Better compensation plans for physician practice success

Insight Article - November 21, 2019

Budgeting

RVUs

Provider Compensation

MGMA Staff Members
How your physicians are paid remains one of the biggest challenges facing medical practice leaders today, influenced by a complex set of factors.

To better understand the challenge, consider some of these complexities discovered in the 2018 and 2019 MGMA DataDive Provider Compensation datasets, the latter based on more than 147,000 physicians and nonphysician providers across the country:
  • Good time to start: While the healthcare industry is faced with a shortage of physicians, demand continues to rise, likely resulting in changes in compensation for new hires. Practices recruiting new doctors are offering more salary, in addition to other incentives, particularly in specialties where there may be a shortage. This report found steady increases in the median guaranteed compensation for newly hired providers between 2017 and 2018. Guaranteed compensation for newly hired emergency medicine, cardiology and urology physicians grew 40.43% ($207,360 to $291,194), 21.25% ($400,000 to $485,000) and 20% ($312,500 to $375,000), respectively.
  • Location: Practicing in a big city doesn't always bring the biggest salary. For example, the median income for a metro-area anesthesiologist in 2018 was $444,846, whereas in non-metro areas (comprising populations of 50,000 or fewer) the median anesthesiologist income was $469,057. While this trend was true for most specialties, there are anomalies within the anomaly — rural cardiologists, for example, make about 10% less than their urban counterparts.
  • Slow shift to quality: For years, healthcare leaders have thought value-based care and quality incentives would become dominant forces influencing physician compensation. While that day may come, about four out of five compensation plans in 2017 did not include quality incentives, while productivity remained the core metric for pay. The inclusion of quality incentives in compensation plans depended on practice size: independent and smaller practices were much less likely to provide any kind of quality incentives. An October 2018 MGMA Stat poll with 1,195 responses found that, of organizations participating in value-based payer contracts, two out of three report that value-based contracts make up 20% or less of their overall contracts.
This is a lot to sort out for a practice executive charged with building the comp plan strategy, much less the physicians whose pay is determined in the process. A 2017 MGMA Stat poll found that only 48% of respondents said that their physicians felt satisfied with their plan — but there is one way to shift that sentiment. 

"One of the principles of evidence-based management is that good decisions are based on good data," according to David N. Gans, MSHA, FACMPE, senior fellow, MGMA. It begins with invaluable tools to take the ocean of data we live in and convert it into the information you need to make better decisions for your practice.  

One such tool is the MGMA Pay to Production Plotter. This tool displays the distribution of the MGMA database for compensation and production, showing each submitted provider’s actual compensation and work RVU (wRVU) production. Simply plot your theoretical data for your physician (compensation/productivity) and choose a database for comparison to visualize how the provider data stacks up to the spectrum of MGMA's data. From here you can get a real sense of what is fair and back it up with national data.

To provide further clarity to this sticky problem, the MGMA Research team has interviewed consultants and practice administrators to provide helpful tips and uses for this tool to their peers, and took a closer look at how medical practices utilize this tool in compensation planning. Jonathan Sheridan, CVA, Medical Consultant, Medical Management, Atlanta, Ga., explains how he utilizes this tool in his work to help educate his clients on making these vital decisions. 

How do you utilize the Pay to Production Plotter?

I have been using this tool since MGMA came out with it on the CD version. I think it's a great illustration of where a physician's compensation and productivity lines up with MGMA's actual respondents within the same specialty, which we use often in conjunction with fair market valuations of physician compensation for medical groups, hospitals and health systems. The tool also allows the user to further refine the MGMA data points to only include respondents with similar practice characteristics (i.e. size, location, employment arrangement, etc.) to that of the subject physician; something that is lacking in other commonly referenced benchmark surveys. By clicking on a data point on the plotter, you can see the actual respondents' compensation and productivity, not just data normalized into quartiles. I use it when conducting compensation valuations as a kind of gut check to see whether I need to dive into greater detail on the relationship between the physician's compensation and productivity.

The first thing I do is research the general benchmarks from MGMA for productivity and compensation for a given specialty and see how those figures line up to the subject physician. I will then plot the physician’s compensation and productivity in order to see its match-up to his or her peers. From the plot we can ask: Is the physician’s compensation and productivity commensurate with his or her peers based on data parameters selected? Is he or she within one standard deviation of MGMA's best fit line? If not, then let's analyze why not. If so, okay, the compensation appears to be reasonable based on the productivity.
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For what type of scenarios do you use The Pay to Production Plotter?

We typically use the Pay to Production Plotter tool when conducting compensation valuations, assessing productivity-based compensation arrangements and reviewing second generation compensation arrangements. We also frequently use this tool to provide a power visual of the compensation arrangement to our clients or the physician in question. From an illustrative standpoint, you are able to show where their current compensation is, where it'll be on this new proposed plan, and how it aligns with everyone else.

Lessons learned

The advice I would give to anybody working on any new system is to take some time and play around in it. Input some data, change the parameters and see how the results differ. This will help you understand what the reports are really telling you - what the Pay to Production Plotter is really saying. From there, you can make educated recommendations and conclusions based on the data. 

Understanding the complex relationship of provider production and compensation is key to financial decision making in modern medicine administration. All decisions should stem from good data backed up with reliable evidence. Utilizing the Pay to Production Plotter in conjunction with other data tools and benchmarking will help a healthcare leader to craft compensation plans that are appropriate and tailored to their practice. "Fortunately, with the right tools and data reports it is possible to view the big picture and to understand and manage even the most complex problem," Gans says.

Coming January 2020: The Power of the MGMA Pay to Production Plotter: An MGMA DataDive Resource

This new MGMA DataDive resource will provide context to the MGMA Pay to Production Plotter, a powerful tool in the Pro Report Builder that helps simplify the complexity of provider compensation data by displaying the actual distribution of the data on two axes, showing each provider's compensation and work RVU production. This new resource will include use cases, real-life examples, a detailed case study and best practices from subject matter experts to help you utilize the tool to its fullest potential.

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