Hospital Impact—The intersection of physician compensation and value-based payment

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In 2009, about 41% of medical groups said they based some portion of their physicians’ compensation on the achievement of value-based measures, compared to 61% in 2017.
Tom Dobosenski

If your health system isn’t tying physician compensation to the value of services your physicians deliver, you may be falling behind.

The AMGA 2017 Medical Group Compensation and Productivity Survey found that not only is value-based payment redefining the relationships between payers and health systems, it is also gaining ground as a factor in physician compensation. In fact, multispecialty medical groups and integrated systems of care that do not account for value in physician compensation have become the exception.

The 2017 report is based on 2016 data provided from 269 medical groups, representing more than 102,000 physicians and other healthcare providers. The data represents large multispecialty medical groups and integrated health systems, with an average of 380 providers per participant.

RELATED: Physicians received an average 2.9% increase in compensation in 2016

When the 2017 compensation survey data is compared to 2009, before the Affordable Care Act began to influence the transition to value-based reimbursement, the difference is stark. In 2009, about 41% of groups responded that they based some portion of their physicians’ compensation on the achievement of value-based measures, compared to 61% in 2017.

The survey asked organizations whether they provide payments to providers based on quality, service or outcome measures as a separate component. As the chart below illustrates, among groups that do so, the most common factors include patient satisfaction, clinical outcomes, HEDIS measures, access or other similar factors.

Unsurprisingly, the pay for primary care physicians is influenced by value metrics more so than for other specialties.

While value-based compensation is now widespread, its impact on physician compensation is less certain. The survey did not ask how much of a physician’s compensation is based on value factors, only whether some of it is. So, clearly it’s being introduced and debated in most organizations. The question is, when will it become significant, putting 15% or more of a physician’s compensation plan at risk for value-based components? Our anecdotal evidence tells us it is still a relatively small percentage.

As the following chart shows, the transition to value-based compensation is not slowing compensation growth.

While compensation continues to increase at the rate of inflation or faster, productivity as measured by work relative value units continues to grow at just over 1%. The key question is: How sustainable is it for compensation to continue increasing at a faster pace than productivity?

New payment and delivery models emphasize the importance of primary care, and compensation is following suit—somewhat. Primary care specialists saw an increase in compensation of 3.2% from 2016 to 2017, compared to 2.8% for other medical specialties and 2% for surgical specialties. However, primary care physician salaries remain ranked at the bottom when compared to other specialties, as shown below.  

Value-based care delivery also focuses on high-cost, high-need patients. If patient mix is unaccounted for in productivity measures, this could threaten physicians’ compensation, given the longer visits needed for complex patients. To this end, we’re seeing a shift—which we expect to accelerate—from measuring physician productivity by pure relative value units to a model that reflects variations in patient mix.

If your schedule system is based on a 15-minute average visit and 50% of your patients are Medicare patients who are older than 65, it may be impossible to meet productivity goals. This will only contribute to the frustration driving physician burnout.

In sum, the 2017 report shows that where the delivery and payment system goes, compensation will follow, but we have serious challenges ahead for creating compensation models if compensation continues to rise and productivity remains flat. 

Tom Dobosenski is president of AMGA Consulting.