Current Physician Compensation Models Prevent Shift to Pay-for-Value

Although new physician compensation models promote pay-for-value, episodic bundles, and risk-adjusted bundles, physicians in non-solo practices are compensated using four methods: base salary, compensation based on personal productivity, compensation based on practice financial performance, and bonus based on factors other than personal productivity and practice financial performance. These methods don’t encourage physicians to move toward a pay-for-value model, according to the American Medical Association’s (AMA) 2012 Physician Practice Benchmark Survey.

Results indicate that 51.8% of physicians were compensated through a single payment method, 30.3% were compensated by two methods, and 17.9% by three or four, according to Carol Kane, senior economist at the AMA and lead author on the report. It made no difference if the physician owned the practice (or part of the practice) or was an employee. Solo practice physicians were excluded because their compensation is directly related to personal productivity and practice financial performance, regardless of what it is called.

These statistics highlight that “salaried” is not synonymous with “employed,” a distinction sometimes lost in the discussion of physician compensation and physician ownership or practice type, wrote Kane. Although the large majority (76.1%) of employed physicians received a salary, 44.0% of physicians with an ownership stake in their practice did as well. In turn, 54.2% of owners and 46.9% of employed physicians had compensation that included pay based on their personal productivity.

Calls for physician payment reform reflect the sentiment that doctors’ charges—and the incentives they reflect—are a major factor in the nation’s $2.7 trillion medical bill,” according to a recent article from The New York Times titled, “Patients’ Costs Skyrocket, Specialists’ Incomes Soar.”

According to the survey, payment type varied across physician practice type. Salary was reported more often by physicians in multi-specialty groups (58.8%), faculty practice plans (84.6%) and by direct employees of hospitals (79.4%) than by physicians in single specialty groups (54.1%). Pay based on personal productivity was more often reported by physicians in multi-specialty than single specialty groups (59.7% compared to 50.9%). Pay based on practice financial performance was reported less often (23.3% compared to 37.6%).

The data also showed that payment methods were overlapping between practice owners and employees. Although pay based on personal productivity was cited more often than other payment methods, salary was not uncommon for practice owners. Productivity based pay accounted for all or the largest share of compensation for 39.0% of single specialty group owners and 50.4% of multi-specialty group owners. Still, almost one-third of owners received all or the largest share of their compensation from salary.

Kane concluded “that it may be difficult to align practice level incentives that encourage judicious use of resources with physician level incentives that do not."