As hospitals and health systems are held to increasingly higher standards on clinical outcomes and patient satisfaction, executive annual incentive plans have changed to better position healthcare providers to meet them.
Although financial goals persist as a key component of any executive incentive plan, the weight they carry has decreased to make room for the growing emphasis on incentive measures that address clinical quality and employee management, according to Integrated Healthcare Strategies.
Ten years ago, Gallagher Integrated surveyed executive annual incentive plans to determine the prevalence of different kinds of incentive measures or goals at nonprofit healthcare provider organizations. The survey was administered again in 2015 to analyze how incentive plans have changed.
Here are nine key findings from the report, according to Integrated Healthcare Strategies.
1. In 2015, financial management represented 32 percent of incentive measures and goals, while clinical quality represented 25 percent, patient satisfaction represented 18 percent and all other measures — such as employee engagement, efficiency, physician satisfaction, employee retention and population health management — represented 25 percent.
2. Financial management was an incentive measure that was prevalent among 100 percent of the surveyed hospitals and health systems in both 2005 and 2015. The most common measure in use in 2015 is margin percent (revenues less expenses divided by revenues), although actual earnings and measures such as EBIDA are also used.
3. Financial management incentive goals that address cash flow, days receivables or expense control are still used, but have declined significantly since 2005.
4. Clinical quality remains the second most common category of incentive measure from 2005 to 2015, but its overall weight has increased significantly. Compensation committees are often involved in determining quality goals. A common approach is to identify and set incentive goals around areas of weak clinical quality performance, such as reducing hospital readmissions after a reduction in CMS reimbursement.
5. The use of patient satisfaction measures has increased slightly between 2005 and 2015, largely driven by the linkage CMS made between HCAHPS and reimbursement. Incentive goals for patient satisfaction are often expressed as achievement of some specific percentile relative to the industry as a whole, or relative to a designated peer group.
6. The most significant single change in incentive goals over the 10-year period was the emergence of the concept of employee engagement in place of employee satisfaction. Measures of efficiency have also increased in use in executive incentive plans, such as length of stay, cost per adjusted patient day and emergency room wait times.
7. Recently emerging incentive measures address the concept of population health management and are usually employed through goals that address new care delivery models to meet community health goals. The survey found provider systems that are still largely on fee-for-service payment models rarely use population health management incentive goals. Those that were identified were qualitative in nature. Here are three such examples, according to Integrated Healthcare Solutions.
- Design and implement a new, complex care strategy in pilot programs to address a population of patients at high risk, such as diabetes patients.
- Implement approaches to better coordinate patient transfers or "hand-offs" from acute care to post-acute care.
- Collaborate with other community health resources to address improving health in the community served.
8. The overall number of incentive goals used in 2015 was about 20 percent higher than in incentive plans 10 years ago. This means awards are spread more thinly, lessening the value of each goal. There are now a greater variety of goals in use now than in 2005.
9. In 2015, incentive plans included more team goals than individual goals for executives for their area of responsibility. In 2005, 40 percent of incentive plans defined team goals and only 60 percent defined a mix of team and individual goals. In 2015, 55 percent of incentive plans were team only and 45 percent were mixed team and individual goals.
This content comes directly from Gallagher Integrated.
To view an infographic that details these key findings, click here.