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As practices review the new Stark II rules, it is also a good time to review the basics of compensation plans, especially when it comes to physician bonuses and incentives. Here are some tips from Kent J. Moore, a reimbursement expert with the American Academy of Family Physicians in Leawood, KS, on the basics of a properly designed physician pay plan.
What’s right for you? Realize first that there is no universally accepted formula for incentives and physician compensation. However, several factors will determine which kinds of incentives are better suited for certain practices. For instance:
• Market trends. The amount of managed care penetration within a given market has a major influence on which incentives to use. Under fee for service, for instance, traditional incentive systems rewarded productivity and little else. The more patients doctors saw and the more services they performed, the more money they made.
"Managed care has changed all that," Moore observes. "Physicians still need to be productive, but they also need to pay close attention to issues such as utilization, efficiency, quality outcomes, and patient satisfaction." As managed care penetration grows, these incentives become more crucial considerations in deciding what kind of behavior and results to reward and encourage.
• Group characteristics. Incentive plans will also vary depending on the kind of organization involved. For example, a small group practice is unlikely to have the same incentives as a large multispecialty group practice. Even among similar types of practices, incentives can vary according to the characteristics of that group or organization.
As such, incentive systems should be tailored to the personality of the group and its individual physicians. For example, is your group a "risk taker," or is it "risk-averse?" "If you are the former, a substantial incentive system may be more effective for you," Moore says.
• Physician characteristics. The career stages of specific physicians can also play a major role in deciding which incentives they find most attractive. Thus, you may want to consider offering slightly different incentives according to whether a doctor is younger and new to the practice, at the mid-stage of his or her career, or nearing the end of it.
Remember that physicians are not a homogenous group. They have different motivations, different specialties, different security needs. An effective incentive and bonus system takes these differences into consideration.
• Ethical limits. The traditional ethical obligation of physicians includes a fiduciary responsibility to act in their patients’ best interests. Unfortunately, some incentives may compromise this fiduciary responsibility, says Moore.
For example, an incentive plan that encourages physicians to consider costs when making individual treatment decisions may not appear to be in the patients’ best interests. This raises the question of whether you can truly divorce financial and treatment decisions in a system that integrates finance and delivery. Regardless, the fiduciary duty to the patient should always come first.
• Practical limits. Beyond the legal and ethical issues, there are also practical limitations on what you can do in the way of incentives and bonuses. For example, the growing use of quality as a basis for incentives raises questions about the ability to identify consistent, objective measures of quality. Some quality measures are really process measures; they measure what or how care is provided, not the quality of the care itself.