List of Exhibits
Introduction
Historical Context
Today’s Medical Practice Environment
External Challenges
Internal Challenges
The Authors
Overview of this Book
PART I Physician Compensation Plan Development
ONE Do You Need a New Compensation Plan?
A Practice Barometer
Medical Practices That Have No Choice
Medical Practices That Seek Alignment
Medical Practices in the Middle
Recommended Action for Medical Practices
TWO The Compensation Plan Development Process
Project Sponsorship
Compensation Planning Committee
Committee Composition
Charge to the Compensation Planning Committee
Compensation Plan Development Time Line
Role of a Consultant in Plan Development
Committee Operating Agreement
Communication Plan
The 12-Step Committee Process
THREE The Life Cycle of Compensation Plan Change
Life Cycle Phases
Phase 1 – Today’s Plan
Phase 2 – Tomorrow’s Potential Plans
Phase 3 – The New Plan
The Complexity of Change
Administrative Readiness for a New Compensation Plan
FOUR Compensation Plan Decision and Implementation
Compensation Plan Checklist
The Decision-Making Process
Decision Making in Private Medical Practices
Decision Making in Hospital-Affiliated or Hospital-Employed Practices
Decision Making in Academic Practices
A Ballot Approach to Decision Making
Implementation Plans
Incremental Adoption
Blended Adoption
Segmented Adoption
PART II State-of-the-Art Strategies
Introduction
FIVE Compensation Plan Options – The Compensation Plan Matrix
Culture and Compensation
Financial Realities and Compensation
Compensation Plan Dimensions
The Cultural X-Axis: Team-Oriented to Individualistic Plans
The Financial Y-Axis: Revenue-to-Expense Treatment
Team-Oriented Plans
Individualistic Plans
Middle Ground Plans
The Compensation Plan Matrix
Plan “Architectures” Based on the Nine Elements
Revenue Treatment
Funds Flow Models
Revenue Distribution Methods
Expense Treatment
Gaining Perspective on Current and Potential Future Plans
SIX Compensation Plan Architectures
Team-Oriented Architectures
Architecture A – Unit-Based Plans
Architecture B – Guaranteed Share Plans (Base Plus Incentive)
Architecture C – Percent-Shared, Percent-Production Plans
Architecture D – Pure Production-Based Plans (No Expense Allocation)
Architecture E – Graduated Revenue Allocation Plans
Individualistic Architectures
Architecture R – Pure Production-Based, Combined with Strict Cost Accounting Plans
Architecture Q – Pure Production-Based, Combined with Modified Cost Accounting of Expenses (Shared and Based on Utilization) Plans
Architecture P – Pure Production-Based, Combined with Negotiated Expense Allocation (with Production-Based Component) Plans
Architecture O – Pure Production-Based, Combined with Equal Share Expense Allocation Plans
Architecture N – Pure Production-Based, Combined with Graduated Expense Allocation Plans
Architectures in the Vast “Middle Ground”
SEVEN Measuring Physician Work and Effort
The Context for Physician Productivity
Influences on Physician Productivity
Productivity’s Negative Effects
Measures of Physician Work and Effort
Measuring and Rewarding Quality
Benchmarking Physician Productivity for Compensation Plan Development
Purposes and Uses of Benchmarking
Availability, Utility, and Validity of Benchmarking Resources
Benchmarking Steps
Physician-Specific Factors and Benchmarking
Examples of Benchmarking for Compensation Plan Purposes
Example 1: Physician Compensation and Key Production Measures
Example 2: Compensation-to-Production Ratios
Example 3: Compensation in the Context of the Practice’s Financial Position
Example 4: Academic Practice and Clinical Full-Time Equivalency (CFTE) Analysis
EIGHT Pay-for-Performance (P4P) and Physician Compensation
Background
The P4P Debate
Aligning Compensation with Reimbursement
P4P Methods and Measures
P4P Compensation Strategies
P4P Revenue Strategies
P4P Performance Measures
Physician Profiles
P4P Documentation
Examples of P4P Plans
Example 1: Direct Link between Reimbursement and Disbursement
Example 2: Separate Incentive Pool and P4P Framework
NINE The Legal Element
Two Primary Bodies of Relevant Laws
Laws Governing Federal Health Care Programs
Internal Revenue Code Requirements
Compensation and Context – Applying the Laws
A Diagnostic Matrix
The Primary Laws (The Stark Law, the Anti-Kickback Statute, and the Internal Revenue Code) Applied in Two Contexts
Compensation in Bona Fide “Group Practices”
Compensation in “Nontraditional” (e.g., Hospital-Owned and Hospital-Operated) Group Practices
Compensation in Settings Other than Bona Fide “Group Practices”
Indirect Compensation Arrangements Involving Hospitals and Organizations Other than Group Practices
The Role of Legal and Accounting Counsel in Compensation Plan Development
TEN Special Issues in Physician Compensation
General Framework for Rewarding Nonclinical Production
Direct Method – Payment for Nonclinical Production Activities
Indirect Methods – Performance Expectations and Physician Recognition
Special Issues in Physician Compensation
Issue 1: Methods to Identify Base Salary Levels
Issue 2: Compensating Physicians for Satellite and Outreach Activities
Issue 3: Compensating Physicians for Leadership and Administrative Services
Issue 4: Compensation Plans for New Physicians
Issue 5: Compensation Plans for Nonphysician Providers
Issue 6: Market Differences in Subspecialty Compensation Levels
Issue 7: Nonobjective Performance Criteria in Compensation Plans
Issue 8: Compensation Plans Involving System-Wide Incentive Measures
ELEVEN Physician Transition Plans – Physicians in Part-Time, Slowdown, and Similar Status
Practice “Transition” – What and Why
The Growth of Physician Transition Plans
Developing a Transition Plan
Goals and Principles of Transition Plans
The Assessment Phase
The Development Phase
TWELVE Industry Trends in Physician Compensation
The Issues and Challenges
Trends in Physician Compensation Arrangements
Trends in Individualistic/Production Plans
Trends in Team-Oriented Plans
Trends in Multispecialty Practices
Trends in Hospital-Affiliated Practices
Trends in Academic Practice Plans
Reemergence of Gainsharing
PART III Compensation Plan Examples
Introduction – Compensation Plan Examples
The Compensation Plan Matrix and Plan Architectures
THIRTEEN Compensation Plans in Bona Fide Group Practices
Team-Oriented Architectures and Examples
Group Practice Architecture A – Unit-Based Plans
Group Practice Architecture B – Guaranteed Share of Revenues or Income (Base Salary) Plus Incentive Plans
Group Practice Architecture C – Combined Equal Share and Production Allocation of Revenues or Income Plans
Group Practice Architecture D – Pure Production-Based Plans
Group Practice Architecture E – Graduated or Negotiated Revenue (or Income) Allocation Plans
Individualistic Architectures and Examples
Group Practice Architecture R – “Strict” Cost Accounting Plans
Group Practice Architecture Q – Pure Production with “Modified” Cost Accounting Plans
Group Practice Architecture P – Pure Production with Negotiated Expense Allocation Plans
Group Practice Architecture O – Pure Production with Equal Share Expense Allocation Plans
Group Practice Architecture N – Pure Production with Graduated or Negotiated Expense Allocation Plans
“Middle Ground” Architectures and Examples
FOURTEEN Compensation Plans in Hospital-Affiliated Practices (Direct Employee, Hospital-Affiliated Group and “Contracted” Group)
Hospital Example 1 – Straight Salary Plan
Hospital Example 2-A – Compensation per WRVU Plan
Hospital Example 2-B – Compensation per WRVU Plan
Hospital Example 2-C – Compensation per WRVU Plan – Indirect Compensation Arrangement
Hospital Example 3 – Percentage-Based Compensation Plan
Hospital Example 4-A – Base Plus Incentive Plan
Hospital Example 4-B – Base Plus Incentive Plan
Hospital Example 5 – Graduated Compensation per WRVU Plan
Hospital Example 6 – Base Salary with Graduated Compensation per WRVU Plan
Hospital Example 7 – Hourly Pay for Physician Professional Services Plan
Hospital Example 8 – Indirect Hospital or Contracted Group with Cost Control Plan
Hospital Example 9 – Indirect Hospital or Contracted Group Using WRVUs and Cost Control Plan
FIFTEEN Compensation Plans in Academic Practices
Faculty Practice Plans Defined
Contextual Issues in Academic Practices Today
Key Success Factors for Academic Practices
Increased Focus on Clinical Service Performance and Production
Evolution of Faculty Member Compensation Expectations
Evolving Organizational and Administrative Structures
Evolution of Faculty Practice Plans
Approach to Faculty Practice Plan Design
Key Components of Faculty Practice Plans
Funds Flow Models
Faculty Practice Plan Architectures
Faculty Time Spent in Clinical Activity – CFTE Levels
Faculty Practice Plan Examples
Faculty Practice Example 1-A – XYZ Plan with Direct Faculty Revenue and Expense Allocation
Example 1-B – Adjusted Straight Salary Plan
Example 1-C – Mission-Based Plan
Faculty Practice Example 2-A – XYZ Plan with Z Based on Combination of Departmental and Individual Clinical Performance
Example 2-B – Z Based on Individual Clinical Production Only
Example 2-C – Z Based on Individual Points and Weights
Example 2-D – Use of Clinical and Academic Incentive Pools
SIXTEEN The Special World of Hospital and Academic Practices – Assessing Reasonableness and Promoting Compliance
Applicable Standards
Understanding Market Data
Evaluating the Data
Measuring to Median
Compensation and Production Relationships in the Marketplace
Applying Market Data to Evaluate Questions of Fair Market Value and Reasonableness
Third-Party and Internal Assessments
Conclusion
Additional Resources
Index