Ohio Hospital Association 2015 Annual Meeting. Physician Compensation: Navigating Change from Volume to Value in a Compliant Way

Transcription

1 Ohio Hospital Association 2015 Annual Meeting June 8, 2015 Physician Compensation: Navigating Change from Volume to Value in a Compliant Way Jason Tackett, Sullivan, Cotter and Associates, Inc., jasontackett@sullivancotter.com Claire Turcotte, Bricker & Eckler LLP, cturcotte@bricker.com

2 Changing Health Care Environment 1

3 Changing Health Care Environment Organizational Impact Industry consolidation Shift from volume to value Physician leaders focused on change management Ongoing scrutiny and regulation Declining reimbursements Provider alignment and integration 2

4 Changing Health Care Environment Redefining High Performing Health Care Organizations Quality and Efficiency Higher Safe care Quality care Patient experience Access Outcomes Efficient and effective care Patient centered High Performing Hospitals Lower Operating margin Improved productivity Cost per unit of service Total cost of care Higher Lower Costs 3

5 Changing Health Care Environment Physician Alignment Strategies Focus on physician alignment strategies multifaceted and unique to each organization Strategic Organization Needs Culture/ Values Reimbursements Measurement Systems Physician Preferences 4

6 Changing Health Care Environment Expected Changes in Physician Compensation Volume-Based Compensation Leverage Incentives of 5% to 15% Primary Metrics wrvus Collections Net Income Plan Structure Individual Specialty-based Value-Based Compensation Leverage Incentives of 20% to 35% Additional Metrics Patient experience Quality and patient sat. Process efficiency Patient Access Panel size Plan Structure Team-based Patient-centered 5

7 Changing Health Care Environment Physician Compensation Strategies Base Model Salary Work Effort (Hours/Shift) Productivity Based Incentives Performance: Quality, Patient Satisfaction, Access, Citizenship Productivity: wrvus Collections Supervision of APCs Financial Results: Revenue Expense Management Hospital Employment Medical Group Practice Individual Team 6

8 Market Trends 7

9 Market Trends Provider Performance Incentive Survey Results SullivanCotter s 2014 Provider Performance Incentive Survey The survey was designed to identify: Structure of quality components in compensation plans Amount of compensation tied to quality Performance measurement levels by individual, specialty and overall Types of measures Number of measures used Trends in performance incentive practices Survey responses were received from 32 organizations with an average of 570 employed physicians Selected results are shown on the following slides 8

10 Market Trends Total Cost of Care: Current and Forecasted Total Reimbursement Utilization of Value- or Quality-Based Incentives Organizations reporting more than 10% of reimbursement associated with incentive-based contracts Currently: 33% The next five years: 82% 100% 50% 53% 14% 0% 18% 18% 30% 4% 26% 26% 11% 0% None Currently Implementing Less Than 10% 10% to 24% 25% to 39% Greater Than 40% Current (n=28) Next Five Years (n=27) 9

11 Market Trends Quality Incentives: Non-Physician Employee Incentive Compensation Plans Patient Care Quality Metrics 66% are incorporating measures into other non-physician employee incentive compensation plans Executives 81% Non-Physician Administrators 71% APCs 67% Non-Direct Health Care Providers 67% Other Direct Health Care Providers 62% Other 48% 0% 50% 100% n=21 10

12 Market Trends Quality Incentive Practices A Look at Performance Incentive Payments 11

13 Market Trends Quality Incentive Practices: Performance Measurement Levels 78% use more than one level of performance measurement in their quality incentive plan Specialty and Individual 44% Specialty, Individual and Organization Wide 28% Individual Only 9% Organization Wide Only 6% Specialty Only 6% Individual and Organization Wide 3% Specialty and Organization Wide 3% 0% 25% 50% 68% have all specialties participating in this incentive n=32 12

14 Market Trends Quality Incentives: Performance Measurement Components by Specialty Specialties with Greatest Prevalence Largest Increases in Specialty Utilization from 2013 Internal Medicine (n=31) 94% 6% Cardiac/Thoracic Surgery 24% Hospitalist Internal Medicine (n=29) 93% 7% Emergency Medicine 20% Family Medicine (n=29) 90% 10% Gastroenterology 19% Anesthesiology (n=16) 88% 12% Orthopedic Surgery 12% Diagnostic Radiology Interventional (n=16) 88% 12% General Surgery 9% 50% 100% Yes No 0.0% 50.0% 13

15 Market Trends Quality Components in the Compensation Plan: Cardiology Top Measures Used % Orgs Using % Measuring by Individual Patient Satisfaction: Subset of Composite Measure 60% 75% Patient Satisfaction: Composite Measure 40% 0% Readmission Rates 30% 17% Mean number of measures being used 5 9% of TCC is the mean target percentage quality incentive payout Majority structure the award amount as an all or nothing payment Distribution of Quality Measures by Category 12% 13% 21% 5% 3% 21% 13% 21% 46% 45% Process Patient Satisfaction Structure Composite Efficiency: Cost/Resource Use Outcome 14

16 Market Trends Primary Care Patient Panel Size Of the 3% of participants that report using patient panel size in their primary care physician compensation model, on average, 25% of their primary care physician s TCC is attributable to panel size (median values reported below) Internal Medicine 1,799 Family Practice 1,845 General Pediatrics 2,066 15

17 Market Trends Key Takeaways Health care reform has already begun to impact physician compensation Health care organizations are engaged in physician compensation and benefit plan redesign Physician compensation is moving toward achievement of patient satisfaction and quality goals, while maintaining a heavy focus on productivity Compensation tied to quality/patient satisfaction generally ranges from 5% to 15% Leading organizations are building the infrastructure for improved, timely reporting of quality outcomes and service indicators 16

18 Regulatory Considerations 17

19 Regulatory Considerations Key Regulations Enforcement climate is increasingly focused on FMV and commercial reasonableness Anti-Kickback Statute Stark Law Insurance Laws Physician Compensation Tax Exempt IRS Laws Anti-Trust Laws False Claim Acts Civil Monetary Penalties 18

20 Regulatory Considerations False Claims Act Qui Tam Whistleblowers A legal provision in the United States under the False Claims Act (FCA): Allows a private person, known as a relator or whistleblower, to bring a lawsuit on behalf of the United States, where the private person has information that the named defendant has knowingly submitted or caused the submission of false or fraudulent claims to the United States Relator need not have been personally harmed by the defendant s conduct Whistle Blower 19

21 Regulatory Considerations Health Care Fraud Cases involving violations of the FCA have grown significantly in recent years: 2010: 574 FCA Cases 2013: 752 FCA Cases In fiscal years 2013 and 2014, health care settlements and judgments were $4.3 billion and $2.3 billion, respectively Between 2009 and 2014 a total of $14.5 billion has been recovered 1 Most cases are filed under qui tam or whistleblower provisions 1 Source: Department of Justice news release, November 20,

22 Regulatory Considerations Why Should I Care? Stark Repayment of all Medicare reimbursement Civil Monetary Penalties of $15,000 per claim Exclusion from Medicare/Medicaid programs Up to $100,000 penalty for circumvention schemes Reputational Risk Gainsharing CMP Civil Monetary Penalties of $2,000 per individual $50,000 penalty per act 3x total amount paid Burden on Organizational Resources Anti-Kickback Criminal fines up to $25,000 Imprisonment up to five years Civil Monetary Penalties up to $50,000 per violation Damages up to 3x the kickback False Claims Act 3x damages of overpayment $5,500 to $11,000 per claim penalty High Settlements 21

23 Regulatory Considerations Recent Case Settlements Involving Physician Compensation April 2015 Citizens Medical Center, Victoria, TX $21.75 million settlement for alleged FCA violation for improper bonuses to ED physicians to refer to hospital Chest Pain Center, compensation in excess FMV and above prior practice income, and improper bonuses to GI physicians based on referrals to hospital March 2014 Halifax Hospital Medical Center, Daytona Beach, FL $85 million settlement for alleged FCA violation for improperly structured incentive bonus pool to medical oncologists that included the value of prescription drugs ordered by the physicians October 2013 Tuomey Healthcare Systems, Sumter, SC $237 million fine after May jury verdict finding Tuomey violated FCA due to Stark violations involving part-time employment of specialists alleged to be in excess FMV and taking into account the volume or value or referrals 2009 Covenant Medical Center, Waterloo, IA $4.5 million settlement of alleged FCA violation involving compensation to five highly-paid specialist physicians that was not commercially reasonable and not FMV 22

24 Regulatory Considerations Compensation Structure While FMV is critical, it is just as important to ensure that the compensation arrangement is properly structured Employed physicians can be paid for their own services and receive bonus compensation only for personally performed services Can provide challenges when acquiring physician practices Should also watch for such issues as: The impossible day concurrent pay for on-call and clinical services, medical director responsibilities Administrative compensation with no real duties associated or outcomes specified Compensation levels that far exceed collections for professional services provided For recruited physicians, practice acquisitions and certain alignment approaches with independent physicians, compensation should not result in a windfall for the physicians 23

25 Transitioning to Value-Based Compensation 24

26 Transitioning to Value-Based Compensation Lead or Lag Value-Based Reimbursement? 25

27 Transitioning to Value-Based Compensation Challenges Primary challenges that will impact the transition to value-based compensation models include: Measurement Pace of Change Leadership Development Developing measurement systems for use in an environment that pays for value Clinical outcomes Population health management Total cost of care Implementing change at a pace that matches changes in reimbursement Developing the MD leadership that is necessary to achieve the desired cultural change 26

28 Transitioning to Value-Based Compensation Speed of Transition -VS- While health systems are careful to ensure transition does not outpace payer reimbursement migration to incentives encouraged in team-based models, there may be advantages to being an early adopter Early adopters must commit resources to initial and ongoing provider and staff training to support the behavior changes required to operate in a team environment 27

29 Transitioning to Value-Based Compensation All Components Must Be In Balance What Happens When Incentives For Quality, Access and Patient Satisfaction are Added to the Compensation Model? Total Cash Compensation wrvu Threshold Base Salary wrvu Rate 28

30 Transitioning to Value-Based Compensation All Components Must Be In Balance What Happens When Incentives For Quality, Access and Patient Satisfaction are Added to the Compensation Model? Total Cash Compensation 29

31 Transitioning to Value-Based Compensation Common Pitfall Quality incentives and payments are included in the published TCC levels as well as in the productivity ratios Specialty Area Hospital Based Medical Primary Care Surgical Incentive Compensation Analysis Metric With Quality Compensation Without Quality Compensation Percentage Difference Median Median Median TCC per wrvu $60.63 $ % TCC to Collections % TCC per wrvu $60.45 $ % TCC to Collections % TCC per wrvu $45.26 $ % TCC to Collections % TCC per wrvu $59.52 $ % TCC to Collections % Plan Design Alert! Be aware that many published survey sources have quality built into their ratios 30

32 Transitioning to Value-Based Compensation Example Compensation Model Compensation approach includes three components: Base salary Variable compensation based on: wrvu conversion factor for each wrvu exceeding a specified threshold Multiplier based on value-based performance score Base Salary + ( wrvus Exceeding $40.00 per x ) Threshold wrvu + Value-Based Performance $0 to $10 per wrvu Low Performance Score High Performance Score = Total Cash Compensation 31

33 Transitioning to Value-Based Compensation Example Compensation Model wrvu-based component based on individual productivity for wrvus exceeding 4,000 Determined by multiplying the annual wrvus exceeding 4,000 by a rate of $40.00 per wrvu (conversion factor) Value-based component determined by multiplying all wrvus based on the rate reflective of performance score (1 through 3) Possible Multipliers for Each Performance Score Performance Score 1 (Low) 2 (Baseline) 3 (High) Multiplier (per wrvu) $0 $5 $10 Value-based performance score can be based on a number of variables, including quality, patient satisfaction and access 32

34 Transitioning to Value-Based Compensation Example Compensation Model Projected compensation over a range of wrvus Base Salary $160,000 wrvus Productivity Comp. > Threshold Low $0 per wrvu Value-Based Compensation All wrvus Baseline $5 per wrvu Maximum $10 per wrvu 4,000 $0 $0 $20,000 $40,000 5,000 $40,000 $0 $25,000 $50,000 6,000 $80,000 $0 $30,000 $60,000 wrvus Total Cash Compensation Effective Rate per wrvu Low Baseline High Low Baseline Max 4,000 $160,000 $180,000 $200,000 $40 $45 $50 5,000 $200,000 $225,000 $250,000 $40 $45 $50 6,000 $240,000 $270,000 $300,000 $40 $45 $50 33

35 Transitioning to Value-Based Compensation Example Compensation Model $350,000 Low Productivity High TCC High Productivity High TCC $300,000 $250,000 $200,000 Base Salary (25th) $150,000 $100,000 $50,000 Low Productivity Low TCC High Productivity Low TCC 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 wrvus (Adjusted to reflect a 1.0 C.FTE) 34

36 Three-Step Process Transitioning to Value-Based Compensation Case Study - Overview Objective: Message: Reduce focus on wrvu productivity Potential to earn the same or more, but earn it differently New Design: Point system and compensation pool funded by wrvu productivity and replaces variable wrvu productivity compensation (10% to 15% of compensation) Step One: Determine withhold based on prior year compensation Step Two: Define goals, weighting and baseline performance level Baseline: Point at which 100% of the withhold is earned Step Three:Determine plan mechanics Clearly define how the baseline is earned Maintain some focus on wrvu productivity Key Decision: Trigger or build into the point system 35

37 Transitioning to Value-Based Compensation Case Study Defining Goals, Weighting and Baseline Points Example baseline options to earn back the withhold Note that if the baseline is set too low, metrics falling above the baseline will become irrelevant Citizenship 10% Academic 10% Patient Satisfaction 10% Quality 20% wrvu Productivity 50% Citizenship 10% Academic 20% Patient Satisfaction 20% Quality 50% Baseline 90% 9 points Baseline 80% 8 points Baseline 50% 5 points In this example, an individual wrvu trigger can apply Example One Example Two 36

38 Transitioning to Value-Based Compensation Case Study Plan Mechanics Two payout schedules: Base payout Up to 100% of the withhold Withhold Amount / Baseline Points (5) = Base $ Per Point Incentive payout Remaining pool dollars paid out based on points exceeding baseline Potential for dollar value per point significantly lower than the base payout if majority of physicians exceed 5 points Remaining Pool $ / Points Earned Exceeding Baseline = Incentive $ Per Point 37

39 Transitioning to Value-Based Compensation Case Study Base Payout Result Example: Physician A earns 6 points; B, 5 points; and C, 4 points Base Payout Pool funded at 100% ($75,000) Two physicians meet/exceed baseline earning 100% of the withhold Physician Withhold $ Per Point Baseline Met Base Payout % Withhold Earned $ $ Points $ % A $20,000 $4,000 Yes, 5 $20, % B $25,000 $5,000 Yes, 5 $25, % C $30,000 $6,000 No, 4 $24,000 80% Total $75, $69,000 92% Funding $75,000 - Earned $69,000 = Surplus $6,000 38

40 Transitioning to Value-Based Compensation Case Study Incentive Payout Result Incentive Payout Total payout equals total pool funding Surplus $6,000 / 1 Point Exceeding Baseline = $6,000 Per Point Physician Base Payout Points Exceeding Baseline Incentive Payout Total Payout $ $ $ A $20,000 Yes, 1 $6,000 $26,000 B $25,000 No $0 $25,000 C $24,000 No $0 $24,000 Total $69,000 1 $6,000 $75,000 39

41 Transitioning to Value-Based Compensation Key Takeaways Transitional models must support the organization s strategy and align with value-based reimbursement Model selection should be based on: Culture Legal and regulatory considerations Ability to collect and report data accurately and in real-time Physicians understanding and familiarity with the specific measurements and criteria Consistency with payer environment Alignment with organizational infrastructure EHR Care management programs Current TCC and productivity levels 40

42 Answering Your Questions 41

43 Speaker Information and Q&A Jason Tackett Sullivan, Cotter and Associates, Inc. Claire Turcotte Bricker & Eckler LLP 4000 Town Center 9277 Centre Pointe Drive Suite 1750 Suite 100 Southfield, MI West Chester, OH

44 Regulatory Considerations Additional Details 43

45 Regulatory Considerations What is Stark Law? Prohibits physicians from referring patients for designated health services to entities with which the physician has a financial relationship unless a statutory or regulatory exception is met Financial relationship includes direct or indirect ownership or investment interest or compensation arrangement Common exceptions include Employment Personal Services Agreements Fair Market Value Civil Statute ~ Strict Liability ~ Intent Not Required Indirect Compensation Arrangements Must meet ALL exception requirements All or nothing and strict liability 44

46 Regulatory Considerations FMV Definition Per Stark Law Civil Statute ~ Exception Mandatory ~ Strict Liability ~ Intent Not Required Value in arm s length transactions consistent with the general market value General market value means the compensation that would be included in a services agreement as the result of bona fide bargaining between well-informed parties to the agreement who are not otherwise in a position to generate business for the other party, at the time of the services agreement Fair market price is generally based on bona fide comparable services agreements, where the compensation has not taken into account the volume or value of anticipated or actual referrals 45

47 Regulatory Considerations Commercial Reasonableness Stark Law requires arrangements to be commercially reasonable which applies to broader business issues related to the arrangement: But for referrals would the health system enter into the arrangement? Health system should demonstrate community need to retain or add service/specialty; ability to increase indigent care; patient care benefits (such as quality and continuum of care): Does the arrangement improve access to or quality of care? Documentation should attest to the existence of relevant commercial reasonableness factors especially arrangements providing compensation for administrative and other non-clinical services: Does the health system need the administrative services? Is a physician needed to perform the services? 46

48 Regulatory Considerations Anti-Kickback Statute Criminal Statute ~ Safe Harbors Voluntary ~ Not Strict Liability ~ Intent Required Criminal law prohibits the knowing and wilful offer, payment, solicitation or receipt of remuneration (i.e., anything of value) to induce or reward referrals of items or services payable by federal health care programs The statutory exception for employment allows any amount paid by an employer to an employee for employment in provision of covered items or services Regulatory safe harbors protect qualifying arrangements from prosecution; all safe harbor requirements must be met Employee must be bona fide (meet IRS test) Does not require FMV Personal services safe harbor similar to Stark personal services exception Requires aggregate compensation set in advance 47

49 Regulatory Considerations Gainsharing Civil Monetary Penalties (CMP) Law Civil Statute ~ Not Strict Liability ~ Intent Required Prohibits hospitals from knowingly paying physicians, directly or indirectly, to reduce or limit services to Medicare or Medicaid fee-forservice beneficiaries Historically, the Gainsharing CMP was implicated even if arrangement was aimed at reducing only medically unnecessary services SGR fix in April 2015 amended the Gainsharing CMP to apply only to reductions or limitations of medically necessary services Relevant to structuring any quality or performance incentive payments to physicians, such as following standard treatment protocols, streamlining or reducing length of stay or usage of supplies, or other cost savings 48