Physician Compensation Models Are Upside Down

Joe Cantlupe, for HealthLeaders Media , July 11, 2013

Samitt eventually moved on to Dean, where the CEO concedes that the health system uses tough negotiating tactics with physicians, in the move toward a quality-based world. Dean told its physicians, "If you continue to churn out volume, (we'll) reduce your compensation by 5% next year. Every year you just continue to churn out volume, you will continue to reduce compensation by 5%."

As outlined in a HealthLeaders Media case study this year, the Dean Clinic leadership believed they were not getting the kind of quality and experience they wanted from primary care physicians. At that time, the Dean primary care network was not unlike others across the country—somewhat fractured—with difficulty in recruiting physicians and keeping patients happy. Five years ago, Dean's PCPs were compensated using the industry standard relative value unit (RVU) formula, in which a standardized dollar amount is given for each encounter or procedure.

The Dean Clinic then "totally revamped "its primary care compensation plan, using quality incentives, and it has been successful, Samitt says. The revised compensation formula was meant to align physician performance with the value-based care goals.

It included 60% compensation that was still RVU-based; but other areas were based on age/gender-adjusted panel size and incentives for services, financial performance, clinical quality and growth. The formula eventually totaled 115%, which allowed the doctors to earn above market compensation.

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