Updating your game plan for APP compensation

The ongoing financial pressures of the COVID-19 pandemic amplify pre-existing challenges of changing payment models for medical groups, making intentional design of care teams and optimization of each team member essential.

Advanced practice providers (APPs) can play key roles on care teams, but simply adding APPs to a staffing model is not enough to ensure better performance that results in improved care outcomes and meeting requirements for value-based reimbursement, according to Amy Noecker, MEd, principal, APP Workforce Practice at SullivanCotter.

“Despite the significant growth in the APP workforce during the last decade, healthcare organizations all too often have not seen reciprocal gains in revenue and access,” Noecker said during her session at the 2020 Medical Practice Excellence Conference. “Without the corresponding increases in patient volumes and revenue, operating margins really can’t sustain any unsupported cost.”

That disconnect can be caused in many ways (e.g., redundant tasks between physicians and APPs), but it can often stem from “the misalignment of physician and APP compensation,” Noecker noted, which is compounded by rapid advances in the APP market, often leaving organizations with recruitment and retention issues.

APPs in focus

Advanced practice providers (APPs) include:

• Physician assistants (PAs)
• Nurse practitioners (NPs)
• Advanced practice registered nurses (APRNs):
  • Certified nurse-midwives (CNMs)
  • Clinical nurse specialists (CNSs)
  • Clinical social workers (CSWs)
  • Certified registered nurse anesthetists (CRNAs)

Rethinking APP strategy

Changes made during the pandemic in healthcare extended well beyond expansion of telehealth and new cleaning/safety protocols. Noecker cited two nationwide SullivanCotter surveys from 2020 that found that 79% of organizations redeployed their APPs as a result of COVID-19, and that 14% of organizations provided premium pay for frontline APPs responding to COVID-19.1

“The APP workforce has some flexibility to move across practices,” Noecker said. “What’s really been key is the quick development and implementation of training programs and then necessary credentialing to allow APPs to provide and bill for medical level-of-care services in their new areas.”

Understanding the data

Going from an underutilized care team to an optimized team will entail a well-defined strategy that leads to a care model focused on patient needs. To ensure the care team’s dynamic is aligned and data-driven, aligning compensation with those plans can make a major impact on outcomes.

Quantifying that impact can be done by assessing the cost of APP turnover, which requires understanding the evolving market for APPs. APP turnover often is influenced by lack of continuing medical education (CME) stipend, hard-to-achieve incentives based on RVU targets and/or lack of APP leadership in the organization. In other instances, even APPs’ perception of their work can be a determining factor: In working with a hospitalist team, Noecker said that interviews with care team members found that APPs who perceive they are underutilized are twice as likely to consider leaving.

In one example, Noecker said an organization with an APP turnover rate that was almost 62% higher than the national average faced an estimated $2.8 million in higher costs (see Table 1), not to mention other indirect costs related to turnover, such as staff morale.² The potential savings by lowering the turnover rate prompted the organizational leaders to re-evaluate the APP incentive program and consider development of an APP leader position.

Part of the data-gathering to reduce turnover should be better understanding of APP contributions to the organization, which can vary by specialty. In the example of one orthopedic group, Noecker said the group was focused on boosting surgical volumes and overall team productivity.

An initial assessment found APP productivity below the 25th percentile. Even though it’s difficult for APPs to increase their work RVUs because the majority of their work takes place within the global period for a surgical procedure, Noecker said, there was cause to look at the care model. 

“Physicians were seeing all of the new patients, most nonsurgical follow-ups and most of the pre- and post-op [visits],” Noecker noted. “All of this while trying to maintain a full surgical schedule,” in addition to inpatient discharges.

After discussion, the care model was updated for APPs to see many of the nonsurgical patients for interventions until they were ready for surgery, and APPs would see certain patients (emergency room follow-ups and fractures) in addition to completing all discharges. To acquaint patients to this model, surgeons would introduce APPs to new patients and families during initial visits to build trust in the team as a whole.

This model with more APP independence boosted APP wRVUs by almost 200% in the first year, and surgeons were able to see more new patients and perform additional surgeries (see Figure 2).

Compensation updates to support care team optimization

Zachary Hartsell, PA-C, DHA, principal, APP Workforce Practice at SullivanCotter, said that the ongoing shift from fee-for-service-dominant reimbursement arrangements to value-based care has left many healthcare provider organizations in some state of transition when it comes to the team-based components of compensation.

“Historically, we have compensation programs that can create an environment of competition between team members, specifically as it relates to wRVUs,” Hartsell said, especially in primary care and urgent care in which APPs and physicians may feel they are competing for the same patients or even the same wRVUs.

Those models promote individual productivity but often are not aligned with value-based metrics or panel management, he added. “Sometimes the individual productivity has the effect of creating inefficiency within the care team,” Hartsell said, leading to overall fewer wRVUs collectively compared to the combined productivity of more cooperative models in which APP productivity thresholds are included for APP and physician payouts.

Nonproductivity incentives tied to quality metrics are typically used to align the APP and physician compensation models, based on shared metrics, though Hartsell stressed that in each of these models, the amount of incentives the physician and APP respectively would be eligible to receive would be different, based on market benchmarks and salary differences.

“Physicians and APPs have traditionally been rewarded very differently, with physician compensation focused predominantly on a draw plus variable compensation that’s usually based on productivity, with some kind of value-based metric achievement,” Hartsell said. “APP rewards aren’t vastly different in terms of the components — they just tend to be more focused on guaranteed compensation that’s tied with salary, with a potential smaller portion of compensation tied to incentive.”

Hartsell said weighting of the types of financial incentives offered is often based on care delivery and specialty. For example, primary care specialties moved quickly to align compensation as population health strategies and value-based compensation has emerged, whereas coverage-based specialties (e.g., hospital medicine or critical care) compensates predominantly on shifts or hour expectations, and less compensation tied to productivity, Hartsell said.

“For the medical-surgical specialties, we tend to see a more integrated model of physicians and APPs working collaboratively to provide patient care to a patient population,” Hartsell said. “It’s important, then, to create reward programs that support collaboration and eliminate barriers and competition.”

Where the evolution is occurring

APP compensation levels reported in MGMA and SullivanCotter surveys has increased in recent years. Hartsell said that the industry has had “pent-up demand” for CRNAs on account of shortages of anesthesiologists and the conversion of CRNA programs to doctor of nursing practice (DNP).

Additionally, Hartsell noted significant growth in the ranks of anesthesiology assistants (AAs), who generally practice similarly to CRNAs (and are paid at similar rates) in the implementation of care plans with anesthesiologists.

In SullivanCotter’s studies, Hartsell noted that just under half (48%) of practices use some form of incentive payment for APPs, and that primary care APPs have higher median incentive amounts over the past three years ($7,444) than medical APPs ($5,753), surgical APPs ($5,542) and hospital-based APPs ($5,503).³ Additionally, those primary care APPs’ incentives were the top of the other specialties when calculated as a percentage of their base pay, at 6.8%.⁴

Noting that financial compensation isn’t the sole factor influencing APP retention, Hartsell said that benefits such as CME expense allowance, paid time off for CME and certification/licensure reimbursement have remained consistent in recent years.

“The CME stipends continue to represent a significant issue. … Adding a $2,000 CME fund typically has a much greater impact than simply adding another $2,000 to base compensation,” Hartsell said. “From a financial standpoint, the math is the same, but there’s a nonquantifiable emotional lift that many APPs feel when they’re treated more like a provider than staff.”

Examples of change

Using the example of primary care within a multi-hospital health system with a large medical group in which APP utilization is growing, Hartsell noted that shifting from a typical wRVU physician compensation model toward a salaried model can have many unintended consequences. Without proper oversight and provider accountability, productivity and access can drop in this setting.

“Physicians were growing dissatisfied with the model, as patients voiced concerns about their inability to get access, and the organization lacked the resources to support their practices with the shrinking market share; this carried down to the APPs, who had little expectations put upon them and their roles varied and were typically not provider focused,” Hartsell said. “Many of the APPs in this model worked as scribes; as a result, you really had dissatisfaction all around.”

To address this, a new compensation model was designed to maintain an overall base salary structure for physicians, but with the addition of specific minimum work standards related to individual performance, productivity and patient experience. With a team expectation around panel size, “this gave the management team clear expectations to be able to hold providers accountable,” Hartsell noted. That expectation was coupled with the introduction of incentive compensation (see Figure 4) tied to team-based metrics, including:

• Patient experience scores
• Panel size
• Quality.

“This solution allowed for the organization to continue to provide the security of a base salary to physicians, with the addition of clear work expectations for management, as well as the opportunity to include incentives that were really aligned with what the organization was seeking to do: Grow the patient panel size and the footprint,” Hartsell said.

Including the team-based incentives also set up the organization to be able to start to offer incentives for APPs that were aligned with physicians, giving APPs “a sense of being.”

The role of APP leadership

Given how vital providing a feeling of value among APPs is to influencing retention, having a dedicated leader for this expanding workforce within the organization structure is important.

Hartsell suggested that APP leaders can be categorized into three groups:

1. Clinical-level leaders, responsible for clinical oversight at the unit or practice level. “These are operational people, primarily providing clinical care,” Hartsell noted.
2. Middle-level leaders, who represent APP leaders managing other APPs or those who manage specific processes, such as onboarding, education or student placement.
3. An overall APP leader, who spends almost all his or her time working on management, strategy and administrative oversight of APPs throughout the organization.

“Our data suggests the presence of an APP leader can reduce turnover by as much as 2%. … The direct cost of turnover for APPs ranges anywhere from $85,000 to $120,000 per year, not accounting for indirect costs such as patient wait times, decreased morale and decreased efficiency,” Hartsell noted.

Additionally, Hartsell notes that this focus on APP leadership can provide savings in the form of efficiency via standardization and improvement in various fragmented or inconsistent processes, such as onboarding.

Conclusion

COVID-19 only escalated a demand for APPs that was rising in recent years. Adding these members to an existing care team comes with less overall investment than a new physician, but the need to refine the care team model and align financial incentives to support the care team’s goals should not be overlooked.

“APP workforce strategies should be tailored to support clinical workforce optimization and overall organizational strategy,” Hartsell said. “We know that the role and value of APPs will continue to evolve as competition and demand increase due to industry pressures for more efficient care delivery.”

Notes:

1. SullivanCotter. 2020 COVID-19 Physician and Advanced Practice Provider Compensation Practices Survey Report. April 2020. Available from: bit.ly/3b3DNge.
2. SullivanCotter. 2019 Advanced Practice Provider Compensation and Pay Practices Survey Report. Available from: bit.ly/3bJNFLq.
3. Sullivan Cotter. Advanced Practice Provider Compensation and Pay Practices Survey Report. 2017-2019.
4. Ibid.

Learn more

• For an overview of trends in APP demand and utilization, download the MGMA Research & Analysis report, Optimizing Advanced Practice Providers in Healthcare.