Posts Tagged ‘value-based physician compensation’

Maturity of Physician Compensation Models from Fee-for-Service to Value-Based

October 9th, 2014 by Cheryl Miller

To be successful, a physician compensation model must mature slowly, as it moves from fee-for-service (FFS) to a productivity-based model to salary with performance incentives, where many organizations are today, says Cynthia Kilroy, senior vice president of provider strategy and business development at Optum. Here, she describes the steps that need to be taken.

As you move and mature from a clinical transformation perspective, you need to balance the financial risk transformation as well. If you get off kilter on any of those, then you are going to be off balance.

Early on in clinical and financial risk transformation, you are seeing more of the FFS and a FFS with pay-for-performance (PFP). When you start to move up, organizations typically start with salary guarantee. That salary is driven by productivity. It is usually a year that organizations support that, then you move up to productivity with a guarantee.

Finally, organizations are providing compensation based on productivity. As you start to move into these risk contracts and as the market matures, you need to look at productivity with a performance incentive. These are systems to find their alliance with the market, and they should be aligned with your payor contracts. Each payor typically likes to have its own incentives. You need to align the incentives the payor is focusing on and have your physicians focus on them as well, because if they are not in sync, you are not going to meet your ultimate goals of shared savings or even gain-sharing.

The other key question is, what can the organization achieve? We can put numbers out there and measure incentives, but if we do not think we are going to be able to achieve it, we need to be realistic about what can be measured. What is realistic to change reimbursement for compensation from a physician perspective? That is a key area as you start that inflection point.

Ultimately you start to see a larger percent of incentives. This is where you start to shift from maybe 5 or 10 percent, where there is more skin in the game. Organizations said change in behavior does not happen until 20 to 25 percent of compensation is tied to incentives.

Then what I see is the employed model, which is a salary with a performance incentive, then moving up to a larger percentage of the salary with the larger percentage from the incentive model.

Regarding the salary with the population incentives, as you start to look at maybe taking capitation, how does that tie into population incentives around efficiency and quality?

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Cynthia Kilroy is the senior vice president of provider strategy for Optum Accountable Care Solutions, where she is responsible for business development, go-to-market strategy, strategic consulting, solution design and cross-company relationships. Her focus is on helping providers navigate the transformation to value-based reimbursement and accountable care models.

Source: 6 Value-Based Physician Reimbursement Models: Action Plans for Alignment, Analytics and Profitability