Best Practices for Developing Employed Provider Compensation Plans

Many hospitals and healthcare systems over the past decade have seen growth year over year in the number of physicians and advanced practice providers they have employed, with the principal catalyst being the gradual shift to value-based reimbursement. According to the 2016 American Medical Association Physician Benchmark Survey, over 50% of family practice physicians in the United States is employed by a hospital or wholly-owned subsidiary. The same holds for physicians that practice in a multispecialty setting, with direct employment trends expected to continue over the next few years. [1]Significant numbers of these organizations grapple with how best to structure provider compensation models that align provider incentives with the strategic vision of the organization, particularly in a changing healthcare reimbursement environment. An essential concept in provider compensation is matching the organization’s reimbursement structure with provider compensation incentives. The bulk of provider compensation traditionally is derived from volume-oriented measures, such as wRVUs. However, the new value-based paradigm requires that we consider alternative means with which to align provider compensation. A provider compensation plan, which encompasses compensation model documents, requires a standardized model structure for medical groups of substantial size, ideally guided under the active oversight of a robust governance structure. Further, as compensation models become more complicated with the addition of value-based components, standardization of the compensation model elevates in importance irrespective of the size of the medical group, as achieving alignment between operations and compensation is paramount. Compensation plans can be customized to address the specific needs and practice patterns of individual specialties such as primary care, surgical and medical specialties, and inpatient medicine specialties. To the extent there is variation between provider compensation agreements, standardization via a formal compensation plan becomes a challenge, if not impossible.

Key elements to address in an effective provider compensation plan include:

  • Base Compensation
  • Productivity Incentives
  • Quality/Non-Productivity Incentives
  • Call Pay
  • Administrative Compensation
  • Advanced Practitioner Oversight
  • Treatment of Paid Time Off (PTO)

Coker Group provides advisory assistance to all types of healthcare organizations seeking to adapt their provider compensation strategy and plan by following best practices while being responsive to the dynamic value-based environment and local economic realities. Coker’s provider compensation plan assessments quantify best practice deviations and delineate recommendations for streamlining and standardizing compensation plan strategy and structures. Coker’s insight also serves as an impetus to guide organizations with establishing an infrastructure that supports optimal and efficient administration of provider compensation. If you are interested in learning more about how Coker Group can help your organization achieve a provider compensation plan aligned with best practice, please contact us to speak with one of our qualified consultants.[1] Accessed January 13, 2019.

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