Changing reimbursement models requires changes to physician compensation models – A structured approach to implementation

Cynthia KilroyMy previous blog, “Changing reimbursement models requires changes to physician compensation models – Characteristics of value-based compensation model,” outlined that as provider organizations move to risk-bearing contracts there are characteristics that go beyond just measuring quality of care and patient outcomes.

A structured approach to engaging physicians is required to ensure long-term adoption and ultimate success of the new compensation model. Throughout the process there should be a formal method for physicians to provide constructive feedback and outline whether or not the feedback was incorporated in the model. Listed below are some guidelines to help ensure long-term adoption and success of the new compensation model.

Define a Common Value-Based Vision – Define a common value-based vision taking into consideration the market trends, culture, population health maturity and long-term goals of the organization.

Educate All Physicians on the Value-Based Vision – Once this has been crafted by the organization’s administrative, operations and clinical leadership, all physicians within the organization should be educated on the vision including those who were included in building the vision.

Define and Design Incentive Metrics – Leveraging the physician compensation governance committee, define and design the metrics that will be utilized to incent physicians. It will be imperative that payer contracting and physician compensation teams work together to identify key metrics on which the organization wants to be measured, but, more importantly, what the organization will be reimbursed by payers. As noted, no more than 10-15 metrics should be included; otherwise the model gets too complicated and it becomes unlikely physicians can meet the demands.

Publish the Incentive Metrics – After the metrics are identified and approved by the physician compensation governing body, the metrics should first be published blinded with the goal of publishing unblinded over time.

Once the metrics are defined, built and published there should be a feedback loop that allows physicians to understand the data utilized in defining the metrics, the analytics platform leveraged, the algorithms used to create the metrics and how their feedback will be incorporated into the metrics. This process will take time and should not be rushed or the metrics will not be accepted in the long run. Once the governing body is comfortable they have received all feedback, the metrics should be approved.

Create a Shadow Incentive Reimbursement Model – Once the metrics are approved, a shadow reimbursement model should be implemented for at least six months. It is important the physicians know their initial baseline measurements prior to implementing the model. Physicians should be given easy to understand, detailed reports to help them identify opportunities to improve their individual performance, as well as opportunities to improve by changing practice patterns. This will minimize the downside exposure if they can improve on the defined measurements.

Implement the Incentive Program – Finally, the model should be implemented in two phases. In phase one the model should measure based on meeting minimum requirements only. In phase two a rating factor should be applied that allows high-performing physicians the ability to maximize reimbursement.

In the final blog in this series, I will outline the value of un-blinded performance metrics.

About the author

Cynthia Kilroy

Ms. Kilroy has over twenty years of experience as a healthcare professional focused on helping clients conceive and implement strategic decisions that change the concept of the business they are in to meet emerging challenges and market needs.  Currently, Ms. Kilroy is SVP of Solution Strategy and Business Development for Optum Consumer Solutions Group and is the designated Provider Market Lead.  Cynthia is accountable for business and product strategies to position Optum consumer health, financial management and population care management capabilities to meet the strategic needs of the market.


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