Physician Compensation Alteration in Value-Based Payment Arrangements

In an effort to transform healthcare and reshape the way providers are reimbursed for services performed, the Centers for Medicare & Medicaid Services has introduced several value-based care models. Private payers also have adopted similar models of accountable, value-based care. These changes are reshaping physician compensation plans across the country and across disciplines.

The goal of value-based care is to improve the health of the population, provide “better” care and reduce healthcare costs. Instead of reimbursing providers under the traditional fee-for-service reimbursement model (paying providers for the amount of services they perform), value-based payments are intended to reward healthcare providers for the quality of care that they provide to patients. The quality of care in value-based payments focuses on outcomes and is based on specific measures. Some specific measures that providers may have to track and report on include hospital readmissions, adverse events, population health and improving preventative care. And, once these measures are tracked, then new compensation methodology has to address the positive or negative results of the care delivered.

Therefore, the challenge for physicians is twofold in this new payment environment: having systems that are able to capture data and report on care provided; and aligning compensation with the results of the data. Unlike the traditional model, value-based care is driven by multiple data sets – so success is dependent on physicians having robust information technology systems that are able to produce reliable data. With that data, physicians are wrestling with new compensation methodologies, including incentives for quality outcomes, per member, per month (PMPM) incentives tied to care coordination or other value based care initiatives, and even total cost of care incentives tied to the entirety of a physician’s patient panel.

Medium-to-large practices and medical groups are better able to afford both the cost for these IT systems and the personnel to manage them, as well as the complexity to redesign compensation plans to address the value-based incentives in new payer arrangements. Many smaller practices have difficulty dealing with the operational cost and complexity these payer contracts necessitate to successfully deliver expected patient outcomes. As a result, compensation programs around the country are in a state of flux.

While the goals of value-based care models are worthwhile, the rising cost and complexity of producing reliable data for value-based care is driving smaller-sized practices to reach out for advice and guidance and larger groups to seek assistance to find their footing. As groups begin to successfully operate within the terms of these new arrangements, physician compensation will adjust to more heavily weight the value-based incentives that come along with successful population health management.

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If you are interested in learning more about way providers are reimbursed for services performed, please contact Nick A. Fabrizio at nfabrizio@mgma.com.