Executive Vice President Medical Affairs The Guthrie Clinic
Presentation Overview About The Guthrie Clinic Compensation Redesign Process and Plan Successes: What Worked Well Progress: What is Working Pitfalls: What Didn t Work Why we see this as Evolution not Revolution 2
About The Guthrie Clinic Physician led non-profit integrated health system Northern Tier of PA and Finger Lakes Region of NY 5500 Employees 5 Hospitals 1.5 Million Ambulatory Encounters Multi-Specialty Group Practice of 300 physicians, 500 total Providers Regional Office Network of Specialty and Primary Sites in 25 Communities 3
Money is the opposite of the weather. Nobody talks about it, but everybody does something about it. 4
Compensation Redesign and Plan 5
The Foundation of Physician Compensation Emphasis in Previous Revisions Emphasis in Current Revision 6
Guthrie Compensation Process Develop guiding principles for this work Commit to an engaged, data-driven process Adopt compensation plan(s) for Guthrie that prepare us well for the future Recognize the need for continuous improvement 7
Compensation Philosophy 8
Guthrie Compensation Principles Fair and Transparent Easily explainable and predictable Clearly defined metrics set in advance and supported by accurate and timely reporting Aligned With Organizational Strategy Consistent with Guthrie s organizational values and long-term strategy Supports transition to value-based care and Guthrie s care delivery model Sustainable Financially viable/affordable for the organization prepared for changes in reimbursement paradigm 9
Guthrie Compensation Principles Supports Recruitment and Retention of Physicians Consistent with market pay practices, which may differ by specialty Citizenship Values unique contributions of individuals, yet promotes teamwork 10
The Basis of the Compensation Plan (Production Based Specialties) Base and Bonus Structure Base Salary determined by Productivity Set by Bands of wrvu s Bonus for Quality Achievement Amount of bonus determined by specialty Additional Pays Medical director APP supervision 10% Ceilings and Floors 11
Plan Structure Base Salary: Set by Productivity measured in wrvu s Band 1 0-25 th % Band 2 25 th % to 35 th % Band 3 35 th % to 45 th % Band 4 45 th % to 55 th % Band 5 55 th % to 65 th % Band 6 65 Th % to 75 th % Band 7 75 th % to 80 Tth % Band 8 80 th % to 85 th % Band 9 85 th % to 90 th % Band 10 >90 th % Quality Based Incentive Incentive Opportunity Amount Varies by Specialty Added Pays Additional Pays (Medical Director, APP supervision, etc) Total Cash Compensation 12
Psychology of Compensation: Transactional Care delivery vs. Relational Care Delivery Compensation Parameters Specific Less Specific Historical Transactional Care (Incremental Formulaic) Transitional (Risk Based Salary: Withhold for Quality) Long Term Balance (Banded Productivity and Incentive) Relational Care (Pure salary) 13
Runs Scored: What Worked Well? Successful Process Based on Engaged Physicians Surveys, Focus Groups Multiple channels of communication Email Workplace Quarterly meetings Leadership meetings Board meetings Physician Management Council meetings Changes tied to guiding principles 14
Simplification (Easily Explainable) Decreased from 9 compensation models to 3 models Hospital based, productivity based and faculty model Decreased the number of physicians who were exceptions to a model by 50% Decreased workload on finance using wrvu s versus net revenue model 15
Incentives for Bonus Quality Bonus (Rewards strategic value added activities) Stable measures from prior year Citizenship Patient Satisfaction Clinical Quality Built to Succeed» 75%- 90% achievement of Bonus Opportunity 16
Back to Psychology : Loss Aversion Using a Bonus rather than a Withhold Scenario A: Monkey spends one token to buy one visible grape Half the time they get one Half the time they get 2 Scenario B: Monkey spends one token to buy two visible grapes Half the time they get one Half the time they get 2 Vast number of Monkeys had a preference for Scenario A 17
The Impact of History and Exception: (Equity Principle) This graph shows that across individuals there was much variation between production level (measured by collections) and compensation level 18
Equity Improved 19
Hits: What is working? Feedback and understanding Fewer appeals Data sharing Affordability Turnover 20
Data Sharing (Feedback and Transparency Principle) Guthrie Medical Group, P.C. Physician A Measures Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 FYTD Prior FYTD Variance Net Revenue - Actual $ 33,409 $ 44,650 $ 65,781 $ 43,760 $ 30,155 $ 52,793 $ 30,250 $ 38,178 $ 37,644 $ 28,814 $ 34,903 $ 58,907 $ 33,405 $ 33,405 $ 33,409 ($4) Net Revenue - Budget $ 39,024 $ 44,662 $ 43,277 $ 43,014 $ 42,784 $ 41,000 $ 42,863 $ 41,002 $ 46,261 $ 40,064 $ 45,689 $ 46,140 $ 38,570 $ 38,570 $ 39,024 ($453) Variance from Budget (5,614) (12) 22,504 746 (12,629) 11,792 (12,613) (2,825) (8,617) (11,249) (10,786) 12,767 (5,165) (5,165) (5,614) Current Previous Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Compensation Compensation Variance YTD YTD Work RVUs 374 531 562 418 314 600 358 408 497 330 417 417 417 2,485 2,908 (423) Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Rolling 12 Prior Month Rolling 12 Top Box Score 92.3 100.0 100.0 100.0 91.7 90.0 100.0 83.3 0.0 100.0 100.0 94.7 94.7 95.7 95.5 n= 13 14 10 10 12 10 7 12 0 10 15 19 19 138 132 FY18 Goal 95.5 95.5 95.5 95.5 95.5 95.5 95.5 95.5 95.5 95.5 95.5 95.5 95.5 95.5 95.5 Goal Variance (3.2) 4.5 4.5 4.5 (3.8) (5.5) 4.5 (12.2) (95.5) 4.5 4.5 (0.8) (0.8) 0.2 0.0 $70,000 Net Revenue - Actuals vs Budget 700 Work RVUs $60,000 $50,000 $40,000 $30,000 600 500 400 300 374 531 562 418 314 600 358 408 497 330 417 417 417 $20,000 200 $10,000 100 $0 0 Net Revenue Budget Work RVUs 120 100 80 60 40 20 0 Patient Satisfaction - Rolling 12 Months 95.7 95.5 Rolling 12 Months 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Unique B# - TBD Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Top Box % FY18 Goal Total Source: This Dashboard can be found by logging into PDS Prism at http://204.232.154.56/prism_portal_plus_guthrie/login.aspx?returnurl=%2fprism_portal_plus_guthrie%2fdefault.aspx Your username is first initial lastname all caps, example "FBLOOM". Please contact Ryan Eberlin or Katie Lesher with any login issues. 21
Affordability Principle Market Survey of changes 2016 to 2017 Median compensation increase across all specialties AMGA 2.9% Guthrie 2.3% Percent of specialties seeing increase in compensation AMGA 77% of specialties Guthrie 67% of individuals Annual Productivity Increase year over year AMGA 1.5% Guthrie ~1.2% East Region Salaries versus national benchmarks 22
Turnover Turnover decreased >30% year over year during the implementation cycle Compensation concerns were #3 on provider dissatisfaction survey Multiple activities so causation unproven, but no increase 23
Change, Change, Change. Changed market survey Changed measure of productivity from net revenue to RVU s Changed incremental reward to banded model Changed incentive from withhold to bonus Changed Revenue Cycle Software and reporting interfaces 24
Consequences: Intended and Unintended 25
Errors: What didn t work so well Challenges based on plan mechanics Challenges based on time restraints Challenges based on data 26
Challenges with Plan Mechanics: Raise in Total Compensation but drop in Monthly Take Home Salary Due to the addition of a bonus, (and 10% ceiling) some physicians had an overall increase in potential total compensation, although the size of the bonus opportunity reduced the base to less than what they previously made. Prior Salary: $270,000 Base Salary per wrvu Band: $280,000 Prior Years Salary Initial Salary on New Model Adjusted Salary on New Model Prior Year's Salary New Salary Base Bonus Opportunity Total Opportunity (10% Ceiling) Fully Modeled Base Bonus Opportunity Total Opportunity (10% Ceiling) Physician A $ 270,000 $ 247,000 $ 50,000 $ 297,000 $ 280,000 $ 17,000 $ 297,000 Change (-8%) Change (+4%) 27
The Benefit of an Error Compensation Committee Response This decision removed the perceived (or possible) drop in salary for a similar productivity range It supported the affordability principle It demonstrated thoughtful reflection by the committee The Compensation Committee was seen as transparent, collegial, fair, timely and responsive. 28
Challenges with Timing: Implementation Pace of full roll-out Initial plan was to complete the roll-out of the new model over 2-3 years, using a 10% ceiling Several specialties were significantly behind market salary by new survey It would take significantly longer than the planned 2-3 year implementation to reach the fully modeled salary bands, if we continued the ceiling. Pulmonary/ Critical Care Gastroenterology Invasive Cardiology Response: Snapped to Band in 1 or 2 years 29
Challenges with Data: Reports: Work RVU Upgrades Work RVU s Reflects professional component of episode of care RVU Values are updated annually by CMS Budget neutrality regulation drives positive and negative adjustments by specialty Most of the time, the CMS changes in wrvu are minor 30
Work RVU s Reports We were in the midst of a revenue cycle software change Have been a clinical EPIC shop since 2003 We did not have Patient Access-Revenue Cycle Module (PARC) Pre PARC go-live, the implementation team analyzed and audited the wrvu values for CPT codes. This was compared to the CMS database and previous values in the legacy system. In mid-january, the CMS update files were imported. Revenue cycle software change: Go-live was February 11 31
Report Errors As reports were being generated, discrepancies in the reports were noted A group from EPIC, systems IT, EPIC reporting, finance, the billing office, and operations met to identify and correct the issues The root cause was identified Updated CMS values placed in the legacy system did not translate completely to the new EPIC/PARC system A utility from EPIC was required to correct this The utility was run and primary audits completed Errors corrected and reports repaired 32
Audit Process The CMS master file was compared to the Guthrie reported values now produced by EPIC/PARC 1000 codes were manually audited This represents 97% of all billed revenue Audit was done at the transactional level for multiple providers in several selected specialties Compared the compensation survey definitions to EPIC and to CMS 33
Challenges with Data: Work Queues Work Queues are auditing and control lists that mimic revenue cycle workflows Error in underreporting noted Team assembled, root cause determined Each WQ has an owner while dozens of individuals may actually work on that list of claims We had a WQ whose completion was delayed. The WQ grew and 3100 RVUs were not credited to physician reports A system upgrade has been implemented Discovered a WQ visibility had changed (hidden to billing office) The WQ owner was on leave and that queue length had grown substantially 34
Audit and Controls Audit Four months of inpatient charges reviewed at the transactional level for 3 hospitals Only 0.0004% of charges had an RVU error Controls: Several emergency intubations Several locum physicians with altered workflow Represented <$7500 of net revenue Redundant owner for each WQ Review of WQ visibility following each system upgrade Daily review of ~10% of encounters Monthly validation of master dictionary for top 100 codes Quarterly review of modifier adjustments, and wider code review Annually : Comprehensive audit of master code file CMS/Optum/Custom codes 35
Summary What went well: Communication Simplification Equity and market competitiveness Bonus structure What is working: Data sharing Affordability What were the opportunities: Unintended consequences of plan mechanics Timing of compensation changes Data collection and reporting Allowed transparency and trust Improved audits and controls 36
Evolution of the Plan What mechanism to match the market? Do we use semi-annual base adjustments? How to approach specialty specific market changes Rising tide floats all boats or market driven? Advanced Practice Providers wrvu s? or Salary? New faculty plan 37
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