Although interest in value-based compensation for physicians continues to rise, trying to implement new payment systems is complex. During a presentation at the National Association of Managed Care Physicians (NAMCP) Spring Managed Care Forum 2017, Karin Chernoff Kaplan, MBA, CVA, director at Veralon, focused on unpacking the complexities of value-based physicians compensation.
“It’s still a volume-based world. Fee-for-service encourages productivity,” Kaplan says, adding that measuring quality is challenging due to no consistent best practices that measure quality. Also, providers have traditionally not had access to cost data.
“Leaders will not test new revenue or compensation models, fearing that change will lead to a near-term decline in revenue,” she said.
Providers also fear that physicians might not support a shift in compensation makeup.
“The most highly-compensated physicians are typically those who are productive. A lot of physicians are being asked to do more for the same compensation,” Kaplan said.
Those fears are real: Kaplan said that value-based incentives that focus on quality and cost management could encourage a reduction in productivity. Also, physicians could become dissatisfied if there’s a risk that their pay may be cut.
“New plans can be perceived as unfair, inequitable or too complex,” Kaplan said. “It’s also difficult to quantify and reflect quality improvements in valuation.”
Trends in physician compensation include pay models where value-based incentives are a larger part of base pay, with less emphasis on volume-based incentives. Currently, value-base incentives represent less than 10% of physician compensation, according to Kaplan.
“Providers agree that physician compensation models should place less emphasis on volume and more on value, to align physician behavior with new revenue models,” Kaplan said.
Most physicians receive a salary comprised of 80% base pay, and 20% volume-based incentives. Kaplan says that soon, physicians could be receiving 80% of their compensation as a base pay, and 20% of their pay from incentives. Those incentives could vary, and include pay for performance, value- and volume-based pay.
Kaplan said that revamping physician compensation is not just about what’s trending. Payment model designs have to fit with the objectives and challenges of a healthcare organization. Important questions to ask before altering compensation models include:
How do we measure performance?
What are the organizational and payer metrics?
How should incentives be paid?
What is the impact on physicians?
Is compensation consistent with fair market value?
Incorporating physicians during the planning of new payment models helps makes the transition to those models easier, Kaplan said. That transition includes simulating new pay models to understand the impact, and identify winners and losers to make necessary adjustments.
“Bottom line, it’s generally best to transition,” Kaplan said, adding that there are many options for phasing in new plans. She suggested starting with a single specialty or department, and letting physicians decide if they want to be a part of the plan. Organizations can also phase in new payment models over time, minimize risk for the first few years, or run new payment models as a “shadow program” for a year.