Slight Pay Increases for Doctors As Contracting System Evolves

Provider groups put money into systems that heighten the focus on measuring performance

Frank Diamond
Managing Editor

Change isn’t easy and it isn’t cheap. Just ask physicians. Pay for specialists and, to a lesser degree, primary care physicians (PCPs) rose only a bit in 2012, according to a study by the American Medical Group Association.

John Cuddeback, MD, PhD, the AMGA’s chief medical informatics officer, says that the slowdown reflects the effort by many groups to switch from a payment system based on productivity to one based on performance. More than 130,000 physicians practice in AMGA member organizations, serving about 120 million patients — approximately 1 in 3 Americans.

John Cuddeback, MD, PhD

Plans will need to find new ways of working with providers to create payment models that focus on quality, says John Cuddeback, MD, PhD, chief medical informatics officer at the American Medical Group Association.

Greater efficiencies

“Our groups have been facing significant financial challenges over the past few years because they’ve been investing” in infrastructure and technology, says Cuddeback. These “take time and money away from the core business — providing care — but will hopefully lead to greater efficiencies and higher quality.”

In addition, an emphasis on team care might also be affecting physician pay. “A number of people who are part of that care team are not doing billable services in most insurance arrangements,” says Cuddeback. “They’re doing things like care coordination that have a tremendous benefit for the patient and in the long term are going to have benefits in terms of overall costs of care for the population.”

Pat Courneya, MD, the health plan medical director of HealthPartners, a health plan and care delivery system in Minnesota, says that doctors doing nonclinician work might account for at least some of the infamous physician shortage, which he prefers to call maldistribution. “Part of the reason there’s a shortage is because physicians are doing a lot of things that physicians don’t need to do,” says Courneya. “That includes some of the administrative stuff that we’ve got in place that simply doesn’t need to be on their plates.”

Pat Courneya, MD

Money isn’t the only thing that motivates physicians, says Pat Courneya, MD, the health plan medical director at HealthPartners. Doctors are idealistic and want to do good.

Courneya predicts that insurers will play a big role in any shift. “It will require a much more deeply engaged collaboration.”

But haven’t we been here before (/archives/2007/12/how-doctors-are-paid-now-and-why-it-has-change)? This time talk will yield results, Courneya predicts. “There’s a much more transparent conversation about the implications of cost. I think that when you look at the share of the overall compensation packages for employed individuals in this country that goes to health care, and the recognition by employees that the lion’s share of their taxes is also going to health care, it raises the profile of that conversation in ways that hasn’t been true before.”

Courneya declines to go so far as to say that compensation should be based entirely on performance. “Anything that complete is fraught with potential unintended consequences. It will be a blend of how do we measure the clinical and other quality performance measures, and how do we measure the productivity of provider teams and organizations.”

Paul Ginsburg, PhD, president of the Center for Studying Health System Change (since this article was written, the center has been absorbed into Mathematica Policy Research), has followed discussions about tying physician pay to performance for decades. Is it really happening this time?

Big change

“I think it has to,” says Ginsburg, who sees a definite shift. “It used to be just productivity, and now there are other elements as well.”

Ginsburg cites the way hospitals have acquired doctor practices in recent years. They don’t want to make the mistakes they made in the 1990s where they just paid physicians a salary and watched productivity nosedive.

“If physician organizations and hospitals that employ physicians are going to be paid on the basis of coordinated care and value, how compatible is that going to be for their still pretty heavily productivity-oriented systems?” Ginsburg asks. “I think even for the ones that have brought in other elements, such as quality, the core is still productivity.”

Physician compensation slows as culture evolves

That 61% of specialists saw an increase in compensation last year does not indicate that those doctors are doing well. “The overall weighted average increase from the 2012 survey to the 2013 survey was approximately 1.6%,” according to the 2013 Medical Group Compensation and Financial Survey by the American Medical Group Association (AMGA). Not exactly robust in light of recent history: Specialist pay rose 2.8% in the 2012 survey, 2.4% in 2011, and 3.5% in 2010.

Primary care physicians did better; their pay increased by 2.8%, reflecting growing demand for their services but still somewhat lower than in the past.

The lesser pay increases reflect an evolution from volume- to value-based practice, according to the AMGA. Medical groups have been pouring money into IT and developing team approaches to care.

Specialist pay increases

Publication year of survey. Data collected in previous year.

Source: 2013 Medical Group Compensation and Financial Survey, American Medical Group Association, and Sullivan, Cotter, and Associates.

Yet there is the danger that measuring only productivity might not work in accountable care organizations (ACOs), on which both public and private payers are placing great emphasis. Cuddeback says, “It’s up to the leadership of the organization to say we’re willing to forgo some volume-based revenue in the short run to do the right thing for the patients and the system as a whole. We’ll try to participate in the savings through an ACO arrangement, but what we’re engaged in is changing the culture, changing the system. The best way of increasing income is to try to get into an arrangement where the group is able share in the savings at the population level. The ACO is the classic model for doing that. And many of our groups are taking the lead in their own market. They’re also taking the lead in doing commercial ACO arrangements. Care given on a risk-adjusted basis means understanding the expected costs of caring for this patient population over the next year.”

It also means global payments. Courneya can envision “a circumstance where physicians who are really very good at delivering high-quality care very efficiently would see substantial growth in income because they’re actually delivering [greater value].”

He cites the HealthPartners medical groups. About a decade ago, HealthPartners was in the 25th percentile for physician satisfaction in the Medical Group Management Association (MGMA) annual survey. “Steadily, our physician satisfaction has gone up to the 85th percentile. That’s a substantial improvement at a time when the staff-to-physician ratio has decreased.”

Joy in practice

HealthPartners physicians operate at 6% to 10% below average total costs in the insurer’s market. “That tells me that we can create an environment where physicians are satisfied with their practice life. They have joy in practice.”

Global payments are tricky, says Cuddeback. “Those arrangements are just beginning to evolve. They will come in as overall income to the practice, but will come in at the end of the year as an adjustment based on actual experience. It won’t come in quite the same way as most revenue traditionally has.”

Doctors need assurances, says Ginsburg. “The key challenge in getting physicians to accept these other elements of performance measurement is confidence that the measurement is accurate, that the measurers are measuring what they’re attempting to monitor,” says Ginsburg. “Also there are issues about suitable risk adjustments. You know, my patients are sicker than everyone else’s patients. Organizations need to employ as many risk adjustments as possible to increase physician confidence in the other elements of performance measurement.”

Doctors motivated by more than money

The discussion of physician payment often turns on what truly motivates doctors (/archives/2013/10/carrot-or-stick-neither-says-study). Pat Courneya, MD, the health plan medical director of HealthPartners, says, “We have spent all sorts of time believing that physicians are motivated primarily by money. The theory was that by tweaking the way we pay for things we would get different behaviors and solve the problems.

“The result is that in many ways we have created an environment where physicians’ personal mission to serve patients has been translated into a transaction. The best practices recognize that physicians get into practice by and large because they have an idealistic view of what they would like to do with their lives and they want to serve patients well.”

In other words, physicians want to do well — and good. Courneya points out that insurers in the Minneapolis market have measured physicians at least in part on performance for nearly a generation.

Since the 1990s

“In my small clinical practice in the ’90s, we were recording performance on best practice for diabetes care, cardiovascular disease care, and patient satisfaction,” he says. “And they served as a portion of our payment model. That has been true across the community in Minneapolis for that much time. It is coming now to some specialty care areas as well.”

Game is changing

There is also a better understanding of the data today.

“When practices are able to demonstrate that it’s possible to do this well, and to do it in a circumstance where physician satisfaction actually increases, that means that the game is changing,” says Courneya. “One of the more important objectives that the public and press should have is seeking out examples of where providers are enjoying practice immensely, but are also able to deliver high quality and feel that they are fairly compensated, and where their patients are very satisfied with the results and the work that they do. That should be a central objective of those who participate in the public conversation on this issue.”

While doctors want greater compensation — who doesn’t? — they also want to be recognized for achieving good outcomes for their patients, says Paul Ginsburg, PhD, president of the Center for Studying Health System Change. “If they know that they are not as good as their peers, they’re going to try to improve even if there’s no compensation involved.”

Primary care physicians lead the way when it comes to acceptance of the new payment systems, Ginsburg says. “They’ve probably more bought into coordinated care. For them it’s not so much the particular visits they provide to patients but also how coordinated the services of others are and how well patients manage their chronic diseases. When their employer becomes at risk for these activities, such as under accountable care organizations, this increases the potential rewards for PCPs.”

The Affordable Care Act promises to expand coverage and therefore to theoretically increase practice revenue. “You have two things going on,” says Ginsburg. “You have changes in the way care is delivered, but you also have increasing demand of additional patients with insurance. And what services they need will be a factor. With covering more people, it could be that with some specialties there will be a large increase in demand for their services.

“I am concerned that so many physicians are becoming employed by hospitals,” Ginsburg adds. “What’s very uncertain is the potential for success in delivering care efficiently. The future is in physician organizations, whether they’re groups or IPAs or hospital-owned entities, but will hospitals be able to manage physician practices efficiently?”

Insurers’ role

And will health plans? Medical directors will need to question assumptions that they’ve historically relied on, says Courneya. “They are going to have to play a very active collaborative role and they’re going to have to be creative.”

He adds, “Society is asking for a situation where those physicians who do the best are also the ones who do the best, if you get what I’m saying.”

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