Feels Like the Odyssey?

WORKING THROUGH A SYSTEM-WIDE COMPENSATION REDESIGN
AND LIVING TO TELL THE STORY
AHLA Physicians and Hospitals Law Institute
FEBRUARY 5-7, 2018
Feels Like the Odyssey?

Kris Shepard - Carolinas Healthcare System
 Deputy General Counsel (present)
 Vice President - Physician Network Development and Central
Contracting (previous)
Annapoorani Bhat - PYA
 Valuation
 Fair Market Value Compensation Valuation
 Business Valuation
 Intellectual Property
 Commercial Reasonableness
Speakers

Outline
Types of Models
Legal/ Contractual
Considerations
Fair Market Value
Challenges
Basics
Comp
Redesign
Case Study
Carolinas
Healthcare

What Is Fair Compensation?

Medscape Physician Compensation Report 2017
What Is Fair Compensation?

Compensation Redesign - Basics

 What is compensation?
 Direct Financial: Pay, productivity/quality bonus
 Indirect Financial: Benefits, vacation, retirement plan
 Non-Financial: Career development, advancement
opportunities, work environment, living environment
Basics

 Why redesign compensation structure?
 Correct pay inequity
 Minimize disparities between arrangements
 Move away from fixed salaries and toward pay for
productivity, pay for value
 Create consistency with alternative payment models
Basics

 Top Challenges
 Finding a solution that works across specialties
 Contract compliance post execution
 Ensure regulatory compliance
 Compensation plan governance
Basics

 Practices may have disparate models due to:
 Legacy contracts not updated with time
 Wide variations in specialties
 Compensation models not modified after physician
practice acquisitions
 Compensation redesign exercise aims to:
 Streamline models
 Create arrangements/contracts that are easy to
administer
Types of Compensation Models

 Base salary
 Base + productivity-based compensation
 wRVU
 Encounters
 Collections (revenue-based models)
 Additional shifts
 Bonus based on quality measures

 AMGA 2017 Medical Group Compensation and
Productivity Survey
 83% of organizations that implement production-based
compensation plans for physicians rely on wRVU as a
measure of productivity
2005 2010 2016
40%
60%
83%

 Example 1 – Base + Productivity Bonus
 Base of $250,000
 $50 per wRVU in excess of 5,000 wRVUs (threshold)
 Base will be revisited each contract period
 Additional compensation: (i) payments for mid-level
supervision, (ii) medical directorship, (iii) excess call pay
 10% of Base Compensation at risk for achievement of
quality metrics

 Example 2 – Shift-based model
 Base of $250,000 which assumed full-time work load to
be 12 hour shifts, 7 days a week, every other week
 Every additional shift is paid $115 per hour
 Additional compensation: (i) payments for mid-level
supervision, (ii) medical directorship, (iii) excess call
pay
 7% of Base Compensation at risk for achievement of
quality metrics

 Alternative Payment Models (APM) –
 Need to find alignment between compensation models
and how payers are reimbursing for services
 Types of APMs
 Pay for performance (P4P)
 Shared savings arrangements
 Episodic payments (bundled payments)
 Global budgets

Fair Market Value Challenges
Case Study: Psychiatry

Case Study – Psychiatry
 Emergency Department
 Inpatient Care
 Consult Liaison
 Outpatient – Child, Geriatric, Adult
 Tele-Psychiatry
 Rural Hospital Coverage

 Coverage Model – Shift-Based
 Day versus night shift
 1-week on, 1-week off versus 5-day work week
 Supported by mid-levels (or not)

 Productivity-Based Model – wRVU
 Issue with compensation per wRVU benchmark data
 Need to support any such model with coding reviews
before and after model is established
 Ensure that total compensation after including varying
components of compensation does not fall outside FMV

wRVU Survey Data, Psychiatry 2015
Description
25th
Percentile Median Mean
75th
Percentile
90th
Percentile
2015 Overall 3,065 3,987 4,260 5,226 6,583
2015 Inpatient 3,658 4,840 4,992 5,841 6,999
2015 Child 2,759 3,336 3,766 4,701 6,058
Compensation per wRVU Survey Data, Psychiatry
Description
25th
75th
Percentile
90th
Percentile
2015 Overall $50.41 $63.19 $66.82 $75.10 $102.63
2015 Inpatient $59.79 $50.01 $49.11 $47.38 $44.36
2015 Child $58.38 $69.04 $72.70 $82.81 $111.22
National Compensation Survey Data, Psychiatry 2015
Description
25th
75th
Percentile
90th
Percentile
2015 Overall $99 $118 $123 $140 $167
2015 Inpatient $105 $121 $122 $138 $155
2015 Child $98 $117 $125 $141 $174

Introduction of Case Study
Carolinas Healthcare System

 More than 7,600 beds
 Accounts for approximately 12 million patients
 More than 900 locations
 Teaching hospital for University of North Carolina-
Chapel Hill School of Medicine
 Long history of operations in the Carolinas
Carolinas HealthCare System (CHS)

 More than 2,500 employed physicians system-wide
 Nearly 500 primary care
 Large specialty groups (Internal Medicine/Family
Medicine, Hospitalists, OB/GYN, Pediatrics)
 Over 1 million unique patients and $1 billion in net
revenues per year
CHS Medical Group (CHSMG)

Variability in Compensation
Three distinct models with 100s of different
variations

Variability in Compensation
 Limited incentive for quality, service, care
management/cost control
 Complicated decision-making:
 Benefit funding
 Manpower planning
 Overhead responsibility
 Ancillary revenue (infusion, lab, imaging)
 Use and role of Advanced Care Providers (ACPs)

Journey to Accountable Care

Models Within Comp Plan
Clinical
BaseSalary
Individual
wRVU
Production
Incentive
Percentage of Base - Performance Incentive
Group
wRVU
Production
Incentive
Fixed
Percentage
Production
Incentive
Excess Shift
Pay
No
Production
Incentive
wRVU Models:
Medical Administration, Education and Research, and Additional Professional
Services
System Incentive
Shift/Salary
Models:
Shift + wRVU
Models:
Production
Incentive

What’s New?
Reduced Variation in
Core Clinical
Compensation Models
• wRVUs are the
primary component for
measuring productivity;
some specialties will
be on shift-based or
salary models
• Consistent rates used
by specialty to ensure
fairness across
CHSMG
Consistent
Performance Incentive
• Specified percentage
of clinical
compensation
available as
performance incentive
• Weighted between
quality and patient
experience
(alternatives permitted
if metrics are not
available)
• Metrics intended to
reflect System and
Care Division priorities
for the benefit of our
patients
Physician Oversight
and Leadership of Plan
• Formation of Physician
Compensation
Committee made up of
physician leaders
• Steering Committee
made up of subject
matter experts
• Flexibility to modify
plan to maintain
appropriate care
delivery incentives and
match organizational
priorities

Timeline
2014
• Planning begins; need to change recognized
• Hired external firm to assist with design work, including gathering feedback from
physician leaders and developing compensation philosophy
2015
• Leadership changes within Medical Group; announcement of CEO retirement
• Comp philosophy and unified design completed; no implementation plan
• From Mid 2015 to Mid 2016  Physicians are in the DARK
2016
• New CEO  New mission and strategy tied to Affordability | Value | Growth
• Hired two firms to provide implementation support and FMV analysis, and a third
for additional design
2017
• Implementation in two phases
• +91% signature rate

Legal/Contractual and Implementation
Issues

 Fair market value and Stark Law compliance
 Third-party opinion
 Reliance on published national surveys
 Team-based incentive models
 Pay equity
 Coding/compliance
 Contractual matters
 Form versus customization
 Contract versus policy versus trust
 Governance through compensation committee
Legal and Contractual Issues

 Importance of leadership, especially physician leaders
 Communication challenges
 Carrots and sticks
 Prepare to be surprised
 Real-time reporting capabilities
Implementation Issues

Summary
Compensation Redesign
 May be triggered by various factors
 Requires buy-in from physicians and corporate
leadership for success
 Actual execution enabled by contracting team and
business group – critical members of team
 Support of consulting resources, experts in the field
critical to success
 Checks and balances post redesign ensures continued
success

Feels Like the Odyssey?

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