INTRODUCTION Framework for Change Comparison of Common Compensation Arrangements Compensation as a Tool to Drive Change

Transcription

1 CPAs & ADVISORS experience clarity // PHYSICIAN COMPENSATION PLAN DESIGN STRATEGY Presented by: Randy Biernat, CPA/ABV INTRODUCTION Framework for Change Comparison of Common Compensation Arrangements Compensation as a Tool to Drive Change 1

2 PHYSICIAN COMPENSATION IN THE HEALTH REFORM ERA COPING WITH CONSTANT CHANGE NAVIGATING HEALTH REFORM Next Generation Compensation Plans: Generally matches the financial realities of today (fee for service) for the majority of compensation Encourages the skills needed for tomorrow, including providing some rewards for managing patient care, improving safety, patient satisfaction, etc. 2

3 FINANCIAL ALIGNMENT We are observing new compensation plans link 60% - 80% of compensation to traditional work effort measures, linked as closely as possible to how the services are actually reimbursed by insurers The reality is that providers tend to relate well to the actual payment mechanisms of the overall group Providers also are typically not pleased to hear that they are a net drain on the financials MISSION ALIGNMENT We are observing new compensation plans link 20% - 40% of compensation connected to non-traditional productivity measures of physician work efforts Consider: Patient Safety Patient Satisfaction Adherence to Standard of Care Protocols Management Participation Miscellaneous Citizenship Items 3

4 PATHWAY TO CHANGE (WHY CHANGE?) Intent is Rooted in Mission / Vision / Values Designed to Create Enduring Sustainability Guided by in the Need to Adapt to Health Care Reform MAJOR PLAN DESIGN OPTIONS THERE ARE MANY WAYS 4

5 COMPENSATION PLANS COMPARED Key Factors Incentivizes Provider Productivity Provider Bears Payor Mix Risk Has No Inherent Fee Setting Constraint Rewards Keeping Practice Costs Low Easy for Management to Administer Matches Practice Income Method Incentivizes Providing Access to Care Incentivizes Practice Profitability Rewards Patient Visit Efficiency Rewards Quality Outcomes Rewards Patient Safety Rewards High Patient Satisfaction Salary % Charges % Collections Rev. - Exp. WRVUs Per Encounter PMPM Star Rating Key Poor Fair Good Excellent KEY FACTORS DEFINED (1/4) Incentivizes Provider Productivity the method of compensation has an direct correlation to provider productivity Payor Mix Risk Matches Practice's the compensation methodology does not insulate the provider from payor mix risk Has No Inherent Fee Setting Constraint the compensation mechanism is not designed such that that changes in fee structure will drive a corresponding change in provider compensation 5

6 KEY FACTORS DEFINED (2/4) Rewards Keeping Practice Costs Low some element of cost (and, therefore, profit) is a fundamental feature of the compensation plan Easy for Management to Administer rates the actual expected pain to manage and administer the compensation plan Matches Practice Income Method This gets to the matching principle of aligning provider compensation to practice reimbursement mechanisms KEY FACTORS DEFINED (3/4) Incentivizes Providing Access to Care provider compensation plan has an inherent incentive for providers to see more patients / be more available for care Incentivizes Practice Profitability direct link in plan exists between overall success of the practice and provider compensation Rewards Patient Visit Efficiency elements that create an incentive to make patient visits quick and efficient 6

7 KEY FACTORS DEFINED (4/4) Rewards Quality Outcomes plan has incentives around measurable quality factors Rewards Patient Safety plan elements that create incentives to create or maintain high level of patient safety Rewards High Patient Satisfaction compensation mechanisms that pay providers for achievement around patient safety measures EIGHT STEPS TO SUCCESS COMMITTED TO PROCESS & NO SURPRISES 7

8 STEP 1: BENCHMARKING For each provider, benchmark charges, collections, WRVU s, compensation, and net income as well as some key relationships between these points (i.e. compensation to collections ratio) Document the results of a benchmarking exercise This creates a baseline for comparing and contrasting the impact of potential new plans STEP 2: INTRODUCE NEW PLAN DESIGN CONCEPTS TO PROVIDERS Kick-off Meeting with Providers Introduce the providers to the general concepts to be explored in developing a new physician compensation plan Establish a connection to the outcome and lay the foundation for the general goals and principles to be followed in the redesign process Key Items to Include: A general update on the state of healthcare General results of the benchmarking exercise Pros and cons of three or four possible plan philosophies. An overview of the general design and implementation process The materials and delivery should focus both on a collaborative process as well as a compliant model/outcome 8

9 STEP 3: WRITTEN PROCESS COMMITMENT Document and share the process to be followed Important Process Elements Include: Key Milestones Commitments made in the kick-off meeting (such as data sharing, non-starters, key elements agreed to). Meeting Dates Key Responsible Parties Points of General Feedback This will be the memorialization of the mutual commitments made in the kick-off meeting and is important in establishing expectations and accountability STEP 4: PHYSICIAN INTERVIEWS Solicit individualized feedback (both positive and negative) Educate providers by answering specific questions and concerns Provides a real sense of what will and will not work for a particular group of providers 9

10 STEP 5: SCENARIO ANALYSIS Model out a baseline scenario compared to historical Modeling should only be done after there is buy in to the conceptual changes STEP 6: PRESENTATION OF RESULTS TO DATE Document & present key work performed, including: Final Concepts Before and After Scenario Results Compensation Calculation & Payment Mechanics Next Steps and Timing This is the 80% Complete Marker 10

11 STEP 7: WORKING GROUP FINALIZATION Select Key Leaders and Technical Experts to Finalize Open Details. Resolve Open Items / Issues Raised at the General Presentation of Results to Date To Accept Change, Providers Will Need To: Understand the Data Elements Utilized Trust Data To Be Complete and Accurate, Become Comfortable with Ongoing Internal Controls Related To All Compensation Data Elements Intended Outcome of this Step is to Document: Key Plan Principles (in Writing) Sources of Information Used in the Model Updated Sample Compensation Calculation Implementation Timeline Details STEP 8: IMPLEMENTATION New Contracts Need to be Drafted, Approved and Signed Compensation Plan Details Will Need to be Communicated with Finance Staff New or Revised Communications About Physician Results Will Need to be Developed and Deployed Updates Should be Made to Written Internal Controls Policies 11

12 PRO-TIPS INSIGHTS ON MAKING IT WORK PRO-TIP #1 When considering the utilization of non-productivity measures, consider the outcome versus process rewards Outcomes oriented the provider is held accountable (and compensated) based on an actual tangible, measureable result Process oriented the provider is held accountable (and compensated) based on complying with an agreed upon process that is integral in achieving the desired outcome For example, consider: Smoking Cessation Patient Satisfaction 12

13 PRO-TIP #2 Consider a Better of Adjustment Period There will be kinks to work out with most new systems. This creates uncertainty in the providers and, therefore, a hesitancy to adopt a new system To combat the uncertainty, utilizing a grace period of three to nine months provides management and the physicians an opportunity to ease into the new plan with some understanding that the pain of change will be blunted by design PRO-TIP #3 Utilize a sliding scale for nonproductivity incentives Helps with frustrations from falling behind early Rewards effort, even short of ideal outcomes 13

14 PRO-TIP #4 Build the employment contract for change. By structuring the employment contract to refer to a compensation plan set at management s discretion, employers avoid needing to frequently re-write & re-sign employment contracts Especially if nonproductivity elements are included in the compensation plan, the plan should really be built to change and be updated and re-calibrated based on the success or failure of certain initiatives PRO-TIP #5 To combat physician turnover, create and fund retention bonus pools Bringing this element into the annual review process can help with a frank dialogue on happiness, career intentions, and overall expectations An advanced retention fund can work like a 401k, where the employer provides a regular contribution and some match on deferred provider compensation 14

15 PRO-TIP #6 Impact of Mid-Level Providers The more an organization is made up of mid-level providers, the more upside only will make sense. Relatively lower compensation levels make downside risk feel threatening QUESTIONS? 15

16 THANK YOU FOR MORE INFORMATION // For a complete list of our offices and subsidiaries, visit bkd.com or contact: Randy Biernat, CPA/ABV Director rbiernat@bkd.com//