Annual Incentives That Work ? Is it Possible?

Thursday, December 10, 2015 | Larry Sobal

How to move toward value while still largely rooted in fee for service reimbursement.

I have been having a lot of conversations lately with different heart programs, and the topic inevitably turns to physician compensation. Among others, there are two typical questions involved. First, leaders want to know what type of compensation plan designs are emerging that differ from a traditional WRVU-based model. Second, and more interesting, are questions related to how to choose annual incentives that work in an industry moving toward value, but still largely rooted in fee for service reimbursement.

Either one of these questions is a great blog topic. Instead of addressing the first one now, I recommend you sign up for tomorrow’s MedAxiom webinar with Jeff Ozmon titled “Compensation Re-Design: Incorporating Value” being held from 1-2 EST. You can register on the MedAxiom website or wait until the recording is posted at a later date. Jeff will provide some great insight on value-based compensation in this webinar.

Too often organizations fall into the trap of metric mania in their incentive plans.

But what if you are like most organizations, who are in this strange paradox where you still want to pursue growth and maintain revenues while increasingly recognizing that you would restructure care delivery if the incentives were different?  

When I’m talking to people from the C-Suite, where the cardiologists are employed by a hospital or health system, I like to turn the conversation around and ask them to list the most critical behaviors that they need from their cardiologists. Often I hear things like the following:

  • “I want them to be high quality and help us meet the growing list of reportable metrics.”
  • “I want them to be leaders in identifying appropriate use and reducing unnecessary variation.”
  • “I want them to offer great service and access to patients and referring physicians.”
  • “I want them to help us find ways to reduce the cost of care.”
  • “I want them to be good corporate citizens.”

Who can argue with these expectations—seems like a laudable list. Where it gets interesting is when I ask them whether these expectations are the basis for the incentive part of the physician compensation plan. Sometimes the answer is yes, but more often the answer is “not really.” Why is that?

I think too often organizations fall into the trap of metric mania in their incentive plans. I recall being on a compensation panel at a conference where another speaker touted that their incentive plan had upward of 30 metrics for the cardiologists, including patient mortality. If I were a physician in that organization, I’m not sure I would know what I was supposed to focus on to meet that many expectations, especially something as diffuse as mortality.

Incentives should promote the behaviors most valued under your present organizational and market conditions.

The point I’m trying to make is that your incentives should promote the behaviors most valued under your present organizational and market conditions. And as long as I’m on my incentive soapbox, let me add some other thoughts. Where I’ve seen inventive plans be most successful, they had the following attributes:

  • They were simple to understand and measure.
  • Each metric had a physician champion paired with an administrative partner to manage the definition, measurement, reporting, etc.
  • They rewarded things that physicians could actually control.
  • They were scaled reward systems (with objective measures to determine success) instead of all or nothing rewards.
  • They lean more toward group incentives (rather than being 100% individual) to encourage cohesion and teamwork.

Finally, if you have an incentive aspect built into your CV Advanced Practitioner compensation plan, consider aligning as many of the physician and APP metrics as possible so everyone is rowing toward the same targets.

What is your organization doing with its incentive plan that is working well (or not)?  Let me know.


Larry SobalLarry Sobal is Executive Vice President of Business Development at MedAxiom. He has a 35-year background as a senior executive in medical group leadership, hospital leadership and insurance. As part of his current role, Larry consults, writes and presents on topics relevant to transforming physician practices and health systems.


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