American College of Physicians: Internal Medicine — Doctors for Adults ®


Changing physician pay can boost autonomy

Experts say 'gainsharing' and other strategies get physicians more involved in how care is managed

From the December 1998 ACP-ASIM Observer, copyright 1998 by the American College of Physicians-American Society of Internal Medicine.

DENVER—Physicians need to fine-tune their compensation systems so they can more effectively work with health plans, hospitals and employers. According to speakers at the annual meeting of the Medical Group Management Association (MGMA), such a strategy will not only raise physician income, but it will also help put physicians back in the driver's seat when it comes to patient care.

During his keynote speech, Lawrence S. Lewin, chief executive officer of The Lewin Group in Fairfax, Va., said that "trench warfare" between physicians and health plans must end. Physicians have to acknowledge that economics and financial oversight play key roles in clinical decision-making, and they must begin to work with health plans and employers to control costs and improve quality.

He said that health care is currently being torn apart by the conflicting expectations of different parties. Consumers, for example, want access to medical services but don't want to pay for them, while payers mistrust the value that they're getting for their premium dollar. And doctors, Mr. Lewin added, continue to expect to make all the medical decisions but don't want to worry about what those decisions cost.

"The idea that 'I don't want anyone looking over my shoulder, I know how to practice medicine,' doesn't serve physicians well in a care management environment," he said. "There has to be a curiosity [on the part of physicians], if not an obsession to know, 'How am I doing and can I do even better?' "


One key way to focus physicians' attention on collaboration and needed improvements is to restructure their compensation plan, said Susan A. Cejka, president of Cejka & Company, a management consultant group based in St. Louis. She said that if the number of hospital bed days needs to be curbed or if HEDIS standards are not being met, linking those variables to physician pay will produce necessary changes in physician behavior.

In small groups, however, developing a compensation plan can be more difficult because all the physicians get involved in the process. In addition, explained Bruce A. Johnson, JD, principal of the Denver-based MGMA Health Care Consulting Group, different practices have different group cultures, which will affect the type of compensation plan they adopt. In small groups set up to allow doctors an individualistic approach to group practice, for example, while the individual physicians may share overhead expenses, it will be difficult for them to agree on aspects of a compensation plan.

For those groups that wish to operate more as a single economic unit, their compensation plan should combine a base salary with a risk pool that uses incentives. Physicians, however, should avoid implementing too many incentives. "The problem with incentives is that they work," said Steven M. Berkowitz, MD, a practice consultant based in Austin, Texas. He pointed out that groups that distribute income solely according to productivity, for instance, often find that their doctors devote no time to outreach efforts or community work because such efforts don't boost income. "The challenge is picking the right combination of incentives," he said.

The right incentives not only help increase physician income but can also get physicians more involved in how care is managed and costs are controlled. Dr. Berkowitz said that when planning incentive systems, physicians should consider working with hospitals and health plans in "gainsharing" arrangements. He likened health care gainsharing to a homeowner who sells a house without a broker: Both the seller and the buyer expect to share some of the savings because by working together, they avoid paying a broker's fee.

In health care, Dr. Berkowitz said, gainsharing arrangements recognize the efforts being made by various providers—doctors, health plans and hospitals—to cut costs and improve utilization, and then share the savings achieved among them all. One excellent application of a gainsharing arrangement would be between physician groups and HMOs to control pharmacy expenses, the fastest rising costs in health care. "Gainsharing is not a get-rich-quick scheme," Dr. Berkowitz said, "but it's the only way to integrate the interests of all the parties involved."

Capital/practice management

Speakers at the meeting also urged physicians to take more control in the health care industry by seeking capital to build their practices. Over the last several years, a growing number of physicians have turned to physician practice management companies (PPMCs) as a significant source of capitalization and for help in managing their practices. A number of industry experts, however, questioned the value that PPMCs can offer physicians.

Several speakers noted that it has been a very rough year on Wall Street for PPMCs, as well as for many of the practices PPMCs have acquired. Many PPMCs charge physicians high management fees, and many have not helped physicians boost their income.

"I have not seen evidence that PPMCs add real value to a medical practice in light of the fees they charge," said Jeffry A. Peters, president of Health Directions Inc., a consulting firm based in Harvey, Ill. Mr. Peters said that while physician practices need management services for administrative, credentialing and information-systems purposes, most doctors will not continue to tolerate the huge fees PPMCs demand. Instead, he urged practices to consider forming their own management services organizations (MSOs) with local hospitals or hospital networks to establish the administrative infrastructure they need while keeping more autonomy and income.

Kathleen M. Canevaro from The Pace Group Inc., a consulting firm with offices in Dallas and Gold River, Calif., said that another way to raise capital is through independent practice associations (IPAs). Ms. Canevaro explained that IPAs have evolved from strictly contracting entities to practice management companies. This new generation of IPAs allows physicians to "maintain a higher degree of independence" than is available with other management models, she said, "and still be able to practice in the environment of managed care."

Founded in 1926, MGMA now represents more than 8,000 organizations, including group practicies, PHOs, MSOs, integrated health delivery systems and most of the nation's academic health practices. Member groups represent nearly 200,000 physicians.

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