Creating a Value Oriented Incentive Plan
Thursday, February 14, 2019 | Joel Sauer
There’s an old adage that says, “You get what you pay for”. Given this, top performing cardiology programs in the US are trying to provide economic rewards for the Triple Aim in some form or fashion. While the total allocation to “value” is still relatively modest (see Figure 1) when considered in terms of total compensation, it is expected to grow over time and is already a meaningful amount of money per physician.
While the total amount of value compensation is certainly important, it’s also critical how this incentive structure is constructed and how these monies get to the individual physicians. Here are my thoughts on the architecture of value incentive plans.
Cardiology is a Team Sport
Perhaps more than any other specialty cardiology has become deeply subspecialized with specific clinical focus areas like advanced imaging, electrophysiology, heart failure, interventional and now structural heart. However, to be done well all of these component parts must act in concert to treat the entire patient. Without this, value will languish.
From a market worth standpoint we know there are differences in compensation between these subspecialties. Additionally the wRVU system has variable remuneration for clinical activities. We can see these variances reflected in the numbers of Figure 2. While there may be legitimate reasons to compensate differently on the clinical side, it’s best to make value equal to promote the team. This should be the case when considering the total compensation available and when determining the value of individual incentive metrics.
For instance it would be a mistake to create value incentives for interventional cardiology while creating none for the general workforce. Likewise, to suggest that one subspecialty’s activities are more valuable than another breeds animosity and fractures the team. This may at times push against conventional financial wisdom where, for example, an organization may find greater direct payback in the cath lab than in the office. However, it is my opinion the best course is to push aside this connection and provide an equal playing field for value.
In similar fashion, when working toward improving value the team should win and lose together. To illustrate let’s imagine a program with ten value metrics each with an equal available incentive of $50,000 (so $500,000 total), with these ten covering improvement in four different cardiovascular clinical areas. At the end of the year seven of the ten metrics are achieved, but three are not. Rather than have rewards go only to the physicians in the clinical areas where success was achieved, it better promotes the team to share the $350,000 ($50,000 x 7) with all participating physicians. In addition, this model creates a healthy peer tension and helps maintain broad engagement throughout the whole care spectrum level.
Decouple Value from Production
Value is about quality (outcomes), total care cost and service – and eventually looking at populations of patients rather than the current episodic single patient relationship. The skillsets and efforts required to achieve value are very different than those for achieving volume. Given this dichotomy, it doesn’t make sense to connect our value payments back to production, which unfortunately often happens.
The most prevalent model is where a portion of the wRVU rate is allocated to value. For instance, physicians are paid $55 per wRVU with another $5 available if certain value metrics are achieved. Mathematically then our value pool will ebb and flow with volume, making it a de facto production measure. A better approach would be to set the value amount at the full time equivalent (FTE) level or some other fixed amount.
By decoupling value from production, we are helping to recognize the different skillsets and behaviors required to achieve success. There may be situations where increasing value for our cardiovascular patients actually hurts our volumes. Appropriate Use Criteria (AUC) for imaging may be a great example of this. For a physician reward system to decrease compensation both on the production side and then again for the value pool – for behavior and actions that are best for our patients – to me is simply wrong. It also sends counter-productive signals to what the value transition will mean for our providers.
Find High-Impact Metrics
Value incentives should be for activities that make a difference. If we succeed on a metric, but no one celebrates, it’s an indication that we missed an opportunity to rally the team. Moving patient satisfaction from a 98.5% up to a 98.7% might be an example of this. Yes we improved the metric, but can anyone feel it from an impact standpoint?
Particularly at the genesis of an organization’s journey into value, it can make sense to look for metrics that have a financial payback to the organization. Wins in these areas will not only help fund the physician incentive compensation (or help establish the value budget), but also convert even the biggest skeptics on the effectiveness of these arrangements.
Impact isn’t limited to just financial return. It can be measured by the patient, by the staff or the providers. The point is that our value metrics should matter and benefit one or all of our key constituents.
Consider Value Idiosyncrasies for Total Compensation
As stated earlier, value is a very different animal than clinical activities, both in terms of the skillsets and in the efforts needed to be proficient. When done right value is not a slam dunk either, as reflected on Figure 3 showing the percentages of available monies actually earned.
These forfeited amounts must be considered when crafting our overall compensation for our CV physicians. Otherwise, we risk instituting an unintentional pay cut for our providers. For example, if our historical cardiology compensation has totaled $10 million and we move 15% to value ($1.5 million), we should expect that only $1.2 million of this pool will actually be earned (80%). This makes our total cardiology compensation $9.7 million, or 3 percent less than historical. If we didn’t intend for this to happen our incentive program could turn into a morale nightmare.
Allocate Enough Time & Resources to Find Value
Finding high impact metrics for your incentive program won’t happen in a week. Expect this process to take 3 – 4 months and will include input from quality, finance, clinical, marketing/business development, supply chain and others. To try and shortcut the process will result in measures that have little meaning to any of our constituents.
In addition to the time, physicians must be involved in our value quest. Not only are they directly going to be impacted by our choices, but they have direct control or heavy influence over nearly every aspect of care delivery. This puts them in a uniquely valuable position to help us create our value system. Including them in the process will also greatly expand engagement overall. Without engagement, value programs will languish.
Cardiology is a deeply subspecialized team sport that requires a compensation plan that recognizes the need for coordinated care. Especially if our clinical compensation is predominantly based on volume (wRVUs), which is often the case with employed CV physicians, we need our value payments to recognize the entire team. The skillsets and behaviors that create value are very different than those for volume, so the architecture of our compensation plans must recognize these differences. To be successful we need physicians highly engaged and involved in the process, from design to conclusion. This will ensure metrics with high impact and meaning to our constituents. To do this right takes time and will require input from a broad spectrum of the organization. It is important not to shortcut the process.
Increasing the value of our cardiovascular care is critical both now and in the future. Appropriately and expertly rewarding our providers to recognize value is paramount. Incentives by definition are intended to motivate or encourage one to do something. Let’s make sure we think that all the way through!
Illustration: Lee Sauer
About the Author
Joel Sauer, MBA, is Executive Vice President of MedAxiom Consulting. Joel consults around the country in the area of value-oriented physician/hospital partnerships preparing health organizations for the value economy. His work includes vision and strategy setting, creating and implementing effective governance and leadership structures, co-management development, joint venture and other innovative partnerships, and provider compensation plan design. Beyond the above, Joel has a wealth of experience in service line development, clinical strategy development, provider workforce planning; including care team creation and physician slow-down policies, MACRA and bundled payment planning, and operational assessments.
To contact, email: firstname.lastname@example.org
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