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Physicians Must Realign Compensation with Value

Physicians Must Realign Compensation with Value

The medical reimbursement landscape is under siege. Or, it may feel like that to physicians. Government mandates stream forth in an impersonal, brusque tone: You must make your patients happy; your care should be accountable; you are encouraged to develop a medical home. Declining compensation and rising healthcare costs have eroded physician revenue, and prompted many to reconsider private practice.

Charles Herrick, a practicing psychiatrist with Western Connecticut Medical Group, a 500+ provider, multispecialty group practice based in Danbury, Conn., acknowledges that physician compensation is a challenge. Herrick sits on his practice's board of directors and is a member of both the compensation and quality committees. He says his group is having trouble recruiting new physicians because of the high cost of living in the northeast and less than competitive salaries.

"Payers are not paying anymore and the switch is beginning to flip in terms of moving from a pure productivity-based to a value-based program and a shared savings program," he says, "… so we are treading water in terms of being able to attract quality physicians and retain them."

If your practice has experienced similar difficulties and is wondering how to incorporate value-based strategies into its compensation model, here are the first steps to success.


Value-based compensation has made few inroads into physician compensation formulas, but the intent is there, just over the horizon. Value is quantified through tasks such as conducting patient satisfaction surveys, measuring patient outcomes for chronically ill populations like diabetes patients, and keeping patients healthy and out of the hospital, all the while holding down costs.

The results of our 2015 Physician Compensation Survey show a mixed bag when it comes to compensation based on productivity, patient satisfaction, and value. Physician respondents to our survey said 63 percent of their compensation was based on productivity; 37 percent was tied to value measures; and 29 percent was tied to patient satisfaction scores.

*Are you making what you’re worth? Compare your earnings to other physicians around the country with our annual Physician Compensation Survey results.

William Reiser, vice president and chief information officer for the Westerville, Ohio-based Halley Consulting Group, says that many practices are still compensating their physicians largely on a fee-for-service basis.  "[Practices] have had … an increasing level of concern and angst on how they are going to approach some of these new compensation structures. How are they going to approach compensating for value; however you are ultimately going to define that," he says.

CMS has initiated a number of quality programs over the years, such as the Physician Quality Reporting System (PQRS), Accountable Care Organizations (ACO), Patient-Centered Medical Homes (PCMH), and the EHR Incentive Programs. Many have had uneven physician uptake, and as of yet, limited financial benefit for practices. There is also a significant upfront investment of time and money required; enough so that many practices elect not to participate and accept penalties for nonparticipation.

There has been significant pushback from industry and physician groups such as the AMA and the Medical Group Management Association on burdensome government mandates like the meaningful use program. Go-live dates have been successively moved and standards softened, as physicians made clear their dissatisfaction.

Yet, the ultimate goal is to improve the quality of patient care and reduce the increasingly inflated cost of care in the United States. If not now, when? Studies show that the per capita cost of healthcare in this country is greater than all other industrialized nations; the National Healthcare Expenditure Projections, 2010-2020,  predicts that U.S. healthcare costs will rise close to 20 percent of the gross domestic product by 2020.


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