Executive compensation has long played a critical role in the retention of experienced healthcare leaders, but a push for high-value care is changing the way that managed care organizations are rewarding their leaders.
Recently, there’s been a shift in compensation plans from offering a base salary to an annual incentive plan derived from a short list of goals related to addressing the organization’s vulnerabilities and then a long-term incentive opportunity.
Clive Fields, MD, chief medical officer of VillageMD, a national provider of primary care and president of Houston-based Village Family Practice, believes as the healthcare system moves to value-based payment, executive payment will move behind it.
“In many cases, they are still paid by emergency room admissions, inpatient admissions, etc. To truly succeed in value-based care, executives have to align as well with the healthcare system and focus on value not volume,” he says. “In other words, hospital CEOs and executives must be on the same page and same directive as the physicians.”
The macro changes within value-based payments are being seen throughout and integrated in hospitals and with executives, things Fields notes everyone is paying strict attention to.
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“More inpatient beds are being closed or repurposed, such as for long-term care, skilled nursing, and rehabilitation—all of which are in short supply,” he says. “We’re also seeing the physical plants they’re managing move in the same way.”
Julian Hagmann, vice president of Caring Professionals Inc., a New York-based homecare company, has spent nearly a decade working with care providers, medical staff, and business professionals. He has seen first-hand how the push for high-value care is impacting executive compensation in the managed care space—and says change was definitely needed.
“Considering the managed care organization is in charge of patient outcomes and are responsible for overseeing all aspects of one’s care, it is appropriate to offer a bonus incentive to the managed care organizations so that there is a focus on quality and therefore increased patient outcomes, rather than only being concerned with enrollment numbers,” he says. “The hope in doing this is to improve quality of life for the enrollees and to reduce Medicare and Medicaid spending on preventable items such as ER visits, falls, shortness of breath, etc.”
Hagmann notes the plans are being held to quality standards imposed by CMS and the Department of Health and explains that members of a plan get assessed every six months. During that assessment, they go through a list of questions surrounding quality of care being received from in the home to care management. These include: Preventable Avoidable Hospitalizations, Flu Shot Compliance, Falls, ER Visits, Shortness of Breath, and Urinary Incontinence & Pain Intensity—basically anything that could potentially result in the patient being admitted to a hospital or nursing home.
“Should those scores improve, then the managed care organization receives a bonus for showing improved patient outcomes, should that fall below their current rating, or whatever metric they chose, then they would not receive a bonus,” he says.
Evolving payment models
In 2018, B.E. Smith conducted The Executive Compensation Intelligence Report, its second-ever executive compensation survey, garnering responses from more than 350 healthcare leaders. They learned that 69% of respondents self-reported a compensation level between $100,000 to $299,000 and another 19% reported earning between $300,000 and $499,000, while 6% exceeded $500,000. Echoing the previous annual survey, 45% of respondents said their compensation was higher than the previous year.