3 Essentials for Shift to Value-Based Physician Compensation

Monday, February 10th, 2014
This post was written by Patricia Donovan

Physician 'evangelists' are needed to lead the compensation transformation.

What’s the organizational ‘glide path’ to advancing new physician compensation models? One wide enough to build alignment, generate analytics and foster communication, advises Cynthia Kilroy, senior vice president of provider strategy and business development at Optum.

It’s also one that brings providers on board early on for crucial tasks like development of performance metrics — particularly physician “evangelists” to lead the transformation, Ms. Kilroy adds.

As healthcare compensation moves from an episodic, volume-based view to a population-focused approach, the engagement and education of participating providers is critical — and also delicate, Ms. Kilroy noted during Accountable Care Reimbursement Models: Moving from Productivity to Population-Based Incentives.

The new financial model moves away from healthcare’s preoccupation with gaining market share, she says, to one focused on questions like: How am I coordinating care? How do I measure physician performance related to that? What’s the service and outcome? How can I better manage chronic diseases?

“Organizations are really looking at the panel size and the risk. Now, when we think about population health management, it’s not just going to be from a volume perspective, but whether I am really managing that population from a cost and efficiency perspective.”

To guide organizations toward a successful physician compensation strategy, Ms. Kilroy suggested 12 questions centered on a company’s value-based goals, governance and physician engagement. Of this last, an organization must decide whether its compensation and incentives philosophy leans more toward reward or risk, she suggests, and then identify the physicians who will lead the change.

To be truly successful, a physician compensation model must mature slowly— “This isn’t a ‘0 to 60’ in one day or 30 days,” Ms. Kilroy warns —as it moves from fee for service to a productivity-based model to salary with performance incentives, where many organizations are today.

Research has shown that physician behavior isn’t likely to change until 20 to 25 percent of compensation is tied to performance, she added.

When moving through clinical transformation, the compensation model must also balance financial risk transformation as well. To that end, risk-adjusted populations topped Ms. Kilroy’s list of 11 characteristics of a value-based physician compensation model — a list that while it included patient satisfaction, Ms. Kilroy acknowledged the difficulty of measuring this, especially if a patient is simply having a bad day. However, peer satisfaction can and should be validated, she added.

Another key aspect of the compensation model is defining the performance metrics themselves, which should be developed with provider input and built on good data drawn from a range of sources — not just health claims.

“I read recently that 30 percent of asthmatics do not have a claim that actually identifies them as asthmatic,” she said, recommending that clinical information be drawn from EHRs, both normalized and unnormalized, and noting the relatively new phenomenon of pulling data from care management systems into analytics platforms.

During the webinar Q&A, Ms. Kilroy offered considerations for measuring provider peer satisfaction, evaluating care management platforms and choosing a risk adjustment method.

Listen to an interview with Cynthia Kilroy in which she shares strategies for prudent sharing of physician performance data, a practice that can foster a culture of trust and respect.

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