The Value Proposition: Aligning Compensation with Quality Care

For all the talk of the need to more closely tie physicians’ compensation to quality care and value, productivity continues to dominate payment schemes. Still, some cardiology groups are finding ways to shift from volume toward value using strategies built off their histories and cultures.

Dueling incentives

The Centers for Medicare & Medicaid Services (CMS) has made it clear to hospitals and healthcare systems that reimbursement increasingly will be tied to quality and value. On March 3, 2016, the Department of Health and Human Services announced that CMS had reached its goal of linking 30 percent of Medicare fee-for-service payments to various alternative payment models. CMS, the single largest healthcare payer in the U.S., estimated that as much as $117 billion of a projected $380 billion in fee-for-service payments would be tied to these models.

It later added that it was on track to increase the share to 50 percent by the end of 2018. In addition, CMS wants 90 percent of all traditional Medicare payments in 2018 tied to quality and value, using levers such as the Hospital Readmissions Reduction Program.

Medicare is one the biggest drivers behind the transition from volume to value, says Joel Sauer, MBA, vice president of MedAxiom Consulting and the author of MedAxiom’s annual report on cardiovascular subspecialists’ compensation. The success of Medicare’s efforts, from shared savings to bundled payments to accountable care organizations, hinges on physicians, he contends.

“You won’t be able to impact those players without the physicians being engaged around the care and coordination with the patient,” Sauer says. “All of those things will continue to see us inch forward on value compensation.”

Commercial payers also have put the traditional fee-for-service payment system on notice. According to the nonprofit Catalyst for Payment Reform, 40 percent of commercial health plans in 2014 were value oriented, up from 3 percent in 2010. The organization, whose members include employers and other healthcare purchasers, cautioned that fee-for-service remained at the core of many of these payment models, with value-based incentives layered on top to entice physicians to be more efficient and accountable.

[[{"fid":"23042","view_mode":"media_original","type":"media","attributes":{"height":512,"width":600,"style":"width: 180px; height: 154px; margin: 5px; float: left;","alt":" - Joel-Sauer","class":"media-element file-media-original"}}]]

“You don’t generally see people fully abandoning fee-for-service when they do alternative models,” says Mark W. Friedberg, MD, MPP, a senior natural scientist at RAND Corp. who studies healthcare payment models and provider performance. “Most organizations that are doing alternative payment still have a lot of fee-for-service going on.”

And that affects how cardiologists get paid. “For the most part, physician reimbursement for their services is still very, very heavily steeped in productivity, and the gold standard for productivity is work RVUs,” says Sauer, referring to relative value units, the measure of value Medicare uses to reimburse physicians for services provided. “Until that stops being the case, you will continue to see heavy emphasis in comp plans on work RVUs.”

MedAxiom’s most recent survey of 183 practices representing 3,815 cardiovascular subspecialists found an uptick in work RVUs between 2014 and 2015 for both integrated and private physicians. The median work RVU increased from 9,210 to 9,498 for integrated practices and from 10,438 to 10,494 for private practices. Electrophysiologists were the most productive subspecialty group in 2015, with an overall tally of 11,637 work RVUs; general noninvasive cardiologists ranked the least, at 8,013 work RVUs. The survey included only full-time physicians.

Compensation mirrored the trend, with both integrated and private cardiovascular subspecialists generally seeing a bump between 2014 and 2015. Median compensation for integrated physicians reached $577,756 in 2015, a more than $22,000 boost from the previous year. Private physicians made on average $486,777, for a $16,617 increase from 2014.

In its annual review of physician recruiting incentives, the healthcare search company Merritt Hawkins reported somewhat similar results. Ninety percent of searches between April 2016 and March 2017 were for employed physicians; and while plans that offered salary and a production bonus tilted toward volume, quality- and value-based compensation gained ground. RVU-based payment incentives dropped to 52 percent, a 6 percentage point dip from the previous year. Still, 39 percent of the incentives included quality- and value-based components, up from 32 percent for 2015-2016.

And in a trend that may alarm some cardiologists, Merritt Hawkins noted a decline in pay for recently recruited noninvasive cardiologists. Their average offer tumbled from $493,000 in 2015-2016 to $428,000 in 2016-2017. Invasive cardiologists saw an increase, though, going from $545,000 in 2015-2016 to $563,000 in 2016-2017.

[[{"fid":"23043","view_mode":"media_original","type":"media","attributes":{"height":457,"width":700,"alt":" - prevalence-cardiology-compensation-models","class":"media-element file-media-original"}}]]

A team mentality

Cardiologists face a quandary. They don’t necessarily want to see their pay decline, as seen with some cardiology subspecialties in the Merritt Hawkins report, but they recognize that the financial incentives in a predominantly volume-based system are misaligned with how they would like to deliver patient care. Cardiology groups across the country struggle with that conflict, says Sauer, who consults with practices on contracts and compensation.

Electrophysiologist Darryl Elmouchi, MD, MBA, frames the problem this way: “How do we ask providers to do these things that we think are not only important for throughput but for better care and better quality, while at the same time we are more or less disincentivizing them if we are using production as a method for paying?”

His cardiology group in Grand Rapids, Mich., has tested iterations of compensation plans, dating back to time as a private group called West Michigan Heart through their present five-year contract as an integrated group with Spectrum Health, says David H. Wohns, MD, West Michigan Heart’s former president. West Michigan Heart joined Spectrum Health as a separate entity with about 36 cardiologists in 2010 and formally integrated in 2015. It now has about 44 cardiologists who are part of Spectrum Health Medical Group. Elmouchi, now vice president of medical affairs at Spectrum, came to West Michigan Heart in 2006.

[[{"fid":"23044","view_mode":"media_original","type":"media","attributes":{"height":457,"width":622,"alt":" - cardiology-invasive-non-graph","class":"media-element file-media-original"}}]]

“It was a group that historically had a shared pool and a productivity pool,” says Wohns, now chief of cardiology at Spectrum. Such models allow groups to pool funds to share with subspecialists, such as heart failure physicians who may generate fewer RVUs than other subspecialists but are valuable members of the team. According to MedAxiom’s survey, 18 respondents used an equal split formula, 61 a blend, 36 productivity and 15 salaries plus bonuses; 53 didn’t designate their compensation method.

“The goal of the shared portion was recognition that we are highly interdependent and nobody will knock it out of the park without working together as a team,” Wohns says, “nor did we want to” from the standpoint of work–life balance and the value they placed on non–RVU-producing activities.

[[{"fid":"23045","view_mode":"media_original","type":"media","attributes":{"height":512,"width":600,"style":"width: 180px; height: 154px; margin: 5px; float: left;","alt":" - Charles-Brown","class":"media-element file-media-original"}}]]

A different approach

With the 2010 integration, West Michigan Heart became almost all productivity-based due to the contract’s structure, says Elmouchi, who was medical director of cardiac electrophysiology from 2010 to 2014. RVU-based compensation didn’t incentivize behaviors the group valued, such as spending time with patients and their families, attending meetings and research.

“It was those values that drove us to want to look at a system that would reward citizenship and quality,” Wohns says. The group agreed to a workaround, a “ghost RVU” system with pooled RVUs and reallocated funds to support nonproductivity activities and quality initiatives.

By 2014, they had nudged compensation away from productivity again but the ghost RVU process was opaque and convoluted, according to Elmouchi. “We made a fix and then made a fix on top of the fix, almost like the tax code,” he recalls. But it allowed them to maintain a culture that cultivated collaboration and team-based care.

The opportunity to revisit that came in 2015 with a new contract and full integration. This time they assumed a swift change toward value-based payments with recognition that productivity still dominated at present. To assuage the latter, they negotiated with the hospital to assess productivity by cardiology subspecialty rather than an individual subspecialist and made it clear to cardiologists that they still were expected to generate revenue.

“We will manage to make sure that as a group our productivity will continue to increase, assuming that there are not major cuts to RVUs, but we will do this in a different way,” Elmouchi says. “Instead of incenting productivity, we will do this because it makes sense for the programs and for the clinical care.”

The current contract calls for a base salary derived from a combination of four national surveys, weighted by sample size, and applied to each subspecialty. The formula is recalibrated annually. Cardiologists also can earn a 10 percent bonus for meeting citizenship metrics and a 5 percent bonus based on quality metrics.

For instance, Spectrum’s interventional cardiologists devised a quality metric to incentivize radial adoption for PCIs in the catheterization lab, an approach that has been shown to shorten stays, lower costs, increase patient satisfaction and reduce some complications. Under citizenship, they developed a scoring system to account for the time and effort cardiologists spend at meetings.

Wohns and Elmouchi credit the citizenship component with the development of Spectrum’s hypertrophic cardiomyopathy program. The program, which unites a team of heart failure specialists, interventional cardiologists, electrophysiologists, cardiac imagers and others, was named one of 26 centers of excellence in the U.S. this year.

“We knew it was the right thing to do, but when it is an RVU system there are conflicts,” Wohns says. “We wanted to minimize those conflicts.”

The 1,600-member Spectrum Health Medical Group is going through a transformation to support a value-based compensation model with at-risk pay of 15 percent based on value, service excellence, access, citizenship and clinical activities. It will be phased in over a three- to five-year period. The cardiology group will adjust its compensation to align with this system.

[[{"fid":"23046","view_mode":"media_original","type":"media","attributes":{"height":512,"width":600,"style":"width: 180px; height: 154px; margin: 5px; float: left;","alt":" - Mark-friedberg","class":"media-element file-media-original"}}]]

From competitors to colleagues

Piedmont Heart chose another route to prepare for a value-based economy. Piedmont Healthcare, an integrated system in Georgia, acquired three separate cardiology groups in 2007 to form what was then called Piedmont Heart Institute. The institute’s 62 cardiologists grouped themselves by disease state or condition, creating six centers of excellence led by a chief with physicians crafting each center’s direction.

They initially assumed a productivity-weighted model as they merged practices but later shifted to giving cardiologists the option of RVU-based compensation or a salary, says Charles L. Brown III, MD, who became Piedmont Heart’s chief medical officer in 2008 and is now CEO of Piedmont’s Physician Enterprise. That option stands today but the group, now more than 85 cardiovascular subspecialists, is paving the way for an increasing proportion of compensation linked to quality and citizenship metrics.

About four years ago, they introduced score cards with multiple metrics, Brown says. The metrics weren’t tied to compensation, but they provided physicians with a preview of what was on the horizon. Two years ago they edged closer to the value side of the equation by awarding bonuses based on the metrics.

“Basically, we robbed Peter to pay Paul, meaning that there was a methodology where if you did not participate in the metrics you got a penalty, and that penalty was distributed to the physicians who met the metrics,” he explains. “They got a bonus.”

Piedmont Heart uses national benchmarks to determine physician compensation. Going forward, they plan to allocate increases in these benchmarks toward quality metrics. “Over the next several years, that will be an increasing percentage of your total compensation,” Brown says.

Their peers at Piedmont are taking note of the cardiology group’s successes. For instance, the Marcus Foundation donated $75 million to Piedmont in 2016 to build a heart and vascular center in Atlanta. The gift follows a $20 million donation in 2012 for a heart valve center.

“[The heart and vascular center] will be a representation of what a lot of collegial work got accomplished over the last 10 years,” Brown says. “It will be state of the art and will define us very differently in the Southeast region.”

[[{"fid":"23047","view_mode":"media_original","type":"media","attributes":{"height":457,"width":700,"alt":" - calculating-production-bonuses","class":"media-element file-media-original"}}]]

Many tactics, many doubts

Friedberg, who is also an internist at Brigham and Women’s Hospital in Boston, points out that groups and hospitals can reward cardiologists in nonmonetary ways as well. Those strategies, detailed in a 2015 RAND study to assess the effect of a variety of payment models on physician practices, include perks such as educational opportunities; performance feedback, either individual or relative to a physician’s peers; easing physician burden by streamlining numerous and sometimes conflicting quality metrics; and integrating technologies into work processes to promote evidence-based care.

He cites one subspecialty practice that participated in a bundled payment for congestive heart failure (CHF). “They knew that if they wanted to make money in this new model, they would have to deal with some variation in how doctors cared for their patients,” he says. They put together a committee to design and implement an easy-to-use default CHF order set.

“They actually earned a bonus,” Friedberg says. “That is not a financial incentive. No one is going to be embarrassed by this, it is not any kind of reputation-based incentive. It is a nudge, just making it ridiculously easy to do ‘the right thing,’ which they decided was a certain way of providing CHF care within their institution.”

The RAND study included 81 interviews with 34 physician practices ranging from small, single-specialty groups to large multispecialty hospitals and corporations in six diverse geographic markets. Researchers also conducted 31 interviews with hospital system leaders, healthcare plan executives, chapters of medical societies and others for market context. “I don’t think anyone really had a perfect solution,” says Friedberg, referring to efforts to counter fee-for-service, “and I don’t think a lot of people had a lot of certainty that they had the best approach.”

No matter if it’s a roadmap less traveled, cardiology groups should prepare for the transition toward value when they contemplate compensation, Sauer advises. “If you are doing comp today, you better have some meaningful portion—and I will leave that up to the user to define—of compensation tied to nonproductivity measures.”