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Early on in our career, we were tasked with turning around employed medical groups for health systems. One major component of this turnaround was to move physicians from guaranteed salaries to individual or group net income compensation models. Since this period of time (early 2000s) we have seen compensation models move away from profit and loss based compensation models to wRVU compensation models. In other words, we have taken physicians out of the business of the practice – an area they have a profound impact on the failure or success – while also allowing physicians significant autonomy over practice operations. This lack of alignment around what is an operations responsibility versus a physician compensation issue is a contributor to rising employed physician group losses and physician burnout. Decades later, we are still being asked the same question: We need to change our physician compensation plan to drive better alignment, what are you seeing across the country? The truth is: if you want to get physician compensation right, start with your purpose and strategy, not the formula.
A crash course: Why is a survey-based compensation per wRVU model not financially sustainable?
- Simply put: a disproportionate amount of business risk lies with the employer organization.
- Physicians have zero skin in the game for revenue cycle, contracting, inflation, or operating expenses.
- Despite taking on all this risk, many health systems do not have a standard operating model, allowing physicians to have a fair amount of autonomy over their schedules and clinical practice.
- A lack of a standard operating model creates variability in performance, patient experience, and poses challenges when moving to value-based care payment models.
- While survey data is great for benchmarking, it should not dictate your largest expense line item on your P&L.
- Fee schedule changes create unnecessary administrative burden and may erode physician trust.
Why does survey-based compensation per wRVU models not align with the purpose of the medical group?
A common mission for healthcare organizations that employ physicians across the United States is to improve the health of the community they serve. Paying physicians for generating more “widgets” doesn’t exactly scream “improving population health” and creates a transactional relationship between the employer organization and the physician. We have yet to have someone passionately argue that a compensation per wRVU model is aligned with keeping patients healthier.
So, how do you get to a place where physician compensation is financially sustainable and aligned with your purpose and strategy? When we look back to our turnaround days the reason we did not see a mass exodus of physicians is because they felt invested in the purpose of the medical group and how they can impact this purpose. A useful framework for healthcare organizations to consider is our Two-Road strategy.
Pay physicians like any other healthcare organization executive: In the first road, we empower healthcare organizations to lean into their purpose with Ancore’s Brand Driven Model. This is an easily administered model that compensates physicians comparably to other executives within the organization. When adopting the first road, a tight operating model with little to no variability in clinical and business operations is crucial. When the healthcare organization takes on the bulk of the risk, the employer organization calls the shots. It comes back to purpose: physicians chose your organization for the mission, principles, and operating model – not because they want to make 20% above the 90th percentile. Under this approach, the compensation structure can be like any other healthcare organization executive who is paid a fair salary plus an incentive tied to the success of the organization. For one large health system with most of its revenue tied to risk, the primary care model is as simple as a base salary plus incentive tied to whether the patient would recommend them.
Financially align with physicians: Road two delegates risk and offers upside to the physicians through the Equity Driven Model. Under this approach, physician leaders are well informed and engaged in the business of healthcare. With the second road, your analytics infrastructure and reporting should be exceptionally strong. These P&L or collections-based models do not require physicians to be CPAs but does invite them to understand the business reality of the practice. Simply put, we can limit the health system’s investment in the employed medical group while embracing physician entrepreneurship. The financial risk shifts to the physicians: their compensation will have significant downside risk, but they will be eligible to earn incremental upside beyond a traditional salary or wRVU model approach. A former academic health system client has experienced remarkable stability on a group net income model nearly 20 years after its implementation.
By starting with purpose and strategy we help the physician and administrative leaders align on what is an operations responsibility versus a physician compensation issue. We refuse to redesign physician compensation; we reimagine physician compensation.
Ready to pick a road? Contact us.
