Quality Still Accounts for Minor Slice of Physician Pay

July 10, 2014

Reward quality instead of quantity — that's the new focus in physician compensation that healthcare industry experts call a paradigm shift.

Judging by survey data released last week by the Medical Group Management Association (MGMA), the paradigm hasn't shifted very much. Group practices on average based roughly 6% of total compensation on quality measures for both primary care physicians (5.96%) and specialists (5.7%) in 2013. Some common examples of quality measures are the percentage of patients with hypertension who have their blood pressure under control, and the percentage of diabetic patients who receive an annual eye exam.

Patient satisfaction scores amounted to another 1.9% of compensation for primary care physicians and 2.3% for specialists last year.

"Quality measures continue to be a small yet increasing percentage of total compensation for physicians," the MGMA said in a news release. However, the change from 2012 to 2013 is hard to discern. The MGMA reported median figures for quality and patient-satisfaction pay in 2012 and averages in 2013. Furthermore, the 2013 data for primary care physicians excludes practitioners in accountable care organizations and patient-centered medical homes, an exception not in effect the year before.

Paying for performance on quality measures as opposed to volume of services is supposed to motivate physicians to up their clinical game and reduce healthcare costs in the process. But is making quality of care a 6% slice of the dollar pie enough to change how physicians practice?

No, said Uwe Reinhardt, PhD, a professor of healthcare economics at Princeton University. To get physicians' attention, he said, the quality slice needs to be at least 20%.

"The weight you give quality in compensation is like giving each part of an exam a certain weight," Dr. Reinhardt told Medscape Medical News. "Six percent is a throwaway question."

One possible reason why the percentage is so low, he said, is that medical groups "don't believe their own quality metrics." Another possible reason is that group practices are only paying lip service to quality as they chase after higher revenue. "I find this more of a human reaction, and I wouldn't blame providers so much," said Dr. Reinhardt. "They struggle to meet their payrolls."

"It's a Start"

Other experts view 6% of compensation as a viable incentive for physicians to bear down on quality metrics.

"Is it enough? It really is. It's a start," said Max Reiboldt, the president and chief executive officer of the Coker Group, a healthcare advisory firm in Alpharetta, Georgia. "It's not an insignificant amount of money."

To economist Paul Ginsburg, PhD, 6% "is probably enough to make it credible" as a carrot.

"Physicians are a competitive enough group of people that even if there is not a lot of money [at stake], they do not want to come out on the low end of quality," said Dr. Ginsburg, the Norman Topping Chair in Medicine and Public Policy at the University of Southern California, in Los Angeles, in an interview with Medscape Medical News.

An article published last December in the journal Healthcare Financial Management maintained that at least $10,000 in income must be at stake for physicians to change their behavior. The quality-pay figures from the MGMA pass this particular test. Median compensation in 2013 was $232,989 for primary care physicians and $404,233 for specialists, according to the association. Six percent of those amounts comes to roughly $14,000 and $24,000, respectively.

Still a Fee-For-Service World

In deciding how much quality of care should count toward physician compensation, independent and hospital-owned group practices are merely responding to how third-party payers such as Medicare and private insurers dole out money, noted Max Reiboldt. He should know. As one of its roles, his firm advises hospitals and independent group practices on how to pay physicians.

"We set up plans to mirror what the reimbursement structure [on the payer level] is," Reiboldt told Medscape Medical News. "It's still largely fee-for-service, roughly 95%." He predicted that group practices will base more of physician compensation on quality metrics — and hit the 20% mark — as payers get serious about paying for quality.

In the private insurance market, the paradigm shift ultimately depends on what employers want, Dr. Reinhardt said.

"The real problem is with the people who buy health insurance," he said. "Why don't they insist on insurance contracts that give quality a bigger weight?"

More information on the MGMA's compensation survey is available on the group's Web site.

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