Production, Cooperation Goals Compete in Neurology Pay Plans

Production, Cooperation Goals Compete in Neurology Pay Plans

Compensation plans in a number of neurology practices are in flux as some groups seek to foster internal cooperation and reward good patient relations, yet retain strong production track records.

As in cardiology (PCR, 3/29/00, p. 1), neurology groups that PCR interviewed are using both equal shares and production systems, and even hybrids between the two (see box, p. 5). Two groups described below are in the process of revising their RVU-based production systems. We also interviewed a fairly small private practice that has had an excellent experience with gross charges to measure productivity, and a medical school group with salaries set largely by its department chair.

MGMA pegs the national median compensation of neurologists at $161,000, or about 14% higher than for internists (see chart this page). This relatively low pay level for non-primary specialists is explained by the lack of many high-dollar procedures to bill for, several neurology practice managers say.

RVU Pay Factors Step Up

Neurology Center, based in Silver Spring, Md., with six clinics and 17 physicians in the Washington, D.C. metro area, will implement on July 1, 2000, an RVU-based production system with two pay factors, one for “base” production that defrays fixed or overhead costs, the other — $7 higher — to encourage higher producers.

CEO Sally Seller gives a numerical example to explain the new system.

* Assume the three-month rolling average of group-wide RVU production is 6,000. A three-month average is used to iron out sharp monthly changes due to vacations and meetings.

* Assume there were 20 physicians, for average monthly RVU production per physician of 300.

* Multiply the 300 RVUs by 60% to get the RVU-production (180 RVUs) needed to pay each physician’s share of the group’s overhead. The 60% figure is chosen because 55% to 60% of the group’s expenses are overhead.

* Pay each of the 12 shareholder physicians the base RVU pay rate times the 180 RVUs. This is an equal share process.

* Assume that Dr. A has a three-month average of 200 RVUs, and that Dr. B has 400 RVUs.

* Dr. A has only 20 RVUs above the base level. Pay those at $7 per RVU above the base RVU rate.

* Dr. B has 220 RVUs to be paid at the higher passthrough rate.

The existing pay system, in place for five years, is similar, except the pool from which the RVU pay rates were calculated has been fixed, causing the pay rates to fall as group RVU production rises, Seiler notes. The purpose has been to finance internally the group’s expansion. The new RVU base rate will be fixed for a year, based on the group’s budget. Seiler anticipates ready acceptance of the new system because her financial models show that actual pay levels for nearly all the physicians will remain largely the same.

The group uses RVUs so that there is no issue of what payer backs a patient, be it Medicare, managed care, or a traditional indemnity carrier. The group has developed some of its own RVU factors where HCFA has none, for example, for legal reviews. It also has changed a few HCFA RVU values.

Group to Change RVUs-Less-Costs Plan

A 25-physician group that declines further identification because it is just beginning to consider changes to its 10-year-old pay plan — it appointed a compensation committee the last week of May — now pays for professional neurology services based entirely on RVU production minus costs allocated to each physician. Ancillaries, such as the technical component of electroneurodiagnostic testing, are divided largely by equal shares, but there are some internal referral fees for non-Medicare/Medicaid patients.

The group’s median pay is about the 75th percentile in MGMA’s national data on neurologists’ compensation ($197,000).

The group’s administrator says this intense focus on production no longer reflects the group’s values. Patient satisfaction — and maybe staff satisfaction — will be pay criteria under the forthcoming system. There will be a pool to reward serving on the group’s executive committee, as well as for hospital department chair positions, speaking engagements and advising outside organizations like multiple sclerosis groups. Ancillary referral fees will be dropped.

However, production and cost control will retain a weight of at least half in the new system, the administrator notes.

Norma Niemeier, office manager of five-physician Northland Neurological Association in Liberty, Mo., says the group tallies gross charges for each physician at the end of each month. From that, it subtracts costs chargeable to individual physicians, such as continuing medical education and major equipment. Then, it divides that net figure by the whole group’s gross charges to get each physician’s share of the group’s profit.

Northland has been using this system for a number of years, and its physicians are very pleased with it, says Niemeier. Pay last year ranged from $150,000 to $183,000.

At the University of Miami Medical Center, neurologists are paid an “expected salary” set by the department chair after examining each individual’s clinical production and academic and administrative work, as well as the department’s and medical school’s finances, says business director Sylvia Powell.

There also are potential bonuses, aimed mainly at non-financial issues such as quality measures. However, because of very tight managed care payments, bonuses have only limited funding now, Powell says.

Contact Seiler at (301) 565-6765 or sas@neurologycenter.com; Niemeier at (816) 792-2600; or Powell at (305) 243-7520 or spowell@med.miami.edu.

Compensation and Production Indicators

For Neurologists

25th

Mean %ile Median

Compensation

Overall $176 $136 $161

1-2 years in specialty $136 $120 $134

Single specialty $191 $148 $175

Multispecialty $171 $136 $159

No capitation $197 $146 $170

10% or less capitation $167 $130 $157

11%-50% capitation $169 $130 $158

51% or more capitation $168 $156 $165

Eastern $160 $129 $155

Midwest $188 $140 $168

Southern $193 $144 $171

Western $158 $131 $156

Gross Charges

Overall $509 $342 $475

Single specialty $554 $446 $559

Mutlispecialty $497 $335 $439

No capitation $593 $437 $559

10% or less capitation $416 $306 $377

11%to 50% capitation $488 $302 $463

Compensation to Gross Charges Ratio

Overall .389 .303 .375

Single specialty .373 .281 .342

Multispecialty .393 .312 .382

No capitation .364 .281 .333

10% or less capitation .446 .373 .438

11% to 50% capitation .387 .312 .375

Production Indicators, Per FTE Physician

Ambulatory encounters 2,291 1,531 2,224

Ambulatory encounters: [*] [*] 1,537

hosp. owned

Ambulatory encounters: [*] [*] 2,292

non-hosp, owned

Ambulatory encounters: [*] [*] 2,412

single specialty

Ambulatory encounters: [*] [*] 2,195

multispecialty

Work RVUs[**] 4,168 2,909 3,983

RVUs: hosp. owned [*] [*] 3,288

RVUs: non-hosp, owned [*] [*] 4,904

Compensation per RVU $42.45 $33.98 $39.67

Comp. per RVU: RVUs less [*] [*] $46.40

than median

Comp. per RVU: RVUs [*] [*] $35.55

more than median

75th 90th

%ile %ile

Compensation

Overall $197 $258

1-2 years in specialty $163 $174

Single specialty $222 $288

Multispecialty $191 $239

No capitation $226 $303

10% or less capitation $193 $255

11%-50% capitation $200 $255

51% or more capitation $178 $210

Eastern $177 $205

Midwest $213 $288

Southern $225 $283

Western $174 $206

Gross Charges

Overall $603 $763

Single specialty $693 $747

Mutlispecialty $570 $816

No capitation $703 $844

10% or less capitation $485 $603

11%to 50% capitation $570 $669

Compensation to Gross Charges Ratio

Overall .461 .56

Single specialty .432 .612

Multispecialty .465 .554

No capitation .415 .503

10% or less capitation .499 .614

11% to 50% capitation .456 .56

Production Indicators, Per FTE Physician

Ambulatory encounters 2,739 3,415

Ambulatory encounters: [*] [*]

hosp. owned

Ambulatory encounters: [*] [*]

non-hosp, owned

Ambulatory encounters: [*] [*]

single specialty

Ambulatory encounters: [*] [*]

multispecialty

Work RVUs[**] 5,432 6,245

RVUs: hosp. owned [*] [*]

RVUs: non-hosp, owned [*] [*]

Compensation per RVU $48.00 $59.09

Comp. per RVU: RVUs less [*] [*]

than median

Comp. per RVU: RVUs [*] [*]

more than median

SOURCE: MGMA, Physician Compensation and Production Survey: 1999 Report

Based on 1998 Data. (888) 608-5601, ext. 895. Compensation and gross charges

are rounded off to nearest thousand. [*] Not in published report.

[**] Nearly all data from multispecialty groups. Full sample for compensation

data above is 350 providers in 118 practices; about three-quarters of the

providers are multispecialty.

RELATED ARTICLE: Two Groups ‘Tweak’ Equal Shares

Single specialty neurology groups in New Jersey and Georgia have modified the equal shares physician payment method to fit their own cultures and needs.

Neurology Group of Bergen County in Ridgewood, N.J., with 11 physicians, pays its seven full partners by equal shares for a set number of patient care hours in the office and hospital and on call duty, says administrator Judith Whitmore. That number, based on a work day from 8 a.m. until 6 p.m. when all the partners must be available for patients in some settings, declines with seniority, as vacations increase and call duty declines. For that effort, the group pays an equal share that last year was “a little higher than” the median national figure of $161,000 for neurologists reported in MGMA’s Physician Compensation and Production Survey: 1999 Report Based on 1998 Data, she says.

The modification of equal shares is that any full partner may work extra hours beyond the base for which the equal share is paid. They can work evenings, during their days off, or during vacation time, and be paid at rates the group has established. Several of the partners do this; one in particular supplements his income dramatically in this way.

The equal share income figure is calculated by taking all the group’s revenues, subtracting all the expenses including paying non-partner physicians as well as the partners for extra time, and dividing the result evenly

This group requires five years for new physicians to become partners, two as an employee and three on the “partner track.”

At six-physician Peachtree Neurological Clinic in Atlanta, every physician’s productivity in work RVUs is tallied every three months. But, if a physician’s RVUs are within 10% above or below the average for the group that quarter, equal share credit is awarded for productivity, says administrator Jo McCoy Only one physician missed this 10% “window” –just one time — in the four years under the system.

In her 23 years with this group, McCoy recalls, it has had several pay systems. It was on a completely equal shares system, which seemed to reward lower producers not to work. Then the group was on straight dollar productivity, with the result that doctors were angling against one another to grab expensive electromyogram (EMG) and nerve conduction study work. Neurology has relatively few high-dollar procedures besides EMGs, McCoy explains. Interpreting an EMG and nerve study can earn $700-$800 in 15 minutes, while an intake on a new patient earns about $195 in a half hour.

The RVU system, based on RVU values the group developed for its own use, allows group members not to focus on collections. One member in particular works a lot at a multiple sclerosis center which does not produce high billings but has opened important marketing avenues for the whole practice. “This system has worked for us,” says McCoy While some members have problems with some specific internal RVU values, the system “has caused us the least distress” of any pay system the group has had, she says.

This near-equal shares system for figuring productivity does not mean equal paychecks. Expenses chargeable to individual physicians are subtracted from each one’s production (RVUs converted to dollar values). Such expenses include continuing medical education and chargeoffs from each physician’s patients. Then expenses from the group’s two clinics, one with four physicians and one with two, are credited to the physicians who work in each of the clinics, and then subtracted from their production.

Members may set their regular paychecks high or low, resulting in low or high bonuses, respectively

Contact Whitmore at (201) 444-0868; or McCoy at (404) 351-2270 or jormccoy@aol.com.

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