Quality, Often Avoided as Pay Factor, Can Improve Marketing and Incomes

Quality, Often Avoided as Pay Factor, Can Improve Marketing and Incomes

Although many physicians and groups are leery of using quality measures as more than a small part of their pay package, such measures can strengthen medical practices through their long-term beneficial effects on reputation and marketing, and can make them better places to work.

“A lot of people are having ulcers over being paid on quality and service measures,” says Charles Peck, M.D., a consultant with Arthur Andersen in Atlanta. “They’re afraid of being differentiated. They would rather make less [money] on production than more [money on quality and service measures].”

There are several scenarios under which some physicians can earn more under quality pay systems than production-focused ones, Peck says. For instance, in a practice that gives strong emphasis to quality formulas, the physicians who score high on quality will earn more, while those who score low may end up leaving. If they are replaced by high-quality physicians, the practice’s referrals will strengthen over time.

Physicians who do well on quality measures demand higher pay, he adds. They say: “If I’m doing a better job, you better pay me more.”

Many practices pay 5% to 10% of total compensation based on quality measures (see examples in box p. 7). Quality measures are often found in large, health system-owned, not-for-profit or staff model practices. Such measures need groups of at least five physicians because of the costs of setting up and running them, Peck says. Excellent data are needed.

Quality measures can be part of a physician “report card’ that includes cost and utilization measures, he adds (see article p. 4 on cost-cutting incentives). He advises health system clients to consider pegging 25% to 30% of physician pay to such report cards. “The systems doing that are the ones doing well,” he says.

Some payers offer higher compensation to groups that do well on quality measures. In some regions, Aetna offers as much as a 30% premium to such groups. In Orlando, the Central Florida Health Care Coalition, a large multiemployer health plan that includes Walt Disney World, may raise its reimbursements and cut copays for the best groups, and cut reimbursements and raise copays for the worst groups. Executive director Becky Cherney says implementation will take several years.

Alliance BlueCross BlueShield in Missouri has a plan, the Physician Group Partners Program (PGPP), that pays groups more based mainly on service, preventive and satisfaction ratings. After three years, the plan, which now covers 55% of Alliance-contracted physicians in the St. Louis area, has helped to open lines of communication between the company and physicians, who have been open to the company’s message on cost control. PGPP physicians’ costs have risen about half as fast as other physicians’ costs, Alliance says. Whether the extra pay to groups ends up in physician paychecks, and whether it does so denominated as production pay or quality pay, are of course separate questions.

Quality pay measures come in four main categories (see charts, p. 6, for examples). First, quality, strictly speaking, often refers to preventive measures such as immunization rates for children and mammogram rates for women over 40 (or 50), in HEDIS, AMA or similar guidelines. Quality also includes outcome measures such as complications after surgery, as well as treatment measures such as C-sections and antibiotic prescriptions.

Second, service measures cover such items as office wait times, times to get a non-urgent appointment, ease in making referrals, consumer paperwork and location.

Third, satisfaction concerns patient and referring physician satisfaction and complaint rates.

Fourth, there are group “citizenship” measures like attendance at committee meetings.

Peck contrasts the stories of two Andersen client hospitals in the same city Both decided to develop primary care networks about the same time several years ago. One acquired the practices of about 300 PCPs, and placed them on productivity pay In response to large losses, the hospital cut pay Now, the physicians have a union, which is seen as a disastrous outcome.

The other hospital built eight clinics, and was “fanatical [about] customer loyalty,” he says. In its physician pay system, it emphasized patient satisfaction, and rated it both by group and by individual physician. The overall group’s satisfaction has risen every quarter since 1995, and some physicians have markedly improved. The group is performing well and supports the hospital’s other goals.

Such pay systems can be used regardless of a group’s percentage of capitation or other payer features, says Peck. “In the end, you’ve got this pot of money” that can be used for physician compensation and quality incentives. He calls quality-based pay “a kind of risk-sharing” of the money available.

Quality pay plans must be customized, he says. “One size report card does not fit all.”

For more information, contact Peck at (404) 221-4459 or charles.a.peck@us.arthurandersen.com.

RELATED ARTICLE: Mixing Production and Quality Incentives

UW Physicians Network, with nine clinics and 56 multispecialty primary care physicians in the Puget Sound area, directly ties productivity and quality incentives in its pay plan by requiring a physician to achieve a certain level of production before being eligible for the quality bonus.

The group is a self-sustaining not-for-profit affiliated with the University of Washington medical school, says Teresa Spellman, director of quality improvement. Its pay plan provides for straight salary for the first two years, using MGMA and Puget Sound area survey data. Its oldest clinic is only 2-1/2 years old, so the incentive plan has only just begun to operate. Production bonuses have been paid for one quarter, but quality bonuses will not be paid until the incentives have operated a full year. Here’s how the pay system works for physicians past their second year:

Step 1: Set pay before bonuses based on 80% of the second year salary. Thus, physicians initially see a sharp drop in their take-home pay

Step 2: Test whether the physician’s production pays for (a) overhead and (b) a contribution to the pay incentive fund. Overhead is calculated at 55% of collected professional fees. Thus, the 80%-of-prior-year figure is divided by .45 to equal the collected professional fees needed to cover overhead. Once overhead is cleared, another $10,000 is added for the incentive fund contribution. This is the threshold collections figure above which the physician is eligible for the production and quality bonuses.

Step 3: Award a production bonus of 45% of individual collections above the threshold.

Step 4: Award a quality bonus with two components. First, overall patient satisfaction is tested. To pass this part, the physician must pull 95% “satisfied” or “very satisfied” ratings on the question: “How would you rate your overall satisfaction with your visits to X Clinic with Dr. Y?” Second, a single quality-of-care measure, like immunizations for pediatricians, will be tested. If both quality measures are passed, the physician is paid $4,500. Spellman cautions that the quality bonus system is still being finalized.

Promedicus Health Group in Blasdell, N.Y., a 100-physician multispecialty group, also uses a half satisfaction/half quality of care test for 5% to 10% of pay, says Daniel Tran, its chief operating officer. The rest of compensation is based on capitation revenues the group receives and the financial performance of its physician teams.

Contact Spellman at (206) 520-5509 or tas@uwpn.org, and Tran at (716) 822-4545.

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