In order for a practice to succeed, a strong
physician-compensation system must be in place to both incentivize the
physicians as well as to make sure that profits are maximized. Equal salaried
compensation does not account for the physicians’ differences in performance,
productivity, quality, and delivery of patient care. It may be hard to
implement a new compensation model into an already existent practice, and there
is always initial opposition to new ways of doing things. However, it may be
well worth the effort as with a little planning and added accountability, the
right incentives can truly drive profits up and engage the physicians. Engaged
physicians lead to higher caliber patient care, increased revenues, a greater
work environment, and the growth of the practice overall—happier physicians
lead to happier patients. Multiple compensation models exist, each with its own
merits and drawbacks. I have listed several of the most common models below.
The Revenue Compensation
model is the most
straightforward—the higher the revenue generated by a physician, the higher the
compensation for that physician. This model is the simplest to understand and
implement. Financial reports can easily identify the revenue generated by
claims billed for a specific physician during a given timeframe. However, this
model neglects to measure the factors that go into patient care, as well as the
costs of running a healthcare practice, and may therefore not be perceived as
equitable. It also does not create adequate incentive measures.
The Net
Income model is similar
to the revenue model, but also takes into account the costs incurred by the
physician while generating the revenue: the greater the revenue and the lower
the costs, the higher the physician compensation. This leads to a closer
relationship between physician performance and compensation. However, taking
costs into account comes at a cost—there is no straightforward way to allocate
practice costs to individual physicians, and doing so may be costly and
time-consuming.
The Base
Salary plus Productivity model is
one in which a portion of the physician’s income is fixed, but the remaining
portion is based on some measure of productivity. This is a compromise between
the traditional compensation method and a productivity-based method, and has
several benefits. First, since there is already a base salary, the productivity
incentives do not need to be as drastic as in a strictly productivity-based
method. Second, the physicians are guaranteed to make a portion of their income
regardless of patient volume, which may not always be in their control and may
reduce seasonally.
Finally,
the Multiple
Factor Performance model rewards
physicians for productivity and non-financial factors as well. This system is a
lot more complex in design and may cost some money to implement. However, it
has its benefits as it encourages physicians to provide quality and not just
quantity; and with good quality come repeat patients, and higher revenues in
the long run. Additionally, as commercial and federal payers are moving closer
and closer to a quality-based payment system as opposed to a fee-for-service
one, it would be of great benefit to the practice to incentivize physicians to
meet quality measures.
The
model that I would recommend is one of a Base Salary plus Multiple Factor Performance.
Each physician should have a reasonably set salary base, but should also be
held accountable for meeting productivity and quality measures in order to
receive performance bonuses. These measures can include patient volumes, chart
completion, patient satisfaction, continuing education, reduction of ER/urgent
care visits, compliance with meaningful use requirements, proactive care for
chronic condition population sets, and other such desirable behaviors. There
can also be a common goal of reducing costs, and the amounts saved can be
distributed among the whole staff, not just the physicians in order to engage
ancillary staff in the growth of the practice as well. The physician
compensation models outlined above can also apply to midlevel providers such as
Advanced Registered Nurse Practitioners and Physician Assistants.
Leading Management Solutions helps medical
practice leaders identify ways to improve operations to increase revenue,
employee engagement, and patient satisfaction. Learn more about us at www.lmshealthpro.com.
About the Author:
Sonda Eunus is the Founder and CEO of
Leading Management Solutions, a healthcare management consulting company (www.lmshealthpro.com). Along with a team
of experienced and knowledgeable consultants, she works with healthcare
practice managers to improve practice operations, train employees, increase
practice revenue, and much more. She holds a Masters in Healthcare Management
and a BA in Psychology.
