Start slow with quality-based compensation

October 10, 2013

Creating a plan to increase pay based performance is a gradual change, not a leap of faith

I s it too soon into the era of quality metrics–favoring value over volume–for primary care practices to revise how they pay their employed physicians? Several experts disagree.  

Alice G. Gosfield, J.D., an attorney in Philadelphia, Pennsylvania, and a Medical Economics editorial consultant, who specializes in health law and healthcare regulation with an emphasis on physician representation, finds that money from value-incentive plans is slowly starting to reach physicians.

She conducted an informal survey of several major clinics in 2007 and found that pay-for-performance dollars were not making their way to physicians. But when she repeated it in 2011, she received twice as many responses and found that more organizations were compensating physicians for quality results.

Some give stipends, while others measure performance, she says. For example, the Billings Clinic, in Billings, Colorado, started with primary care and now each specialty picks its own metrics for compensation bonuses.

Gosfield says groups tend to start with primary care when making this change. “That is likely because it’s the place where most patients first access the healthcare system. To get the biggest benefit, they want to make to be sure that their patients coming in the door are treated effectively,” she says.

However, some experts are less optimistic that quality metrics will pay enough anytime soon for them to alter private primary care practice compensation.

Reed Tinsley, CPA, a Houston, Texas-based healthcare consultant, says the big question with making such a switch is “What’s in it for the practice?”

“Until this market moves to a payment-for-quality system, which I don’t think it ever will because no one can define quality, how does a practice benefit in the long run? How is it going it make money doing this? It’s not,” Tinsley says.

Justin Chamblee, MAcc, CPA, a vice president at Coker Group in Alpharetta, Georgia, says that most private groups, whether they have two or 200 employees, are struggling with this issue.

“One of the things we always recommend to private groups is to make sure that incentives are aligned. There is a big push to move from volume to value but in many markets, the reimbursement mix may not have changed yet enough to really make this work,” he says, adding that practices are still largely paid via fee-for-service.

“We say start thinking about these value-based metrics but don’t go crazy changing your compensation model because you can actually do more harm than good by moving to a model that is largely focused on value when your revenue is still being driven by volume,” Chamblee says.

Gosfield agrees. “You can’t switch your internal compensation system to a methodology that doesn’t take into account how the dollars are actually generated into the practice,” she says.

Measuring comes before paying

However, you will never be able to reward employees based on quality if you do not measure for it. Once employees know you are measuring to determine increased compensation, they will pay attention to it, Gosfield says.  

“There are three truisms in quality measurement. First, you cannot improve what you do not measure. The second is, what gets measured is what gets done. If you start to apply quality measures, people will work to get an A,” she says. “The third rule is, so be careful what you measure.”

Start with one initial quality measurement, she suggests, slowly adding in more, gradually reaching about 8 to 10. The physician’ “risk” to their salary should be no more than 5% to 10% of their pay, she says.

Be proactive
Chamblee says his group recommends that private practices actively seek out value-based options and payments.
“Look at the opportunities related to clinically integrated networks, joining Medicare accountable care organizations, pursuing patient-centered medical home models. There are a lot of potential dollars out there but it’s really incumbent upon a private group to go after those,” he says.

Finding these opportunities is so important because many private practices now are a zero-sum game: Revenue less expenses dictates what physicians are paid.

“It is a lot easier to start incentivizing based on quality when the funds are coming separately to provide that incentive as opposed to using current dollars that have been earned based upon volume and making physicians earn that money again,” Chamblee says.

Tinsley negotiates with numerous managed care plans and says that the one piece of leverage he has is if a practice can show it is more cost-effective than competitors while achieving the same or better clinical outcomes. This differentiation is important because not all physicians drive costs in the network the same way. But he agrees that you have to seek out such opportunities.

“Raises don’t come to you. You have to go out and ask for them,” and even then many payers will say no because they do not want others providers to demand the same deal, Tinsley says.

“They don’t want to get into those politics,” he says. “Until the market sits down and says we are going to reward physicians, I don’t care what size of practice it is, I don’t see this moving in a non-volume-based reimbursement.”  

Getting started
Once quality money is earned, practices can tie the distribution of that money directly to what is driving that revenue, such as achieving specific quality measures. They can supplement that with other metrics that are important to the practice, such as adoption of electronic health records (EHRs) or key measures such as patient satisfaction or keeping referrals and diagnostic testing in-house when appropriate, Chamblee says.

Gosfield and Tinsley agree that patient satisfaction is a good place to start. For example, physicians who earn high satisfaction scores could be eligible for a bonus, similar to productivity bonuses that are currently paid by some groups.

“Patient satisfaction scores are so important to a small practice-I am amazed at how bad customer service can be,” Tinsley says.

Existing patients should be the biggest source of referrals in a primary care practice. Are your patients referring friends and family to you? If not, you are not a “referrable practice,” he says.

“That can be the physician’s fault, it could be the staff’s fault, it could be everyone’s fault,” Tinsley says. “If you have a bad experience in a physician’s office, that taintment can go a long way.

Tinsley has seen smaller practices give bonuses in the range of $5,000 to $10,000 for earning high patient satisfaction rates.

Chamblee says one way many practices share money is a scorecard approach. For example, there might be five metrics that the practice values, and each is assigned 20 points. Physicians receive an annual score of up to 100 points for how well they meet those metrics. The score can dictate payment of the dollars.

He also sees other practices, especially small ones, that just divide up any quality bonuses equally since all the physicians likely contributed to achieving those metrics.

“It can really be a simple approach or a more complex one. The more complicated ones are more important in larger practices, where it is more important to drive incentives directly,” he says.

For now, Chamblee sees that incentive payments for quality achievement will most likely come in the form of annual or semi-annual bonuses, not permanent salary increases.

“The nature of this type of cash flow makes it hard to pay those on an ongoing basis,” he says.

That may change as practices get more per-patient per-month payments from payers, he notes, and the dollars are more predictable.

Even if the time isn’t right
Although moving to a more quality-based compensation packages may not help practices earn more money now, practice owners should still start looking for appropriate opportunities to move in that direction, Gosfield says

“You can still work on improving around your margins, standardization in the practice, templatized documentation, standardization in use of ancillary personnel, use of standing order sets,” she says. “Even before someone pays you differently for your quality results, you can begin to link some of your compensation to performance on those kinds of metrics.”

Physicians are bad at focusing on margins and instead focus on revenue, Gosfield says. They really need to ask themselves what they can do in their practice to get better quality results and improve the patient experience of care because that is what they are going to be measured on.

However, Tinsley does not see much value in rewarding physicians to take steps independent of dollars coming in at this point. For example, he sees EHR use as part of the job, not something for which employed physicians should get a financial reward. But he does support incentivizing employees for taking time to participate in activities such as serving on a quality assurance/improvement committee if a practice is part of an independent practice association.

Down the road
Gradually, as quality does become a bigger component in how a practice is paid, compensation packages can change accordingly, the experts say.

“What physicians get measured on is publicly available and increasingly their compensation from payers is going to turn on this stuff,” Gosfield says.

Medicare’s value-based purchasing modifier will be applied to groups of more than 100 physicians initially but it is inevitable that it will move to smaller groups, she says. In the meantime, smaller groups can take advantage of other opportunities such as Bridges to Excellence.

“That is additional money and practices will have to figure what they will do with it when it lands in the group. What will make your practice better and sustain or improve the results you are getting,” Gosfield says.

Chamblee says that how quality incentives for employees look further down the road really depends on where fee-for-service goes.
“Our opinion is that fee for service is going to be around for a long time and volume, to some extent, will always play some role within a practice,” he says.

Volume will likely dictate a good part of the compensation arrangement for some time in most markets, he adds, but says that as this model changes, the awarding of incentives should change commensurately.