beacon partners challenges and trends in physician performance and productivity
TRANSCRIPT
Beacon Partners
Challenges and Trends in Physician Performance and Productivity
Leader in Healthcare Consulting
• Fastest growing• Privately held• Significant North American presence
– Boston – San Francisco - Toronto• Hospitals • Integrated Delivery Networks• Academic Medical Centers• Physician Groups• Managed Care Organizations
The Beacon Process
Challenges and Trends in Physician Performance and
Productivity
Presented by: Philip A. VillacciPrincipal
Date: June 18, 2008
Overview
• Key Challenges– Desired Outcomes of Physician – Hospital Alignment– Top 10 Effective Strategies– A Road Map for Leaders
• Emerging Trends in Physician Compensation - Physician Perspective– Emerging Trends – Responses– Emerging Trends – Results
• Productivity Based Compensation– Evolution of Compensation Plans– Mission Based Budgeting– Elements of a Successful Compensation Plan– Incentive Compensation
Key Challenges
Key Challenges
• Migration of services from inpatient to outpatient settings• Decline in professional fees driving physicians to seek income from
other sources (mainly technical/facility revenue)• Increase in private capital dollars available to healthcare enabling
physicians to invest in equipment and facilities to access these fees• Exacerbated because of the absence of regulatory, e.g., CON,
restrictions• Desire to maintain a controllable lifestyle (which often does not
include ED call coverage) including Part time employment• Elimination of moratorium on specialty hospital formation• Shift from solo to “corporate practice” with professional managers• Increasing sub-specialization of medicine
Revenue Generated By Specialty
Source: Merritt, Hawkins and Associates, 2007 Physician Inpatient Outpatient Revenue Survey
Desired Outcomes
• Recognize that the dynamics underlying hospital-physician relationships have fundamentally changed and old alignment models may no longer be relevant
• Create new models that recognize this shift and align physician and hospital economic interests over the long-term, understanding that:– One model cannot meet the needs of all physicians – Preserving principle of “aggregation of care” is paramount
• Integrate physician alignment recommendations with other institutional strategic planning initiatives
• Create a process for accountability and execution system-wide by establishing operating principles
10 Effective Strategies
Top Ten Effective Strategies according to SHSMD survey
• Employ intensivists (75% of best performers)• Employ VPMA (74%)• Employ hospitalists (74%)• Provide financial support to independent practices for recruitment (72%)• Retreats limited to physician leaders and management (70%)• Formal physician relations program (68%)• Planning retreats involving Board, physician leaders, and senior management (68%)• Actively engage physicians in planning clinical service lines and centers of
excellence (66%)• Employ primary care physicians (65%)
– The needs are very different than the needs of hospital departments• Employ some hospital based specialists (64%)
Source: Society for Healthcare Strategy and Market Development.
A Road Map for Leaders
• Create a positive organizational culture• Focus on communication, openness, trust, and respect• Ensure visibility/accessibility to senior management, including the CEO• Create opportunities for physician leadership development• Involve physicians in substantial decision-making• Provide integrated information systems• Demand high-quality and safe patient care• Develop infrastructures that enhance efficiency and access to care• Employ multiple strategies to ensure success
Pushing Performance through Productivity Based Compensation
Emerging Trends in Physician Compensation –Physician
Perspective
Emerging Trends – Physician Perspective
• Expenses increasing faster than revenue and income– Malpractice insurance– Non-physician payroll
• Downward pressure on reimbursement/income• Diminishing returns
– Seeing more patients– Minimal growth of income– Loss of personal time
Emerging Trends – Physician Perspective
• Physicians seeking:– Ancillary business opportunities
• Diagnostic imaging, physical therapy, clinical trials
– Compensation from hospitals• Hospital-based physicians seeking subsidies due to
high level of charity care• Compensation for duties historically not paid for such
as on-call and administrative meetings• Physician recruitment
– Stark Law restrictions not appealing to existing physician groups
Emerging Trends – Physician Perspective
• Physicians seeking (continued):– Joint venture or management service
arrangements with hospitals• Regulatory compliance creates unexpected obstacles• Purchasing organizations, MSO services
Emerging Trends - Responses
1. Hospitals are beginning to employee physicians again
2. Hospitals and physician practice groups are developing mutually beneficial arrangements
– Clinical Institutes/co-management agreements
3. Physicians are demanding compensation from hospitals for their time and effort related to
– Hospital/department administration
– Providing call coverage for the ED
– Other non-clinical activities
Emerging Trends - Responses
Hospitals employ physicians again – why?
• Enhance physician recruitment
• Stabilize medical staff
• Recruit high-dollar, in-demand specialties
• Defensive strategy; protect high-revenue specialties/service lines
• Improve physician cooperation on programs (e.g., medical error reduction)
• Rescue distressed practices
Emerging Trends - Responses
Docs becoming employed physicians – why?
• Stabilize and secure income
• Reduce risks and exposure
• Workload relief
• Improved lifestyle and personal time (esp. younger physicians)
• More input
• More control
• Improved efficiency
• Access to alternative revenue sources
Emerging Trends - Responses
Clinical Institutes/co-management agreements
• Management Services Agreement between Hospital and physician group. Key components:– Physicians manage program and services across departmental boundaries and
facilities– Fixed fee plus for management services plus financial incentives based on
meeting defined program quality, outcomes, satisfaction and/or efficiency metrics
• Professional Services Agreement between Hospital and the physicians. Key components:– Physician practice group provides all surgical and medical services for
program, including medical management pre- and post-op– Practice group may provide services directly or under arrangement with other
parties
Emerging Trends - Results
Results• Increased pressure on physician
compensation• Temptation to move ‘closer to edge’• New levels of physician
compensation may be economically unsustainable
Productivity Based Compensation
Evolution of Compensation Plans
Compensation plans are the major tool that move physicians from employees to partners. The changes in methodologies have been:• Guaranteed salary• Salary plus individual productivity incentives• Salary and/or incentives with downside risk• Group incentives• Group incentives that cross specialties (greater revenue sharing)• Group incentives with risk for budget/costs• Service line incentives that involve multi-disciplinary practices and hospital
performance• Joint ventures that involve physician investment
As risks and rewards are aligned, true partnerships can be formed
Mission Based Budgeting
• In Academic Medical Centers the use of a Mission Based Budgeting tool which entails Clinical, Academic, Research, Teaching and Strategic based program for funds flow and compensation can stabilize a Faculty Practice Plan’s dismal spiral into debt. The separation of activity and compensation into “buckets” allows for benchmarking and evaluation of each mission on its own merit
Mission Based Budgeting
• What is it? – Clinical– Administrative– Research– Teaching– Strategic Support
• Why do we use it?– To describe the flow of funds between healthcare business units– To establish principles on which long-lasting agreements will be
based– To link funds flow expenditures over time to their respective
business plans– To measure and improve the financial performance of each
business unit– “Damn thing makes sense” - satisfied client
Results
Compensation Methodology
Consider the following elements in the compensation plan design• Ensure that there are three components to the plan
1. Base compensation2. Clinical incentive compensation (productivity)3. Annual performance incentive compensation
• Establish base compensation, including administrative payments where applicable
• Include clinical production incentives paid at least quarterly• Annually, include risk for managing to budget, quality
incentives and other measures strategically important to the medical entity
• Ensure that all measures utilized be objective, measurable, understandable and fair
Compensation Methodology
• Design the compensation plan to result in a healthy balance between autonomy and risk– Solves many governance/management issues– Encourages physician ownership and involvement in decisions
that affect their futures• Provide incentives for both individual and organizational
performance• Align the compensation plan’s goals and rewards with the
organization’s mission and strategic plan
Evaluate plans annually; update as necessary and continuously evolve to meet the needs of the market and the organization
Define Clinical Time
• Define what a full time position is (one FTE)
• The table to the right shows the MGMA median and 75th% for weeks worked per year, and hours worked per week
• Weeks worked per year does not take holidays into account (includes vacation, CME, sick)
• Hours worked per week is direct patient care only; additional duties associated with seeing patients are in excess of reported hours
Specialty Median 75th %tile Median 75th %tileCardiology 46 48 40 50 Emergency Medicine 48 48 35 39 Family Practice 47 48 38 40 Gastroenterology 47 48 40 45 Hematology/Oncology 47 48 40 40 Internal Medicine: General 48 48 40 40 Internal Med: Hospitalist 47 48 40 40 Neurology 47 48 40 40 OB/GYN 47 48 40 40 Orthopedic Surgery 47 48 40 45 Pediatrics: General 48 48 36 40 Pulmonary Med: Critical Care 46 48 50 55 Radiation Oncology 46 47 40 45 Radiology: Diagnostic 42 46 40 45 Surgery: General 47 48 40 45 Surg: Cardiovascular 46 48 40 50 Surg: Thoracic (primary) 47 48 40 40 Surg: Vascular (primary) 46 47 40 50 Average 46.6 47.8 39.9 43.8
Weeks per year Hours per week
Define Clinical Time
• Set up grid for less than full time including work hours (sessions) and time off
• Physicians must choose their employed FTE amount
• Note definitions:– One session equals four
hours of direct patient contact
– Days off includes sick, vacation and CME; holidays are in addition to paid days off
FTE Status Session per week Days off per year1.00 10 300.90 9 270.80 8 240.70 7 210.60 6 180.50 5 15
Define Other Time
• How much of the job is clinical?– For most it will be 100%
• Is there an administrative component? – Does administration pay at a different rate?– Not everyone needs an administrative component. Use a ratio
of 1:20 to pay for physician administration (20 fully productive FTEs at the MGMA 63rd percentile of work RVUs)
– Medical directorships for hospital services need defined hours and deliverables as well as an annual performance reviews
Setting Base Compensation
Specialty Median 1.0 FTE .9 FTE .8 FTE .7 FTE .6 FTE .5 FTE Administrative/HrCardiology: Invasive $440,840 $443,044 $398,740 $354,435 $310,131 $265,827 $221,522 $150Cardiology: Noninvasive $370,807 $372,661 $335,394 $298,128 $260,862 $223,596 $186,330 $150Emergency Medicine $243,449 $244,666 $220,199 $195,733 $171,266 $146,799 $122,333 $150Family Practice $160,729 $161,533 $145,379 $129,226 $113,073 $96,920 $80,766 $150Gastroenterology $384,015 $385,935 $347,342 $308,748 $270,155 $231,561 $192,968 $150Hematology/Oncology $358,453 $360,245 $324,220 $288,196 $252,171 $216,147 $180,122 $150Internal Medicine: General $174,664 $175,537 $157,984 $140,430 $122,876 $105,322 $87,769 $150Internal Med: Hospitalist $182,184 $183,095 $164,785 $146,476 $128,166 $109,857 $91,547 $150Neurology $216,199 $217,279 $195,552 $173,824 $152,096 $130,368 $108,640 $150OB/GYN: General $256,485 $257,767 $231,991 $206,214 $180,437 $154,660 $128,884 $150Orthopedic Surgery: General $415,347 $417,424 $375,681 $333,939 $292,197 $250,454 $208,712 $150Pediatrics: General $167,158 $167,994 $151,194 $134,395 $117,596 $100,796 $83,997 $150Pulmonary Med: Critical Care $297,693 $299,181 $269,263 $239,345 $209,427 $179,509 $149,591 $150Radiation Oncology $441,371 $443,578 $399,220 $354,862 $310,504 $266,147 $221,789 $150Radiology: Diagnostic $419,148 $421,243 $379,119 $336,995 $294,870 $252,746 $210,622 $150Surgery: General $300,800 $302,304 $272,074 $241,843 $211,613 $181,382 $151,152 $150Surg: Cardiovascular $472,582 $474,945 $427,450 $379,956 $332,461 $284,967 $237,472 $150Surg: Thoracic (primary) $351,873 $353,632 $318,269 $282,906 $247,543 $212,179 $176,816 $150Surg: Vascular (primary) $327,795 $329,433 $296,490 $263,547 $230,603 $197,660 $164,717 $150
Balance Base to wRVU
Example
FTE Status 0.9Sessions per week 9Days off per year 27
Clinical 8 sessionsAdministrative 1 session
Clinical Comp $379,956Administrative Comp $31,200Total Comp $411,156
Incentive Comp wRVUWork RVUs above 8,000 $49.50Work RVUs above 9,500 $54.45Work RVUs above 11,000 $59.90Incentive Comp Call > 7 nights/moWeeknights (Mon-Thu) $500Weeknights (Fri) $750Weekends/Holidays $1,000
Dr. A
Physician specialty = Cardiovascular Surgery
Incentive Compensation
Incentive Compensation – Group Rewards
Purpose• Annual incentives allow organizations to include non-
productivity metrics that encourage physicians to:– View the bigger picture– Focus on quality and satisfaction measures– Get involved in the cost of delivering care and increase
awareness of the overall health system’s fiscal well-being– Participate in the budgeting process resulting in realistic and
meaningful targets– Work toward a positive group culture– Value contributions to governance and citizenship
Incentive Compensation – Group Rewards
• Metrics for annual bonuses must be established in advance and must be measurable. Indicators may include items such as:– Quality indicators– Patient satisfaction surveys– Referring physician satisfaction– Committee participation– Presentations– Staff surveys– Other citizenship measures
Incentive Compensation – Group Rewards
Funding the Annual Incentive Pool• The initial pool is made up of the clinical incentive,,
withhold of 25%• A bonus should be budgeted annually to recognize
quality indicators• The annual bonus pool is at risk for budget
performance. If budgets are not met, the accrued annual incentive pool is used to off-set losses and/or budget variances up to 100% of the pool amount
Incentive Compensation – Group Rewards
• If practices performs better than budgeted, surplus to be shared 50/50 between the hospital and the physician incentive compensation pool– Upside to be shared even if the division is performing at a
deficit (but with a positive budget variance)– It is critical to judge performance on direct expenses only and to
keep indirect allocations “below the line”
The importance of risk• Risk encourages an ownership mentality rather than an
entitlement mindset
Incentive Compensation – Group Rewards
Review of Suggested Methodology• Establish annual budget for all direct operating costs
– Include a budgeting amount for physician bonuses (two line items)
• Track dollar amounts in pool on a quarterly basis– Include 25% of productive incentive (withhold amount) as well
as budgeted amounts– Track production withholds on an individual basis
• Establish non-financial metrics for physician performance (score card)– Metrics should include those not associated with clinical RVU
production
Incentive Compensation – Group Rewards
• At end of fiscal year, re-size the pool according to financial performance of the practice
• Distribute incentive amounts according to individual scorecards
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