Physician integration is a leading goal for many hospitals next year. Wayne Miller, JD, of Compliance Law Group, discusses three challenges affecting physician integration over the next year.
1. Distributing single-fee payments to physicians. Going forward, healthcare facilities will have to develop compensation arrangements or formulas to share single-fee payments from Medicare, says Mr. Miller. "Medicare is saying, 'If you save money with fee-for-service patients, we'll give you a share of that savings,'" he says. "We don't know how much that share will be, but there are a couple of ways that [compensation] could be distributed."
He says hospitals may choose to pay physicians as they ordinarily would — either on a fee-for-service basis or an employed basis — but would add a regular bonus to that base payment. "You might decide that if you save money, you'll pay the physician a share of the bonus you're expecting from Medicare," he says. Hospitals might also decrease physician base compensation slightly to encourage shared savings. By putting part of a physician's payment at risk, he says hospitals can encourage physicians to spend time figuring out ways to cut costs.
"Ideally, you want to reward the doctors who are the most efficient, but that could be a fairly complicated formula," he says. "The thing with the law is that it's going to have some sort of objective measure. You can't just say, 'We like Doctor X, and it seems like he saved money, so we're going to give him $100,000." Mr. Miller says for bonus payments based on cost savings to be legal, hospitals must implement a set of measures that track and benchmark how much money physicians save per patient.
Mr. Miller says hospitals could also choose to compensate physicians based on productivity by using the resource-based relative value scale under Medicare. "That kind of formula rewards doctors for being productive as well as for saving money, which is the direction Medicare wants to go," he says.
2. Involving physicians in hospital governance. As hospitals move toward the development of ACOs and greater physician integration, many hospitals are attempting to acquire physician practices or employ physicians, Mr. Miller says. "Most hospitals have a fairly consistent corporate structure, and they usually have two separate entities — one that runs the hospital as the operating entity, and one that deals with management or ownership of bricks and mortar," he says. "The question is, should doctors have involvement in the governance of these entities?" He says while physicians may not be able to serve as owners as the operating entity because of Stark, they may be able to become owners of a separate hospital management company. "There's no exception that allows the doctors to be an owner of the providing entity, but they may be able to have something to do with the part of the hospital that doesn't provide care," he says. Physicians may also be able to be compensated for medical directorships and other positions that influence hospital operations, for which they would contribute to the addition of services, issues of pricing and payors and equipment purchases.
He says from a hospital's perspective, incorporating physicians into hospital management can achieve greater physician buy-in, while physicians benefit from a monthly stipend and greater influence over hospital decisions. In states where hospitals cannot employ physicians, like California, Mr. Miller says physicians may also be involved in the management of a separate medical foundation. "It's more than the doctors just getting a paycheck every month," he says. "The hospital really wants the doctors to be partners with the hospital as they go out there and try to get these integrated service arrangements that involve both hospital and doctor services. The more involvement of the doctors, the more they're going to get doctor buy-in for these programs."
3. Ensuring compensation meets physicians' standards. No one is exactly sure how the distribution of single-fee payments or pay-for-performance will work, but physicians are already concerned that payment will drop in the coming years. While physicians may experience increased revenue from a rise in patient volume resulting from universal coverage, this increase may not be enough to make up for patients spending less time in the hospital. Traditionally, the longer a patient stayed in the hospital and the more tests and procedures he or she needed, the more money a physician would make.
Pay-for-performance could struggle in implementation if Medicare bonuses for quality outcomes do not make up for the decrease in compensation, Mr. Miller says. "We don't know how much Medicare is going to pay, and the idea is that [the difference] is going to be made up, but in the long run, [physicians] may be earning less." He says the bright side is that physicians may be assured a flow of income because patients will be assigned to them. "In this world, with a lot of competitiveness, to have patients assigned to you that will be your patients is of value," he says.
Read more on hospital-physician relationships:
-12 Organizations Offering CMS Recommendations on ACOs
-6 Ways for Community Hospitals to Align With Physicians in Competitive Markets
-8 Points on Hospital-Physician Integration From Stephen Moore at Catholic Health Initiatives
1. Distributing single-fee payments to physicians. Going forward, healthcare facilities will have to develop compensation arrangements or formulas to share single-fee payments from Medicare, says Mr. Miller. "Medicare is saying, 'If you save money with fee-for-service patients, we'll give you a share of that savings,'" he says. "We don't know how much that share will be, but there are a couple of ways that [compensation] could be distributed."
He says hospitals may choose to pay physicians as they ordinarily would — either on a fee-for-service basis or an employed basis — but would add a regular bonus to that base payment. "You might decide that if you save money, you'll pay the physician a share of the bonus you're expecting from Medicare," he says. Hospitals might also decrease physician base compensation slightly to encourage shared savings. By putting part of a physician's payment at risk, he says hospitals can encourage physicians to spend time figuring out ways to cut costs.
"Ideally, you want to reward the doctors who are the most efficient, but that could be a fairly complicated formula," he says. "The thing with the law is that it's going to have some sort of objective measure. You can't just say, 'We like Doctor X, and it seems like he saved money, so we're going to give him $100,000." Mr. Miller says for bonus payments based on cost savings to be legal, hospitals must implement a set of measures that track and benchmark how much money physicians save per patient.
Mr. Miller says hospitals could also choose to compensate physicians based on productivity by using the resource-based relative value scale under Medicare. "That kind of formula rewards doctors for being productive as well as for saving money, which is the direction Medicare wants to go," he says.
2. Involving physicians in hospital governance. As hospitals move toward the development of ACOs and greater physician integration, many hospitals are attempting to acquire physician practices or employ physicians, Mr. Miller says. "Most hospitals have a fairly consistent corporate structure, and they usually have two separate entities — one that runs the hospital as the operating entity, and one that deals with management or ownership of bricks and mortar," he says. "The question is, should doctors have involvement in the governance of these entities?" He says while physicians may not be able to serve as owners as the operating entity because of Stark, they may be able to become owners of a separate hospital management company. "There's no exception that allows the doctors to be an owner of the providing entity, but they may be able to have something to do with the part of the hospital that doesn't provide care," he says. Physicians may also be able to be compensated for medical directorships and other positions that influence hospital operations, for which they would contribute to the addition of services, issues of pricing and payors and equipment purchases.
He says from a hospital's perspective, incorporating physicians into hospital management can achieve greater physician buy-in, while physicians benefit from a monthly stipend and greater influence over hospital decisions. In states where hospitals cannot employ physicians, like California, Mr. Miller says physicians may also be involved in the management of a separate medical foundation. "It's more than the doctors just getting a paycheck every month," he says. "The hospital really wants the doctors to be partners with the hospital as they go out there and try to get these integrated service arrangements that involve both hospital and doctor services. The more involvement of the doctors, the more they're going to get doctor buy-in for these programs."
3. Ensuring compensation meets physicians' standards. No one is exactly sure how the distribution of single-fee payments or pay-for-performance will work, but physicians are already concerned that payment will drop in the coming years. While physicians may experience increased revenue from a rise in patient volume resulting from universal coverage, this increase may not be enough to make up for patients spending less time in the hospital. Traditionally, the longer a patient stayed in the hospital and the more tests and procedures he or she needed, the more money a physician would make.
Pay-for-performance could struggle in implementation if Medicare bonuses for quality outcomes do not make up for the decrease in compensation, Mr. Miller says. "We don't know how much Medicare is going to pay, and the idea is that [the difference] is going to be made up, but in the long run, [physicians] may be earning less." He says the bright side is that physicians may be assured a flow of income because patients will be assigned to them. "In this world, with a lot of competitiveness, to have patients assigned to you that will be your patients is of value," he says.
Read more on hospital-physician relationships:
-12 Organizations Offering CMS Recommendations on ACOs
-6 Ways for Community Hospitals to Align With Physicians in Competitive Markets
-8 Points on Hospital-Physician Integration From Stephen Moore at Catholic Health Initiatives