BUSINESS CONSULT
THOMAS METHVIN
Manager, ECG Management Consultants
JOSHUA HALVERSON
Principal, ECG Management Consultants
Rethinking Cardiologist
Compensation:
Spectrum Health Cardiology
D
uring the past several years, the specialty of cardiology has experienced singular and unprecedented economic disruptions. Driven primarily
by reimbursement changes, cardiologist employment by
hospitals and health systems dramatically rose.
Most of these transactions resulted in arrangements
where work relative value units (WRVUs) are used to
determine physician compensation.
New World, New Thinking
Fast-forward to today—many organizations face
renewal of these employment contracts. As reimbursement shifts to reward value, cardiologists and hospital
executives have come to the conclusion that WRVUbased models exacerbate inherent flaws in the feefor-service (FFS) system, under which physicians are
rewarded for performing services but not for managing
care. These models also create disincentives to performing non-WRVU-generating activities that are beneficial
to patients and the organization.
A Different Kind of Model
Spectrum Health Medical Group (SHMG), a large integrated multispecialty physician organization in Western
Michigan, is exploring alternative ways to pay its physicians. SHMG is currently developing an enterprise-wide
compensation framework that is patient centered,
economically sustainable, and flexible enough to evolve
with the industry. Within the medical group, several
specialties have embraced new physician compensation
arrangements.
SHMG’s cardiology practice consists of more than
30 physicians spanning all the major subspecialties and
is closely aligned with the group’s surgical specialties
to offer comprehensive cardiovascular services to the
Western Michigan region. Until recently, the group compensated its physicians using a typical WRVU-driven
model.
Beginning in 2015, the group shifted its compensation approach to an innovative model wherein physicians are rewarded for performing a variety of activities
that are valuable to the organization, not just those that
can be measured in WRVUs. Under the new plan, each
cardiologist receives a base salary that is calibrated to
industry benchmark levels.
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CardioSource WorldNews
Physicians can earn up to an additional 15% based
on achievement of division, department, and organizational goals in areas such as clinical excellence, patient
satisfaction, program development, scholarly activity,
and patient access.
WRVU productivity incentives have not disappeared
completely. Instead, they have been reframed in a way
that rewards group-level productivity and decouples any
direct links between individual productivity and compensation. The group is segmented into subspecialty
pods (e.g., electrophysiology, invasive-interventional),
and each pod receives funding for achieving group
WRVUs that are above a predetermined threshold. Individual physicians are then paid based on their number
of half days worked and not their individual productivity.
This time-based distribution plays an important role in
mitigating some of the perverse incentives associated
with an FFS reimbursement system.
New Model, New Behavior
Darryl Elmouchi, MD, chief of cardiovascular medicine at Spectrum Health, has noticed material changes
in the behavior of the cardiologists under the new compensation plan, even in a relatively short period of time.
Previously, it was challenging to find sufficient coverage
for certain valuable but low-WRVU-generating activities.
“The issue wasn’t that physicians weren’t interested
in participating in these activities,” said Dr. Elmouchi.
Rather, “they faced real financial disincentives under the
old plan due to the extra time requirements and reduced
WRVU potential.”
One major concern shared by both physicians
and hospital leaders was the implications of the new
model on patient access and throughput. Early results
appear to indicate that the group has not experienced
a reduction in overall WRVU productivity. System
leaders believe that this and other improvements have
only been possible due to strong leadership and a group
culture that is performance-based, values transparency,
and encourages accountability.
Better, but Not Perfect
Despite the advantages of the new model, Dr. Elmouchi
recognizes that certain plan components will continue
to evolve. For example, he believes there will need to be
embedded incentives to foster team-based care delivery
models that utilize advanced practice providers (APPs)
more effectively. He also questions how much longer
the group WRVU incentives will need to be in place.
“Depending on the pace of environmental changes,
value-based components of the plan could eventually
supplant some or all of the remaining volume-based
components,” he said.
Overall, he says cardiologists have readily embraced
the new model and that the group is better prepared to
meet the evolving needs of patients, payors, and their
community.
Could This Model Work for You?
The short answer is “it depends.” The ability of a group
to successfully adopt value-based compensation models
is dependent upon a host of internal and external factors, including but not limited to:
• The presence of a consistent high-performance
group culture that encourages collegiality and accountability.
• The ability of current systems infrastructure to
provide timely, accurate, and reliable reports on nonWRVU performance measures.
• The willingness of system leadership and local
payors to enter into alternative risk-based reimbursement models.
Groups with wide variations in performance often find
it difficult to implement alternative compensation methodologies without disproportionately impacting certain
segments of their practice. When variation does exist,
transitions away from WRVU-based plans are often
incremental in nature so as to prevent large swings in
compensation. Furthermore, there are fair market value
(FMV) and other regulatory constraints that necessitate
the close involvement of legal counsel. Regardless of
whether a group is currently ready to make the switch,
there is still merit to proactively exploring what it would
take (culturally, operationally, and financially) to execute
a value-based strategy. ■
Joshua Halverson is a Principal, and Thomas Methvin
is a Manager, at ECG Management Consultants. For more
information, contact Thomas at [email protected] or
Joshua at [email protected].
August 2015