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I
Special Report:
It has often
been said that every medical group has three physician compensation systems:
 |
The one they used to have (and that
some wish they would go back to). |
|
The one they are using now.
|
| And the one that they are thinking about using in the
future. |
Physician Compensation Systems (also known as Income
Distribution Systems) are one of the most discussed issues in any medical group.
Try as they like, many groups cannot develop and reach agreement on a system
which supports the long-range goals of the group.
Why can't they? For three important
reasons:
-
Lack of
long range goals - At its best, a physician compensation system
should be structured to support the long-range goals of the group. For many
groups, this is a problem because either the group has not developed a
coherent plan for the future, or because groups have never seen the physician
compensation system as a strategic tool to help them reach their long-range
goals.
-
Lack of an organized process
- Most groups just "talk around"
their compensation system and never implement changes. This happens because no
one is "in-charge" of
moving the effort forward.
- Win/lose mentality - any change in the compensation
system results in appearance that one set of physicians "win"
while another set "loses."
Because of this, physicians are often skeptical of a revised system proposed
by one of their peers.
But there are several environmental changes that are forcing
groups find a way to overcome these obstacles and update their physician
compensation system. These changes include:
|
Shrinking of the pie: All
indications are that there will be increasing pressures on physician income.
As the pie shrinks, physicians concern over how the pie is divided will grow.
|
|
Ancillary Services: Stark
legislation has made it very important for groups to review how they allocate
their returns from in-house ancillary services. Direct returns based on volume
referred can create legal risk for the group. |
|
Capitation: Physician
compensation systems which work well in a fee-for-service environment can kill
a group in a capitated environment. There is no "omni-system"
that works in every environment. |
| Value of Primary Care: For groups trying to attract
primary care as a strategy to lock in referrals and increase their
attractiveness to managed care entities, a system must be put into place that
allows for competitive compensation levels. |
With an array of pressures, and an almost limitless set of
alternatives in structuring a physician compensation, how can groups take
positive steps to change their method of income distribution? There are 5 key
steps:
-
Education: Education of the
group as to the need for change, and general options .
-
Practice Goal Identification:
What are the long range goals of the group? As
the old saying goes, "if you don't
know where you are going, how will you know when you get there?"
A group's physician compensation system must be
aligned with the groups long-range goals.
-
Establish Structure: Once
the group's long-range goals have been identified,
the current compensation system should be evaluated
in terms of its abilities to support those goals, and alternatives should be
identified when it or components of it do not.
-
Testing: The alternatives
should be tested using historical or projected data to assure that the areas
where incentives are appropriate are generating anticipated results. In
additions, physicians will typically not accept a system unless that have a
financial benchmark with which to evaluate it.
- Communication: The results of the preceding efforts
should be reviewed with the physicians. It is critical that they understand
how the proposed changes were developed and what will be their impact. Once
this is done, it is up to the group to adopt the needed changes.
As you might expect, our knowledge in this area is based on the fact that Latham
Consulting Group has substantial experience in assisting medical groups with physician
compensation issues through our Income
Distribution/Physician Compensation Services.
If we can provide assistance or answer any questions you might have, please contact us
at 704/365-8889 or e-mail us at wlatham@lathamconsulting.com.
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