Part 9 of 12 – Practice Survival 101 (or maybe 501!): Optimize Provider Compensation – Here is How

Three workers look at their market value.

12 Part Series: MedCV Practice Financial Management – Insights & Tips You Need to Know About to Quickly Maximize Your Income

Tip 9 of 12 – Optimize Performance by Aligning Provider Compensation with Desired Results.

Providers’ pay per wRVU:
a. Assessment: Provider pay per paid wRVU is a metric that evaluates provider pay in comparison to expected revenue.

The following three sets of values should be considered to establish target values and quantify this opportunity:

  1. The organizations current specialty specific pay per wRVU for both physicians and APCs. 
  2. Specialty specific regional benchmarks for pay per wRVU for physicians and APCs.  You may also want to consider the cost of living index in your location compared to the cost of living in the region to provide a more precise comparison.
  3. The organization’s specialty specific net revenues per wRVU for physicians and APCs. 

Setting a target for provider pay per wRVU will require balancing the need to be competitive in attracting and retaining providers while maintaining a strong financial position.   Several factors will have an impact on this decision, including geographic location and the organization’s reputation.  Pursuing each financial opportunity identified in these financial optimization blogs will serve to optimize your financial performance and reduce the burden of this balancing act.

The financial opportunity is calculated by multiplying the difference between actual and target provider pay per wRVU by the wRVU generated by each provider.

b. Improvement Action: One major reason for high pay per wRVU is low provider production combined with fixed compensation arrangements. Steps toward increasing production levels were outlined in the revenue improvement section.  A compensation arrangement which sets base pay at a below market level then links additional pay to wRVU is a standard approach to putting an incentive on production. When implementing this system, the organization must have internal controls in place to assure the wRVUs attributed to each provider are for charges that are allowed and accepted by the applicable payers.

A major flaw in the payment per wRVU compensation system is its failure to recognize aspects of provider performance other than production.  Organizations wishing to optimize their performance must institute a system that aligns provider compensation with desired results.   When considering desired results there must be a distinction made between specialties.  The desired results for primary care physicians and others who primarily manage chronic conditions is to maintain or improve patient health.

“Applying the same focus on desired results in managed care negotiations will align provider compensation with payer contracts!”

The continuous monitoring and management of each patient’s health condition is required to achieve these results.  The pay per wRVU system for this group places the focus on incremental volume rather than health condition monitoring and management.  A payment system based on a per member per month rate adjusted for the attributed population’s health and provider performance would align compensation with desired results for this group of providers. (Note: Please see the 7 steps toward compensating primary care physicians for their true value HFMA whitepaper for the components of this compensation system).

Meanwhile, the desired results for providers who perform episodic interventions is the effective and efficient restoration of each patient’s health and functioning. While productivity is one desired result for this group the optimal compensation system should also consider results around service, quality, costs, and citizenship.  A pay per wRVU approach using an adjusted rate based on these other performance factors would align compensation with desired results for this group of providers.  (Note: Please see the How to apply a value equation in setting compensation for specialty providers HFMA whitepaper for the components of this compensation system.) Applying the same focus on desired results in managed care negotiations will align provider compensation with payer contracts!

Like we like to remind our physician members at the end of each of these 12 part series, as a physician, if this sounds like a lot of work and maybe even has your “business anxiety level” up a few notches, you are not alone. The great news is that your role in this should just be to make sure it gets done and that those who are going to be responsible and accountable for this can explain and report details about what the plan looks like and its status to you.

Share this article with your practice manager, group administration, or hospital administration to make sure they are working on this or see what resources they have to get at this work. If they need help in getting started, they should consider connecting with John Rezen at Value Health. The key is to be able to have your baseline, you would expect your team to report to you the improvement(s) made and the results.

Stay tuned for Part 10 of 12, Service costs-to-revenue of the last 6 part series focused on Expense Management. If you can’t wait that long, no problem, just contact John for the full 12 part series.

John Rezen

President & CEO
Value Health, LLC

MedCV Advisory Board Member

Again, it’s in your best financial interest to make sure each of these 12 Key Performance Indicators are optimized, you understand them, and take action, even if the action you take is to share the series and your new found business insight with your group or hospital administration.

Financial Improvement

Each of the 12 part “2-3 minute reads” in this Financial Improvement series provided by John Rezen, FACHE, MHA and your MedCV team can quickly add CASH to your bottom line just by having your practice “work smarter” for you. Even if you are not directly responsible for the management of your practice, knowing this information will help you make sure you are making the income you deserve.

As hospitals and medical groups emerge from the COVID- 19 economic shutdown, they will be faced with significant pressure to improve their financial performance. The following checklist of performance measures should help physician enterprises identify financial opportunities and accelerate their improvements. Below are the 12 topics, to read a previous segment, click on the name/link. The current segment is Blue and upcoming segments are Black.

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Your Career is More Than Your Practice

MedCV is a Private Credentials Vault App built specifically for Physicians and Advanced Practice Providers where you can manage & control your most valuable career documents, remind you of expirations, track your CME, and of course… even find your next great job! 

Published by Niels Andersen

Founder and CEO of KontactIntelligence, MedCV, VetCV, and VeritasHealthCare. 40 Years in healthcare, 20 years in healthcare tech supporting Government and commercial health systems, physicians, as well as Veterans and their families throughout the US.

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