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From the Consultant’s Corner 6/25/15

June 25, 2015 News No Comments

Physician Compensation: Making Quality and Patient Satisfaction Part of the Package

Although physician compensation plans traditionally have focused on volume and productivity, emerging payment models that increasingly tie reimbursement to care quality and patient satisfaction dictate the need to look beyond productivity-based salary arrangements. In fact, by tying provider compensation at least in part to quality metrics, an organization can start to shift physician thinking away from fee-for-service and toward value-based payment. This is a critical step in laying the groundwork for outcomes-driven care delivery.

Moving compensation towards quality is no small feat, and organizations looking to pursue this endeavor should not rush but take a careful and collaborative approach that aligns the different players around enterprise goals and objectives.

Following is a step-by-step strategy for developing quality-focused physician payment plans that can push organizations beyond “number of patients seen.”

Garner strong leadership support. Retooling physician compensation requires total leadership commitment that stretches across plan development and well beyond implementation. Leaders must be prepared to encourage the shift to quality, participate in metric identification and target setting, and maintain consistency throughout development and even after the new plan is in place. Consistency is especially important when creating plans for multiple practices in the same field. Nothing derails a physician-hospital relationship faster than different compensation for similar providers. For example, if two cardiologists doing the same work have two different payment structures, distrust and mutiny can ensue when the providers discover the discrepancy.

Engage physicians in the process. Unfortunately, the hospital-physician dynamic has gone through a few rocky periods in the past. The advent of hospital or health system-affiliated practices in the 1990s, for instance, put a strain on hospital-physician rapport. Health systems that employed physicians during this time regularly offered significant compensation without aligning incentives. These organizations assumed that physicians would immediately embrace an employee mentality and operate in the best interest of the health system. Regrettably, these arrangements were often less than successful, as physicians were not incentivized correctly and continued to function autonomously. The agreements frequently ended badly, resulting in frustrated physicians and hospitals. Some physicians have not forgotten this experience and are reticent to embrace any payment plan driven by the health system. As such, organizational leadership may have to overcome physician hesitation before they proceed in developing a plan.

Fostering provider enthusiasm may involve crafting a formal communication and education plan to promote the importance of quality-based compensation. The more physicians appreciate the intent of the compensation program, the easier it will be to agree on suitable metrics. One key point to convey is that all payment arrangements must include some performance measures regardless of specialty to move the organization away from volume and toward value.

In addition to employing a communication plan, organizations should involve physicians in pinpointing appropriate performance benchmarks and targets. Oftentimes frank discussions between leadership and physicians can lead to a compensation structure that meets the needs of both parties, aligning them around common goals.

Determine the right measures. Any set of performance metrics should be consistent with a health system’s mission and values to reinforce enterprise strategic objectives. That said, leadership must also recognize that quality goals—and in turn compensation—will vary by specialty and service line. As a result, organizations should build layered incentives and payment structures based on relevant data that accurately assess performance for particular fields. For instance, when designing compensation plans for primary care physicians, a health system may want to use Healthcare Effectiveness Data and Information Set (HEDIS) measures to gauge the reliability and performance of key primary care activities, such as breast cancer screening, hypertension control or diabetes disease management. This recognizes the role that primary care physicians play in the patient’s care and connects performance with outcomes.

Since specialists spend a lot of time in the hospital, it may be appropriate to tie their performance measures more closely to health system goals. In particular, an organization may wish to relate at least a portion of compensation to cost of care, readmission rates, and/or length of stay or complication rates, including infections. When using cost of care as a benchmark, for example, an organization could first determine the average cost of a specific type of case. Then, providers that perform at or below the cost while achieving defined outcomes could receive a bonus.

Stress certain measures based on strategic priorities. An organization may choose to weigh some metrics differently depending on its mission and priorities. For instance, if a health system is in the midst of a large-scale initiative to lower surgical site infection rates, it may weigh infection-related measures higher than others. Similarly, if the organization has incurred substantial readmission penalties in the past, measures that reflect unnecessary readmissions may gain importance.

Include patient satisfaction in the mix. While patient satisfaction metrics currently make up a small percentage of most physician compensation plans, it can be beneficial to include these when redesigning programs. Because patient satisfaction is now a component of risk-based and accountable care reimbursement models, it is likely to become more prominent in provider payment arrangements going forward. Moreover, there is data to suggest that satisfied patients adhere more closely to their treatment plans, which in turn could improve outcomes. For these reasons, satisfaction scores from routine surveys should be a basic benchmark for all physicians, allowing the organization to reward high performers and encourage low performers to improve.

Looking at physician compensation through a quality lens has both clinical and operational value. Organizations that commit to this effort will not only increase the relevance and effectiveness of their provider payment plans, but also set the stage for more value-based care.


Randy Shulkin is an executive consultant for Culbert Healthcare Solutions.


JenniferMr. H, Lorre, Dr. Jayne, Dr. Gregg, Lt. Dan

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