Putting the compensation pieces together in a value-based world

Just how different does the future look for your medical practice in 2017? In re-evaluating compensation models amid the shift to value-based health, more trust in your data could prevent seismic shifts in how you do business.

A handful of sessions at the MGMA 2016 Annual Conference, held Oct. 30-Nov. 2 in San Francisco, drew capacity crowds, with attendees who wanted to make better sense of the new Medicare Access and CHIP Reauthorization Act (MACRA) rules and the new world of payer reimbursement that the industry is poised to enter.

Justin Chamblee, CPA, senior vice president, Coker Group, Alpharetta, Ga., and Jon Morris, JD, MBA, manager, Coker Group, told those assembled at the Oct. 31 session — “Aligning Physician Compensation and Organizational Goals in the Value-Based Era” — that the shifts their healthcare clients face in managing physician compensation are focused on building on recent trends rather than starting over from scratch.

“The last five to seven years had this mass consolidation — everybody moving under one roof — trying to create a critical mass ... But that was just alignment,” Morris said. “The next step is really going to be integration: How are we going to take this critical mass … and gain efficiencies, reduce costs, collaborate, share information, improve quality and enhance the patient experience?”

That sweeping consolidation has meant arrangements to add groups and providers that can leave a gap between talent alignment and integration, and lead to “higher guaranteed pay than you might normally provide, or higher rates than you might normally provide,” Morris said. “Those might not necessarily be sustainable going forward.”

But as practices begin “revisioning” what their compensation model should look like in a value-based era, Chamblee and Morris warned that the old concepts of productivity and volume are still very much alive.

“In the post-MACRA world, we don’t really see there being too many environments where some measure of productivity can completely be thrown out,” Morris said, noting that a traditional compensation model — work RVUs multiplied by your rate per work RVU — only becomes slightly more complex with added value components such as quality, advancing care information, clinical practice improvement areas and resource use.

“As reimbursement changes from volume to value, we don’t necessarily think this means volume is completely going away, but just that … what you get paid for your volume will be somewhat determined by the value you provide,” Morris said.

Practices that use the Quality Payment Program’s Merit-based Incentive Payment System (MIPS) under MACRA may be among the most affected organizations in addressing new incentives in their compensation arrangements, moving physicians away from a production focus to a quality-based focus. But Chamblee cautioned that doesn’t mean the end of a volume focus.

“It is still very much a volume-based reimbursement environment,” Chamblee said. “It is not capitation … we’re not waking up and tomorrow being in a fully capitated environment.”

Morris noted that the Vermont All-Payer Accountable Care Organization (ACO) Model is seeing a major shift in going to full Medicaid capitation in 2017, but that does not represent the reality for most medical providers as they approach the new year.

“A lot of our clients are still in that area where volume is important and very relevant,” Morris said. “You’ll continue to see practices [that] are struggling to keep up with the administrative, regulatory and technological burdens, continuing to align and integrate with hospitals.”

Chamblee echoed that sentiment by pointing to MACRA specifically.

“In the majority of markets, volume still plays a critical role … MACRA is still, in our vernacular, a volume-based reimbursement model,” Chamblee said. “They temper the volume-based reimbursement with how well you do the work, but it’s still largely fee-for-service.” 

Flowing through the formula

Chamblee and Morris presented a targeted compensation/work RVU ratio that serves as a model for introducing value components into a practice’s compensation model. As Chamblee noted, the rough template is “a means of slowly moving into this value-based realm by starting with more value in the work RVU base bucket, less in the individual performance incentive bucket and, over time, shifting that value as [practices] get more comfortable with these kinds of incentives,” giving practices more control over compensation arrangements along with the flexibility to morph the model as reimbursement markets shift.

“Where this provides benefit going forward is we have a big-picture economic trigger that we can adjust. If we’re targeting the 45th percentile or 50th percentile rate per work RVU as market data changes, we can change that, and the impact flows through the model,” Chamblee said. A practice wanting to shift to paying at the median would then adjust the components to have the change flow through the entire model.

Practices will need to know which metrics to target to build that compensation model, “whether we’re piggybacking on PQRS or if we have some citizenship metrics, whether we’ve got Press Ganey as patient satisfaction,” Chamblee noted. If it impacts a practice’s value-based purchasing, “it needs to impact physician comp.”

Trust in data

Revising a practice compensation model requires buy-in from providers and the ability to overcome the perception some may have about a possible decrease in compensation as models shift. But Chamblee said that those challenges create a pathway to building a cohesive compensation philosophy — as long as you have the right data to support the effort.

“I think what most organizations struggle with is [that] they’ve spent hundreds of thousands, if not millions of dollars, in putting these IT systems in, and now they don’t know what to do with them,” Chamblee said of the growth in use of EHRs. “The data is in there somewhere, but we don’t know how to identify the key metrics … I truly see that being a struggle and focus for the next three to five years as health systems and medical practices better define what quality is.”

Chamblee recalled one client that already had some value-based incentives built into their model yet still had difficulty in selecting meaningful metrics to tie to $8,000 in incentives, much less trying to build a model for a larger pool of incentives in the future. Without knowing and trusting the metrics for what they are, the revision process becomes far more difficult.

“How do we turn it into something that is meaningful from a physician compensation standpoint? Just getting that data is not enough,” Chamblee said. “It has to be accurate. It has to be transparent. It has to be done in a timely matter.”

Answering those questions about data will help allay those inherent fears of the unknown, Chamblee said.

“If we can show a compelling reason why we need to change something and the data is there, it’s timely, it’s accurate and meaningful, the buy-in piece becomes a little bit easier because they see the reason why.”

MACRA is a good example of the point at which practices will begin anticipating changes in reimbursement by way of data-driven, flexible compensation strategies created in the near future.

“We don’t really know what the reimbursement model is going to be in five years, so [you should] develop a comp strategy that works today but then also can be effective next year and the next year … without having to go back and completely blow up what we have and redesign it,” Chamblee said.