Matt Seiler, a senior consultant in our San Francisco office, recently sat down with Jason Lee, an associate principal, to have a conversation about provider financial services in its current state.
Matt: Jason, tell me about your history working as a consultant in the healthcare industry—for ECG and, specifically, in provider financial services, which we refer to as our PFS Division.
Jason: I’ve been involved in healthcare consulting for almost 20 years, the last 14 and a half with ECG. I’ve worked with many health systems across the country to assess their physician compensation models and determine the fair market value of the reimbursement that goes into or comes out of those models. I’ve recently moved my practice into the PFS Division, focusing on innovative physician arrangements and risk model compensation and helping clients incorporate population health and value-based incentives into how we pay physicians.
Matt: How do these models differ across systems of varying sizes?
Jason: Physicians work for all types of organizations that are taking on risk, whether midsize multispecialty groups or large, aligned groups with health systems. The majority of the groups embracing risk arrangements tend to be larger, 250-physician-plus multispecialty groups with a pretty solid primary care base. But risk arrangements can work with medical groups large and small; it’s really the ability to manage risk that differentiates who uses these models.
Matt: In recent months, there’s been a lot of talk about Stark law changes, making compliance with it a bit more flexible for provider organizations. Could you talk about that?
Jason: The federal government is looking closely at the Stark law. It has evolved a lot over the last 20 or so years, in part because more and more innovative approaches to patient care were developed during that time. Health systems are looking at different ways to incentivize and align incentives with physicians to ensure that populations are being taken care of. Under current Stark law, there are a few exceptions that allow risk models to incentivize physicians under a population health or value-based approach.
There’s some uncertainty around which incentive model is best practice and how it might fit within the risk exception. The hope (and the indication from CMS) is that the guidance arriving in summer 2019 will give us some clarity as to how we can ensure that those exceptions allow the physician to share in the risk of taking care of those populations and enjoy the reimbursement for the value that they’re adding.
Matt: Another big topic in provider compensation in recent months has been compensation for primary care physicians. The Centers for Medicare & Medicaid Services are in the process of launching multiple at-risk primary care reimbursement models. Is that something medical groups should be interested in?
Jason: I think this has been a long time coming. We know that, since the Affordable Care Act nearly 10 years ago, CMS has been looking at different models—shared savings models, ACOs, bundled payments—to reimburse physicians and let them share in value creation. The direct contracting model is, I think, another step along that pathway; it introduces more reimbursement mechanisms that would emphasize risk-based compensation for PCPs. Currently, depending on the market, the percentage of risk- or value-based reimbursement coming into a given health system can really vary—from low single-digit percentages all the way up to 30%, 40%, or even higher. As Medicare introduces this program, I think you’re going to see more and more health systems use this as a lever for modifying their compensation plans to include these elements.
Matt: A lot of organizations are still in the very early stages of determining how they can effectively compensate and incentivize their physicians as the slower-than-expected transition to at-risk reimbursement continues. How has physician compensation model design changed from maybe three years ago?
Jason: The adoption of risk-based models has been quite slow, in line with the incidence of risk-based reimbursement. Plus, the level of sophistication among medical group leadership has really evolved over the last 10 years. A lot of health systems were reluctant to introduce more than a few quality incentives here and there into their compensation plans for fear that they would misalign the physicians’ incentives with how they were getting reimbursed.
Matt: Clarify how physician compensation differs from fair market value. How are they related?
Jason: There are two components when it comes to paying physicians. The first is managing the funds flow and ensuring that the distributions to the physicians are properly incentivizing them for their contributions and value. Second, we have to confirm that those payments are adhering to regulatory and compliance standards under Stark law and the Anti-Kickback Statute. Our compensation division focuses on developing models that align those incentives with the physician’s activity. Then our FMV team makes sure those payments meet regulatory and fair market value standards.
Matt: Physician compensation can be quite complicated in terms of the number of factors that affect take-home pay for doctors. Physicians are no longer paid on a revenue-less-expense basis; instead, some health systems factor in a productivity component, a quality incentive, and an efficiency performance incentive. Do you have experience in assisting healthcare providers with devising these multifaceted compensation plans?
Jason: At ECG, we work with clients struggling with all types of operational and quality challenges, whether that’s ensuring that their quality is at the highest level or trying to incentivize operational improvements among their providers. We know that aligning compensation model incentives with objectives really is the key to ensuring overall business and strategic success. We recommend to our clients that they collaborate with operational, administrative, and clinical stakeholders to ensure that whatever model they put together meets those objectives and everybody agrees on them. We’ve worked with dozens of clients across the country just in the last couple of years to introduce elements that you mentioned as well as other risk-based elements.
Matt: My final question of the interview involves physician recruitment. Historically, physicians across many specialties have been in short supply. That persists today and is expected to get worse. Could you speak to ECG’s physician compensation philosophy and how you’ve dealt with recruitment challenges that your clients face around the country?
Jason: I think physician supply certainly is an acute problem in most if not all markets across the country. I think this shortage is driving many health systems in two ways. First, it calls for a diligent focus on how they reimburse their physicians. This is to ensure that the physicians feel that their contributions are both valid and valued and that the incentives are aligned for those providers.
The second piece is to make sure that the care team is as robust and efficient as possible. That means making sure that the operations are smooth and efficient so that we can optimize our physician’s time. Making sure that the support team—whether that’s advanced practice practitioners, clinical personnel, or operational personnel—is fully qualified and trained. I think that the physician shortage crisis in our industry today is driving innovation in both of those areas—physician compensation as well as operational efficiency and effectiveness.