Understanding the Evolving Elements of Physician Compensation Models

The healthcare industry has been working to understand the implications of the paradigm shift from volume-based to value-based care. With over 40 years of experience working with healthcare organizations from around the country, Integrated Healthcare Strategies, now a part of the Gallagher Human Resources & Compensation Consulting practice (HRCC), has been at the forefront of these discussions contributing our published data, work with clients, and nationally recognized thought leaders to provide insights into the evolving elements of physician compensation plans.

AY: The shift from volume to value has not only led to the increase of value-based performance initiatives, but has also sparked discussions surrounding organizational alignment and how to prepare for, and adapt to, the changing landscape. While productivity-based incentives remain the dominant driver of compensation, we have seen an increase in non-productivity payments tied to value-based metrics, Advanced Practice Provider (“APP”) supervision and utilization, medical directorship and physician leader roles, and on-call coverage. In our experience, the total cash compensation reported in published surveys is more complex than ever and comprised of payments from these additional services, many of which are not billable and work RVU generating. Data from our annual Physician Compensation and Production Survey substantiates the fact that base salary and productivity-based components of compensation have decreased as a proportion of an average physician's total cash compensation as organizations shift focus to these additional services and components of compensation.

AY: Given the shortage of physicians in the country, many of our clients have dramatically increased the number of employed APPs, re-evaluated the care delivery models, and expanded the roles held by APPs as they continue to be utilized more as independent providers within team-based care models. Based on data gathered from our National Advanced Practice Clinician Survey, we find that base salaries remain a significant portion of pay for APPs, however many APP compensation models are expanding to incorporate performance-based pay components more aligned with physician models. Given the increase in APP utilization, we have also seen an increase in the payments for the physician supervision of APPs and stipend models remain the dominant payment vehicle for physician partners in a team-based delivery model, particularly in certain specialties and practice settings. Ultimately, in determining when to provide payment, the appropriate payment structure, and the amount of payment to a physician for supervision of APPs, an organization should assess its care model, organizational goals, and philosophies for physician and APP compensation.

AY: To effectively navigate the changing landscape, organizations need strong physician leadership to help define and address current organizational and marketplace challenges. We have seen a significant growth in the types of administrative roles filled by physicians since initiating our annual Medical Director and Physician Executive Survey in 2003. These roles are key to the transition towards new models of care and reimbursement, as well as the clinical leadership of managing existing service lines. Organizations are looking towards compensation models that expand the traditional structure of paying for administrative time and incorporate performance measures of physician leaders by including programmatic goals and outcomes as part of the administrative payment model. With the continued expansion of physician leadership roles, organizations will need to ensure that the payments remain competitive yet compliant with regulatory guidelines.

AY: Organizations need to continue to ensure that their compensation models reflect new and emergent trends and care models while remaining market competitive and compliant with regulatory guidelines. The success of any physician compensation model will require a foundation of clearly articulated organizational principles, philosophies, goals, and an understanding of the evolving market data.

To learn more about the Gallagher HRCC Physician & APP services, visit www.IntegratedHealthcareStrategies.com.