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ECG’s Provider Survey: An Interview with Josh Halverson

Josh Halverson  Web
Tell us about your history working as a healthcare consultant.

I went to graduate school at the University of Minnesota, thinking I wanted to be a hospital CEO. But after working with one all through graduate school, I discovered it was not the job that I was interested in. So I gravitated toward a consulting project that was going on at the hospital I was working at and thought, “Hey, they’re doing the stuff that is really interesting to me.” I was pretty naive and didn’t really understand what consulting meant, but that’s what initially introduced me to it.

I went from graduate school to the healthcare strategy practice of Arthur Anderson in Seattle, and worked there for a couple of years. That was where I was really introduced to consulting, and the glamorous and not-so-glamorous parts of it.

After about two years, I pursued moving to a firm that did healthcare exclusively. I interviewed with about three different firms and decided to go with ECG, and I’ve been here for almost 20 years. I say “almost” because I left for a period of about 18 months to work in the industry again. I knew within six weeks that I had made a mistake. I think I’m a problem solver by nature and discovered that I really liked the variety of consulting. So I came back to ECG and have since helped establish our St. Louis and Dallas offices, and now lead our provider compensation services.

Could you describe changes organizations have made or are planning to make for 2021 regarding COVID-19’s impact on production or provider compensation?

Organizations I’ve been working with have mostly recovered from the volume deterioration that occurred in late spring and early summer. The increase in COVID cases we’re currently experiencing is creating a lot of uncertainty about the possibility of needing to close things down again. What organizations did this past summer was create measures that stabilized physician compensation, by providing base compensation when compensation was tied to production. I suspect that organizations would do that again for round two. During this period, organizations have discovered that they made a ton of investments in stabilizing provider compensation and were pretty generous with the guarantee levels. Due to the financial strain organizations are currently under, I suspect that this time the guarantee levels will not be as generous.

Besides COVID, some of the immediate issues organizations are encountering are around the Medicare Fee Schedule changes. With all these balls in the air creating instability, we’re encouraging our clients to make sure their plans are flexible and accommodate the uncertainty we have in front of us.

You mentioned the Medicare rule changes. Do you have any insight as to how Medicare’s 2021 MPFS rule changes will impact organizations?

The Medicare Fee Schedule is basically moving toward E&M codes. Those specialties that are concentrated on E&M codes are going to be positively impacted. The procedure-based specialties, all things being equal, are going to be negatively impacted in terms of productivity.

The challenge with all this is that Medicare has said they need to be cost neutral. Essentially, they have proposed to decrease the overall conversion factor that Medicare will pay for physician services. That creates a pretty significant reduction in overall reimbursement across the board. So even though productivity or RVU values will be up, the reimbursement that follows that RVU will be down; significantly down in those specialties that are procedurally oriented.

How will compensation planning or PSA funding for calendar year 2021 and beyond change given these significant market and regulatory forces?

Anything that’s connected to an RVU is going to be different, meaning that we expect, on average, RVU measures to go up; and if the pay rate per RVU is not changed, overall funding and compensation will go up without a change in productivity. That increase will be based on changes to the fee schedule.

Now, what we are talking about with our clients is the right approach to adjusting the payment per RVU for a PSA or compensation plan. One approach is to change the rate or lower the payment rate per unit to align with the new Medicare Fee Schedule. The other approach that we’re seeing is to say, “We’re going to wait to implement the 2021 fee schedule and all the changes in there until we have some more visibility around what the impact on reimbursement will be.”

The secondary effect of these changes is their impact on the survey data. It will be challenging to normalize self-reported RVUs, because everyone’s going to be using a different fee schedule. We do expect some volatility in the benchmark data, but we’re working with clients to make sure we’re capturing or developing methodologies to reduce the leverage of the surveys. And while surveys are still very important, looking at historical levels of compensation, at the organization’s financial perspective or position, and calibrating compensation using a myriad of market factors rather than relying on a single benchmark is always the best way to make judgments.

What unique qualifications position ECG to assist organizations as they approach compensation planning and PSA funding to account for these market dynamics?

My short answer is that ECG is a healthcare firm that does compensation work rather than a compensation firm that tries to do healthcare. We are experts in all aspects of physician and provider reimbursement, and we have teams focused on operations as well as compensation design. This expertise gives us insights into changes in reimbursement that have a significant impact on the economics by specialty. The operational aspects of changes to the scope-of-practice rules is an example of parameters that are changing and have to be contemplated as you pursue incentive design.

Lastly, our proprietary tools and surveys capture CPT code–level data. As a result, we can actually simulate and model the changes to productivity based on the fee schedule. Our custom reports and benchmarks will be able to show the productivity differences between the two fee schedules. We also have a very substantial cost survey that allows us to capture the practice economics for specialties within an integrated health system, understand the revenues and expenses by specialty service line, and figure out the right level of compensation given the organization’s economic performance.

Is there anything you’d like to mention about challenges the Compensation Services Division is helping clients tackle?

We have gone through, and are continuing to go through, a tumultuous and chaotic period. On top of the uncertainty that’s caused many providers to feel just overworked and burned out, there’s the changing economics; and on top of that, changes to compensation. So we’re sensing an exhaustion among providers when they’re thinking about compensation, and that’s contributing to the challenges they’re facing. But from our perspective, when an organization takes on a change in compensation, especially in a time like this, the process itself is almost as important as what comes out of the process. Change management establishes the reasons why change is critical. And so from our perspective, those are ingredients that are necessary for organizations to successfully migrate toward new compensation plans.

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