March 1, 2010

Judging by the interest in our physician compensation webinar, this is a hot topic. Considering that Medicare rate cuts are discussed annually, and that operating costs continue to increase, some private practices are left wondering how they?re going to survive. The net result is that physician incomes are declining and the market trends indicate that this will continue. Faced with increased operating losses, managers of hospital employed physician networks are struggling to align physician compensation with productivity. This very often puts the physicians and the administration at odds. The following points will help you craft a structured, on-point message and strategy to manage physician compensation issues.

Educate
Physicians understand data and respond to initiatives for change when they are integrally involved. Plan for periodic educational sessions about current issues and trends, and their impact on practice operations. This will insure that your physicians get the complete picture and not a distorted view. When all parties have common information it is easier to reach an understanding. The physicians may not like the changes, but at least they will understand the motivations.

Get Them Involved
There?s a direct correlation between feeling involved and satisfaction, so include physicians in a structured process. Form an advisory counsel or planning committee and discuss financial performance and operating results in detail. When they help develop solutions, they?re also developing a culture. This is crucial to recognizing change issues and formulating a mutual solution.

Broader Use of NPPs (Non-Physician Providers)
Nurse Practitioners and PAs increase practice revenue. You may have to pay a premium for their services, but ultimately it?s cheaper than adding another physician. NPs and PAs add flexibility and capacity to practices. Scope-of-practice and billing issues for NPPs will need to be addressed, but when you consider the positive, it?s worth the time.

Revise your contracts
When possible, amend existing contracts to provide the ability to revise the compensation structure, if drastic changes in reimbursement occur. Include similar language in new contracts. Doing so will alleviate some of the pressure associated with compensation-related discussions. A key tenet is to tie compensation to productivity.

Going Forward
As reimbursements decline, there very well could be a line of physicians at your door asking to be employed. As you consider employing these new physicians, verify you have a strategic need for them. Don?t employ just to employ. Make sure the practice fits within the strategic goals of the hospital, and perform a robust due diligence that determines debt level and includes an operations review. It is important to understand what you are getting involved in up front.

If you choose to employ, you must set appropriate expectations. Make sure compensation reflects the current reimbursement landscape and make sure that the physician knows they?re embarking on a venture of shared risk. Painting an accurate picture of the reality of today?s practice environment will help you have the tough conversations with your employed physicians.