PODCAST | Trends in Physician Compensation

BESLER | The Hospital Finance Podcast®

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Dave Hesselink, Principal, discusses the results of SullivanCotter's 2019 Physician Compensation and Productivity Survey on a recent episode of the The Hospital Finance Podcast® with BESLER. Now in its 28th year, this survey is the largest and most comprehensive of it's kind with data reported on over 206,000 physicians, advanced practice providers and PhDs from nearly 700 participating health care organizations. It features key information on insight on physician base salary, total cash compensation and productivity data and ratios including work RVUs, collections, patient visits and panel sizes.

TRANSCRIPT

Mike Passanante: Hi, this is Mike Passanante. And welcome back to the award-winning Hospital Finance Podcast®. Consulting firm SullivanCotter recently released survey results indicating that physician compensation programs are evolving as organizations address a variety of new challenges in a rapidly changing health care environment. To discuss the study results, I’m joined by Dave Hesselink, Principal in the Physician Workforce Practice of SullivanCotter. Dave, welcome to the show.

Dave Hesselink: Thank you very much. Appreciate being here.

Mike: So Dave, for those in our audience who may not be familiar with SullivanCotter and the work that you do, can you tell us a little about your firm?

Dave: You bet. SullivanCotter partners with health care organizations across the country and our objective is really to help drive performance and improve outcomes through the development and implementation of what we call integrated workforce strategies. The workforces that we focus on include executives, physicians, advanced practice providers, and other employees. More specifically, in the physician space, we help those health care organizations optimize performance while managing the complex regulatory risk that they face from their financial relationships with both employed and independent physicians. In that space we provide an array of services including physician compensation design, fair market value of commercial reasonable assessments, physician affiliation and needs assessments, business valuations, as well as other advisory support. And in addition to our consulting services, we also offer data and physician compensation software and benchmarking tools to help attract, retain, and engage the executive and clinical workforces.

Mike: Absolutely, and as I mentioned, we’ll be talking about the results of SullivanCotter’s 2019 Physician Compensation and Productivity Survey. So Dave, can you just explain for us what you were looking at, specifically, in the survey and who you surveyed?

Dave: You bet. This is an annual survey that we’ve actually been conducting now for over 25 years. Over that time span, it has become the largest annual physician compensation survey in the industry. This past year, we had over 200,000 incumbents included from nearly 700 participating organizations. That sample size of 200,000 represents about one-quarter of active practicing physicians in the US. We conduct that survey to evaluate trends in physician compensation, pay practices and productivity for our survey participants and the purchasers of the survey. Rather than this being an online survey where individual physicians are participating, the responses for our survey are compiled centrally at the organizational level by an individual within the organization who is knowledgeable about physician compensation and productivity. Often, this is in the HR function. We feel it is really the best approach to getting the most accurate and impartial data from the organizations that participate in our survey. Participating organizations typically include health systems, hospitals, medical groups, other organizations that employ physicians. In addition to publishing and selling our survey, we use the survey results to inform our advisory services, which I just talked about, to really help focus on aligning physician compensation not only with market benchmarks but with the overall organizational objectives as well.

Mike: Certainly, many different types of provider organizations are thinking about how to alter their physician compensation plans to bring them into alignment with some of the new models that are out there with payments. I want to talk to you a little bit about that. What would you say are some of the key environmental factors that are driving the need for new approaches to physician compensation?

Dave: I think there’s two that I’ll talk about. Probably the most significant change in health care over the past 10 years, I would say, has been the evolution in payer reimbursement from a pure fee-for-service approach to really what I’ll call, in most markets, a modified fee-for-service approach that also includes value-based incentives or value-based payments. I want to be clear for your listeners. When I say value-based payments or value-based incentives, I mean third party payments for performance in areas other than volume. Think about clinical quality, patient experience or reducing the cost of care. All of those really align with the IHI’s Triple Aim. With a greater share of health system payments based on factors other than the volume of care provided or physician productivity, physician employers have, over the past several years, shifted their reward systems to include performance in a variety of areas that reflect their payer environments. That's what I would call more of a balanced scorecard approach. In the advisory work that we do, we help physician employers evaluate their particular environment and align their physician compensation programs to be successful.

The second significant trend, I would say, that affects health care organizations is the growing physician shortage. Physicians who previously put off retirement due to a weak economy in the last decade now have already moved ahead or are starting to move ahead with those retirement plans considering the strong economy we have today. In 2018, physicians supply projections were updated and the physician shortfall is now expected to exceed 120,000 physicians by 2030 - just in the next 10 years. I’m sure your listeners can identify this because new patient waits for some specialists already can be weeks or months. To avoid potential disruption to the important goals that your listeners have around quality service and cost, we believe that implementing a creative and contemporary physician recruitment strategy will be very important for organizational success now and into the future. In addition to that, there is also a lot of interest in advanced practice provider recruitment as a supplement to those physicians, particularly with the shortage that I’ve just outlined.

Mike: Let’s dig into that a little bit because you found in the survey that market supply and demand for physicians continues to drive increases in total cash compensation. But that’s not really leading to an increase in productivity, isn’t that right?

Dave: That’s correct, Mike. In fact, annual physician cash compensation continues to increase while physician productivity has been mostly unchanged over the past eight years. Our survey also provides data on physician collections and shows that collections remain pretty flat over the past several years. When you combine all of that data together, I think what this illustrates is that employers, physician employers are investing more in their physician practice organizations to attract and retain providers without reciprocal increases in productivity or reimbursement. A greater investment in that physician enterprise really puts more financial pressure on the rest of the health care organization’s performance. I’m sure your listeners can validate that in their organizations as well.

Mike: Dave, let’s talk about value-based payments and how that plays into compensation because those incentives around value-based payments are taking on a more prominent role in compensation. Can you tell us what you found there?

Dave: Yes, it’s an interesting environment right now. There is definitely greater interest in aligning physician compensation around what I would call a more balanced set of performance metrics. I mentioned a few earlier: clinical quality, patient experience, access, cost of care. However, when we look at the survey results, the amount of compensation tied to performance on these metrics has been relatively flat over the past four years, representing, what I would say, in the range of 5 to 10 percent of total cash compensation. We annually collect information about how physician compensation plans are structured, and the prevalence of those value-based incentives in compensation plan design has increased - no question about that. In 2019, approximately 60% of survey respondents reported that value-based incentives were used in their compensation plan designs, and that was up about 5% from 2018. So while the use of value-based incentives has increased, what we find is the amount of compensation tied to performance on these metrics has remained relatively constant. I think that there’s a little question mark there about that result that I think your listeners may have. There are probably two limiting factors most health care organizations face. The first one is the ability of the reporting infrastructure to keep pace with a large amount of clinical quality data that is required for good metric development and the rigorous testing of that data to ensure physician acceptance. The last thing you want to do is collect some data and send it out to physicians and find out later on that the data is not reliable or is not trusted by the physicians that you’re sending it to.

I think the second limiting factor here is really the outdated regulatory environment that is still largely focused on supporting physician compensation based on the quantity of care provided rather than the quality of care provided. As a result, hospital and health system employers in particular are a constraint to relatively small value-based incentive programs. There is some recent movement on the regulatory front, however, as CMS recently proposed changes to the regulatory framework of the Physician Self-Referral Law - or Stark Law as it is commonly referred to. That happened in October of last year. Those are still proposals at this point, but we’re hopeful that these regulatory changes could result in greater flexibility to increase value-based incentives without fear of federal intervention.

Mike: Dave, what do you think provider organizations should be doing right now to remain competitive when it comes to compensating their physicians?

Dave: Well, first of all, it is important to monitor national and regional physician compensation trends to ensure that your physician compensation programs are competitive. We believe participation in and use of benchmarking surveys like ours is the best way to do this. Secondly, I would say periodic evaluation of your physician compensation program is important to make sure it remains up to date and that it is producing the results consistent with your organizational philosophy and strategic objectives. We have a section of our survey called devoted to pay practices, and it is a great tool for conducting this periodic review. Of course, listeners can also contact us to get more in-depth evaluation of their compensation program if they like and recommendations for improvement. Finally, I think it is important for physician employers to understand the dynamic physician recruitment environment. There are a host of physician recruitment tools and practices that are being utilized today in this increasingly competitive environment. As an example, new physicians coming out training often have significant student-loan debt. A particularly attractive recruitment tool is to offer assistance with student-loan repayment in return for a commitment to practice for a predefined period of time - say three, four or five years. Your initial compensation offer might be competitive, but recruitment incentives like student-loan repayment can easily sway candidates in your favor. Our survey contains information on those practices as well: the prevalence of their use, the ranges that are in play, the retention requirements and more. Your organization’s physician recruiters will likely appreciate access to information to better understand the national recruitment environment as an adjunct to their knowledge of the local environment.

Mike: So Dave, if someone wanted to read more about the study or purchase a copy of the survey, where can they go?

Dave: Well, to obtain a copy of the 2019 Physician Compensation and Productivity Survey, listeners should go to Sullivancotter.com and click on the contact us tab. I will say that our 2020 surveys are currently open for participation through April 3rd, and we would love to have as many organizations participate as possible. Information on our individual surveys, our survey bundles – we do bundles and surveys together – pricing can be found on our website.

Mike: Excellent. Dave Hesselink, thanks so much for joining us today on The Hospital Finance podcast.

Dave: My pleasure, Mike

by Liz Jones