Provider shortages and shifting priorities among the workforce are changing what a sustainable modern compensation program looks like.
Despite the uncertainty built into those trends, CFOs can adopt a set of three guidelines to determine how and when to adjust their compensation programs, according to VMG Health physician compensation strategy consultant Anthony Domanico. Together, they're known as the "1-3-5 Rule," which refers to how many years an organization should wait before making certain kinds of compensation program updates.
Annually: Update rates
To avoid retention issues, it is critical to update provider salary, productivity and other compensation rates every year to ensure they keep up with the market, Mr. Domanico writes. Some organizations have success tying rates to a target market percentile of the physician compensation and productivity surveys, which means their physicians typically see market-based increases typically around 2 to 3 percent.
Every three years: Look at making adjustments to the compensation model
Healthcare continues to move away from volume-based and toward value-based reimbursement, and payer contracts tend to come up for renewal about every three years, Mr. Domanico writes. Organizations can expect more of their revenue to be tied to quality and other outcomes not based on productivity the next time a contract comes up for renewal.
When that happens, organizations should consider shifting compensation model percentages to align with the revenue breakdown of its new payer contracts.
Every five years: Consider a major overhaul
New kinds of compensation models are emerging, many of them shifting the focus away from traditional measures like wRVUs. Over time, some new models will become more mainstream and could leave legacy models looking outdated. Being stuck with an antiquated compensation program could make recruiting and retaining providers difficult.