Physician Incentive Metrics ? Is it time for a redesign?

Thursday, May 4, 2017 | Larry Sobal

A few weeks ago I blogged about why we still struggle with physician alignment. One of the reasons I noted for poor alignment is that “there is too much emphasis on financial incentives as the panacea for misalignment.” I’m not naïve enough to think that the use of financial incentives will go away (if anything they are increasing), but today I will elaborate on how you might be able design them to actually be of benefit.

It’s unusual these days to see a physician compensation plan without some at-risk incentive component, particularly involving physicians employed by a hospital or health system, as an increasing number are. But incentive-based metrics are used in many ways, including as part of clinical co-management agreements, professional services agreements, commercial payer or ACO contracts and, of course, MACRA.

As an example, MedAxiom’s most recent heart program survey showed that the per cardiologist FTE incentive opportunity was $37,697, while the average incentive earned (per cardiologist FTE) was $23,679—a success rate of 62.5%. This reflects that most incentive plans represent between 5-10% of physician income with some programs approaching 20% or more.

Whether those numbers are good or bad isn’t as important, in my opinion, as the question about if earning the metric(s) actually correlated and caused meaningful improvement. Linking metric performance with compensation only has real value if it drives some behavioral or measurable change. Right?  Based on what I see in working with organizations to modernize their physician compensation plans, I’m not sure everyone buys into that philosophy.

The fact is, aligning compensation or payments to metrics is a great concept, but it’s much more complicated and difficult to do than people realize. I see more hastily and poorly designed metric incentive plans than I do effective ones, but that doesn’t seem to stop the obsession with using metrics to try and fix a variety of issues that metrics have no business fixing. Said another way, too often I see organizations using metrics as their hammer, and every physician alignment issue is a nail.

So if you are inclined to use financial incentive metrics and want that to support stronger alignment, consider the following checklist to help you identify the most appropriate and effective metrics.

• Before you jump into creating metrics, first spend your time crafting a shared vision with the physicians. This will go further toward improving alignment than metrics will. Unfortunately, I often see alignment models in place that never take the time to reach consensus on where the collaboration wants to be in the future, so the metrics never have the context of how they will support accomplishing the vision.
• Have a physician and administrative Governance model in place. At a minimum, this is some type of Governance Council, but often has subcommittees to focus on specific opportunities. Again, this will do more for alignment than metrics, and having a formal group and process to vet and oversee any metric plan is critical.
• Take the time to reach out to a wide variety of key stakeholders to learn where there are improvement opportunities. Start by asking, “If the ________ physicians could do something different to improve quality, cost, service or culture, what would that be?” Cast a wide net, listen carefully, and collect a long list of possibilities. Oftentimes this is a good role for the service line leader to play.
• After you sift through the list of possibilities, combine duplicates and throw out the obviously irrelevant metrics, cross reference the list to make sure you have also considered any reported data (cost or quality) that is submitted to CMS, to registries or is publically reported somewhere.
• Now put these in an Excel spreadsheet with each possible metric as a row and the following column titles across the top:
  • Detailed definition of the metric
  • Source of data
  • Automated or manually collected
  • Can the data be collected for individuals, a group or both?
  • Is the metric publically reported – Yes or No and to whom?
  • Linked to external payment – Yes or No and with whom?
  • What is the baseline performance for the previous 24 months or 2 years?
  • What are the implications if performance is or isn’t improved?
  • #1 thing these physicians control to influence the metric performance?
  • How does this metric impact quality of care?
  • How does this metric impact cost of care?
  • How does this metric impact service?
  • How does this metric impact culture?
  • Can we specifically identify any measureable financial benefit associated with metric improvement such as true cost avoidance or increase in net revenue? If so, how?
  • Is this metric commercially reasonable – yes or no?
  • Should this be a candidate for a financial incentive or just be internally monitored?

Linking metric performance with compensation only has real value if it drives some behavioral or measurable change. Right?

• Getting the spreadsheet filled in to this point, and discussing it with your Governance Leadership team (likely taking multiple meetings) should allow you to reduce the list even further as you will naturally cut out some ideas that are simply not as viable as others to be a candidate for linking dollars to the performance. Challenge each possible metric regarding whether it is meaningful, clearly measurable, etc.
• For the remaining metric candidates, add these additional column titles:
  • Target performance for the upcoming reporting period?
  • Is it an upside-only or upside/downside reward?
  • Can (and how would) we objectively “scale” success measurement so that the   incentive is not an “all or nothing” reward?
  • Which leadership and physician dyad team would “own” the metric in terms of overseeing and validating data accuracy, transparency of reporting, etc.?

Once you get to this point, my advice is to reach consensus to pick a manageable number of metrics, maybe 5-7, that are the best candidates for an incentive. Don’t pick 20 or more metrics like I sometimes see, as research consistently shows individuals cannot change behaviors to act upon that many incentives all at once.

Too bureaucratic? Too much work? Well, consider the alternative, which is a set of metrics that demotivate, disengage, and derail whatever relationship you were hoping for between physicians and their incenting partner organization. In that case, your shared vision should really be reclassified as a dream, or more likely, a nightmare.

 

Illustration: Lee Sauer

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Larry Sobal is Executive Vice President and a Senior Consultant at MedAxiom. He has a 35-year background as a senior executive in medical group leadership, hospital leadership and health insurance. Larry consults, writes and presents on topics relevant to transforming physician practices and health systems. His weekly blog post comes out on Thursdays and can be accessed at www.medaxiom.com.

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