Healthcare experts often compare the awkward transition from fee-for-service to pay-for-performance as having one foot on the boat, one foot on the dock. Danville, Pa.-based Geisinger Health System can attest to this, as well. The integrated delivery system hailed by President Barack Obama for its low costs and high-quality care is also balancing incentive payments and base salaries, but in a compensation model that clinicians find reasonable, according to a new report in Health Affairs.
Thomas H. Lee, board member for the Geisinger Health System Foundation and Geisinger Health Plan, Albert Bothe, executive vice president and CMO, and Glenn D. Steele, MD, president and CEO, authored the report. The authors detail the system's compensation model — one they call "a work in progress" — that applies to a subset of 220 primary care and 654 specialty physicians who Geisinger employs. Although fee-for-service and pay-for-performance seem contradictory, the authors say incentives for clinical volume enable it to achieve "the financial viability to pursue its mission" and that the two models can coexist.
About 20 percent of physicians' total compensation is tied to performance incentives that are defined annually for each clinician. Physicians receive these incentive payments twice per year. A March payment reflects performance from July through December, and a September payment reflects performance from January through June.
Approximately 80 percent of total compensation is in monthly paychecks for the physicians' base salary. This base salary is defined for each physician based on "factors that describe his or her work effort," according to the report. While this may include activities such as teaching, research or administrative duties, most physicians' base salary is determined by work relative value units.
The system uses proprietary survey data to benchmark physicians' productivity and compensation. For instance, Geisinger compares outpatient visits per year with RVUs. In 2011, for internists, these median figures were 3,051 and 4,771, respectively. Geisinger's management and compensation committee will then review any outliers — physicians whose RVU is higher but compensation is lower than these benchmarks, or vice versa.
The system takes a special approach to compensating specialists, tying incentive payments to five general areas: quality (40 percent), innovation (10 percent), legacy (10 percent), growth (15 percent) and financial (25 percent), according to the report. Legacy is defined as the pursuit of Geisinger's educational and research missions, growth pertains to increasing the population served by Geisinger and financial reflects work units under fee-for-service contracts in the past six months.
The system has designed the incentives carefully so RVUs are not highly correlated with total pay. "Because the incentive program constitutes 20 percent of expected compensation, this productivity-determined portion constitutes about 5 percent of total compensation. … Hence, this compensation system conveys a message that Geisinger values hard work as defined by conventional measures of productivity, but extremely high levels of such productivity do not translate directly into higher income," says the report.
The authors say the basic features of their physician compensation model can be applied in other healthcare organizations, and the authors say Geisinger's experience over the past 10 years suggests that fee-for-service productivity can coexist with incentives to improve quality and efficiency.
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Thomas H. Lee, board member for the Geisinger Health System Foundation and Geisinger Health Plan, Albert Bothe, executive vice president and CMO, and Glenn D. Steele, MD, president and CEO, authored the report. The authors detail the system's compensation model — one they call "a work in progress" — that applies to a subset of 220 primary care and 654 specialty physicians who Geisinger employs. Although fee-for-service and pay-for-performance seem contradictory, the authors say incentives for clinical volume enable it to achieve "the financial viability to pursue its mission" and that the two models can coexist.
About 20 percent of physicians' total compensation is tied to performance incentives that are defined annually for each clinician. Physicians receive these incentive payments twice per year. A March payment reflects performance from July through December, and a September payment reflects performance from January through June.
Approximately 80 percent of total compensation is in monthly paychecks for the physicians' base salary. This base salary is defined for each physician based on "factors that describe his or her work effort," according to the report. While this may include activities such as teaching, research or administrative duties, most physicians' base salary is determined by work relative value units.
The system uses proprietary survey data to benchmark physicians' productivity and compensation. For instance, Geisinger compares outpatient visits per year with RVUs. In 2011, for internists, these median figures were 3,051 and 4,771, respectively. Geisinger's management and compensation committee will then review any outliers — physicians whose RVU is higher but compensation is lower than these benchmarks, or vice versa.
The system takes a special approach to compensating specialists, tying incentive payments to five general areas: quality (40 percent), innovation (10 percent), legacy (10 percent), growth (15 percent) and financial (25 percent), according to the report. Legacy is defined as the pursuit of Geisinger's educational and research missions, growth pertains to increasing the population served by Geisinger and financial reflects work units under fee-for-service contracts in the past six months.
The system has designed the incentives carefully so RVUs are not highly correlated with total pay. "Because the incentive program constitutes 20 percent of expected compensation, this productivity-determined portion constitutes about 5 percent of total compensation. … Hence, this compensation system conveys a message that Geisinger values hard work as defined by conventional measures of productivity, but extremely high levels of such productivity do not translate directly into higher income," says the report.
The authors say the basic features of their physician compensation model can be applied in other healthcare organizations, and the authors say Geisinger's experience over the past 10 years suggests that fee-for-service productivity can coexist with incentives to improve quality and efficiency.
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