Category Archives: Physician Compensation

The Hospital Makeover—Part 2

Posted on by • Posted in Board, C-Suite, Financial Distress, Financial Instability, Financial Performance, Financial Reserves, Financial Stewardship, Financial Strength, Financial Viability, Financially Distressed, Health System, Hospital, Hospital Industry, Labor Spend Management, Leadership, Leadership Vision, Leadership Will, Operating Expense Reduction, Operating Expenses, Operating Income, Operating Margin, Operating Performance, Operating Revenue, Physician Compensation, Physician Employment, State of the Union, Talent Management • Leave a comment
https://www.kaufmanhall.com/insights/thoughts-ken-kaufman/hospital-makeover?utm_source=mkto&utm_campaign=ken-weekly-blog&utm_medium=em&utm_term=230706&mkt_tok=NjU0LUNOWS0yMjQAAAGMyohOOZcZs3aJnJhxoHk_Hk8EYNak25kOEXMHBJnN1UR7-zgWFnovwx7nW95hz47QWJel9dLywqwuLOz84xyF9t7AMAtzIJm_DDlYVLtq46Rk

America’s hospitals have a $104 billion problem.

That’s the amount you arrive at if you multiply the number of physicians employed by hospitals and health systems (approximately 341,200 as of January 2022, according to data from the Physicians Advocacy Institute and Avalere) by the median $306,362 subsidy—or loss—reported in our Q1 2023 Physician Flash Report.

Subsidizing physician employment has been around for a long time and such subsidies were historically justified as a loss leader for improved clinical services, the potential for increased market share, and the strengthening of traditionally profitable services.

But I am pretty sure the industry did not have $104 billion in losses in mind when the physician employment model first became a key strategic element in the hospital operating model. However, the upward reset in expenses brought on by the pandemic and post-pandemic inflation has made many downstream hospital services that historically operated at a profit now operate at breakeven or even at a loss. The loss leader physician employment model obviously no longer works when it mostly leads to more losses.

This model is clearly broken and in demand of a near-term fix. Perhaps the critical question then is how to begin? How to reconsider physician employment within the hospital operating plan?

Out of the box, rethink the physician productivity model. Our most recent Physician Flash Report data shows that for surgical specialties, there was a median $77 net patient revenue per provider wRVU. For the same specialties, there was a median $80 provider paid compensation per provider wRVU. In other words, before any other expenses are factored in, these specialties are losing $3 per wRVU on paid compensation alone. Getting providers to produce more wRVUs only makes the loss bigger.

It’s the classic business school 101 problem.

If a factory is losing $5 on every widget it produces, the answer is not to produce more widgets. Rather, expenses need to come down, whether that is through a readjustment of compensation, new compensation models that reward efficiency, or the more effective use of advanced practice providers.

Second, a number of hospital CEOs have suggested to me that the current employed physician model is quite past its prime. That model was built for a system of care that included generally higher revenues, more inpatient care, and a greater proportion of surgical vs. medical admissions. But overall, these trends were changing and then were accelerated by the Covid pandemic. Inpatient revenue has been flat to down. More clinical work continues to shift to the outpatient setting and, at least for the time being, medical admissions have been more prominent than before the pandemic.

Taking all this into account suggests that in many places the employed physician organizational and operating model is entirely out of balance. One would offer the calculated guess that there are too many coaches on the team and not enough players on the field. This administrative overhead was seemingly justified in a different loss leader environment but now it is a major contributor to that $104 billion industry-wide loss previously calculated.

Finally, perhaps the very idea of physician employment needs to be rethought.

My colleagues Matthew Bates and John Anderson have commented that the “owner” model is more appealing to physicians who remain independent then the “renter” model. The current employment model offers physicians stability of practice and income but appears to come at the cost of both a loss of enthusiasm and lost entrepreneurship. The massive losses currently experienced strongly suggest that new models are essential to reclaim physician interest and establish physician incentives that result in lower practice expenses, higher practice revenues, and steadily reduced overall subsidies.

Please see this blog as an extension of my last blog, “America’s Hospitals Need a Makeover.” It should be obvious that by analogy we are not talking about a coat of paint here or even new appliances in the kitchen.

The financial performance of America’s hospitals has exposed real structural flaws in the healthcare house. A makeover of this magnitude is going to require a few prerequisites:

  1. Don’t start designing the renovation unless you know specifically where profitability has changed within your service lines and by explicitly how much. Right now is the time to know how big the problem is, where those problems are located, and what is the total magnitude of the fix.
  2. The Board must be brought into the discussion of the nature of the physician employment problem and the depth of its proposed solutions. Physicians are not just “any employees.” They are often the engine that runs the hospital and must be afforded a level of communication that is equal to the size of the financial problem. All of this will demand the Board’s knowledge and participation as solutions to the physician employment dilemma are proposed, considered, and eventually acted upon.

The basic rule of home renovation applies here as well: the longer the fix to this problem is delayed the harder and more expensive the project becomes. The losses set out here certainly suggest that physician employment is a significant contributing factor to hospitals’ current financial problems overall. It would be an understatement to say that the time to get after all of this is right now.

Conditions are right for physicians to seize the moment in US healthcare but are they ready?

Posted on by • Posted in Healthcare Reform, Innovation, Innovative Care Models, Physician, Physician Acquisition, Physician Burnout, Physician Compensation, Private Equity, Value-Based Healthcare • Leave a comment
Conditions are right for physicians to seize the moment in US healthcare but are they ready?

Here’s where we are:

Physician income has not kept pace with inflation and administrative costs prompting 70% to leave private practice. Half are now employed by hospitals and another 20% by private equity-backed practice managers. Both trends began before the pandemic in response to tougher financial conditions for physicians across all specialties. While hospitals held their own at the sector level, physicians lost ground. Per CMS’ NHE analysis, from 2000 to 2021:

  • Spending in hospitals increased from 30.4% of total spending to 31.4%
  • Spending for prescription drugs was essentially unchanged from 8.95% to8.88%
  • Public health spending. increased slightly from 3.2% of total spending to 4.4%.
  • But spending for physician services shrank from 21.1% to 15.6%.

In tandem with the erosion of finances for medical practices, investments in medical practices by private equity grew. Per Pitchbook, there have been 874 practice acquisitions by PE/Venture backed sponsors in the last 12 years with 20 in the first half of this year alone. Most of these are small ($7.53 million/transaction) and most involve a tuck-in to an existing PE backed platform (i.e., Privia, Sheridan, et al). Rightfully, physicians point out that while hospitals and drug companies have protected their piece of the health care pie successfully for 20 years while physicians have lost ground.

Physicians are not happy and burnout is pervasive. The employment of physicians in hospital and private equity settings has not made life happier for physicians. Per Medscape’s most recent assessment, burnout increased to 53% in 2022–up from 47% in 2021 and 26% since 2018. More than one in five physicians (22%) reported experiencing depression—up from 15% since 2018. They’re anxious about the future and increasingly sensitive to compensation comparisons with professions that require less training and earn more. They’re suspicious of consultants, lawyers and bankers whose experience is limited but fees inexplicably high They’re incensed by executive compensation in hospitals, drug companies, and health insurer settings they deem overpaid and overhyped. And they resent execs in for-profit and private equity companies who achieve astronomical wealth via their stock-option packages earned on the backs of the physicians they control.

The realities are these:

Physicians lack a strong voice. The American Medical Association’s membership includes less than a third of active-practice physicians. It is increasingly under-fire for under-representing primary and preventive health providers in its government-authorized monopoly on coding, its lobbying efforts against scope of practice expansion for APNs and pharmacists, its opposition to medical training innovations that could significantly improve the readiness and effectiveness of the physician workforce and more. The AMA’s influence is strong on a shrinking number of issues and increasingly resonate out of touch on issues that resonate with voters and lawmakers (expanded scope of practice for nurses and pharmacists, price and outcome transparency, et al).

Physicians operate in a buyers’ market but behave like it’s a sellers’ market. Physicians are trained to think of themselves as the hub of a system in which what they say determines what everyone else does…including patients. They are conditioned in medical school, residency and practice to be self-centered and resist efforts via data, clinical practice redesign or even “value-based incentives” to change their behaviors. They despise the notions of price transparency, cost effectiveness and outcome-based comparisons to their peers while calling for more accountability from hospitals, insurers and drug companies. They discount notions of consumerism and self-care and believe report cards over-rate patient experiences since medical practice is uniquely complicated.

Most live in a buyers’ market mentality unwilling/unable to see the sellers’ market healthcare has become. Otherwise, price transparency would be prevalent, operating hours and support services more conducive to the needs of patients and digital investments to maintain connectivity significant…but most don’t.

My take:

The U.S. economy will be testy for the 12 months: bringing down inflation will require interest rate hikes. Unemployment will increase slightly, wage inflation will slow, and the 2024 election cycle will draw unwelcome attention to healthcare spending and its affordability as root causes of growing financial insecurity in American households. 

Given this backdrop, the profession of medicine faces a tipping point: become an integral part of the system’s solution or a vestige of its past. That solution should address medicine’s role in…

  • Addressing affordability for households and patients and the direct role it plays.
  • Integrating generative AI into more accurate diagnostics and more accessible, efficient treatment methods.
  • Embracing transparency about medical services pricing, costs, outcomes, business relationships and conflicts of interest.
  • Creating care plans around individualized social determinants of health and distinctions in populations.
  • Streamlining medical training toward competency-based lifelong learning, data-driven technology support, a team-based delivery and ‘whole person’ orientation to individuals.
  • Accepting full accountability for their effectiveness in reducing unnecessary costs and spending, increasing equitable access and engaging consumers in self-care.

How value-based and alternative payment models figure into this is anyone’s guess. Some physician organizations (AAPG, NAACO, et al) are all-in for expansion of these while others note their lackluster results to date. And physician calls for a replacement to RVU-based conversion-factor will grow louder as Congress revisits MACRA and how Medicare pays physicians.

These are important and require urgent attention, but they do not elevate the profession to its rightful place at the center of system transformation.

I hold the profession of medicine in high regard. I respect and trust my physicians—Ben, Ben and Blake are trusted friends in my personal journey to health. But their profession as a whole appears stuck in the past and unable to play a central role in the health system transformation. Until and unless new physician leaders with fresh thinking about the entire system step up, the profession’s role will continue to erode.

Playing the victim card and blame game against Medicare, hospitals, insurers, drug companies and everyone else they deem unworthy will not solve the health system’s problems.

I believe conditions are right for physicians to seize the moral high ground and lead the needed reset of the health system but most aren’t ready.

Senate Finance Hearing on Hospital Consolidation: Political Theatre or Something More?

Posted on by • Posted in Affordability, Antitrust, Cost Management, Cost Structure, Cost-Effective, Health System, Horizontal Consolidation, Horizontal Integration, Horizontal Merger, Horizontal Mergers, Hospital, Hospital Industry, Market Consolidation, Market Power, Market Trends, Mergers & Acquisitions, Monopoly, Monopoly Behavior, Physician Compensation, Public Opinion, Public Perception, Quality of Care, Vertical Consolidation, Vertical Integration, Vertical Merger, Vertical Mergers • Leave a comment
Senate Finance Hearing on Hospital Consolidation: Political Theatre or Something More?

Last Thursday, the Senate Finance Committee heard testimony from experts who offered damning testimony about hospital consolidation (excerpts below).  Committee Chair Ron Wyden (D-OR) gaveled the session to order with this commentary:

“I’d like to talk about health care costs and quality. Advocates for proposed mergers often say they will bring lower health costs due to increased efficiency. Time after time, it’s simply not proven to be the case. When hospitals merge, prices go up, not down. When insurers merge, premiums go up, not down. And quality of care is not any better with this higher cost. “

Ranking Member Mike Crapo (R-ID) offered a more conciliatory assessment in his opening statement: “In exploring and addressing these problems, we have the opportunity to build on our efforts to improve medication access and affordability by taking a broader look at the health care system through a similarly bipartisan, consensus-based lens…We need to examine the drivers of consolidation, as well as its effects on care quality and costs, both for patients and taxpayers. We also need to develop focused, bipartisan and bicameral solutions that reduce out-of-pocket spending while protecting access to lifesaving services.”

Congress’ concern about consolidation in healthcare is broad-based. Pharmacy benefits managers and health insurers face similar scrutiny. Drug price control referenda have passed in several states and a federal cap was included in the Inflation Reduction Act.

The reality is this: the entire U.S. health system is on trial in the court of public opinion for ‘careless disregard for affordability’. And hospitals are seen as part of the problem justifying consolidation as a defense mechanism.

What followed in this 3-hour hearing was testimony from 3 experts critical of hospital consolidation, a Colorado community hospital CEO who opined to competition with big hospital systems and a Peterson Foundation spokesperson who offered that data access and transparency are necessary to mitigate consolidation’s downside impact.

None of their testimony was surprising. Nor were questions from the 25 members of the committee. It’s a narrative that played out in House Energy and Commerce and Ways and Means Committee hearings last month. It’s likely to continue.

Often, Congressional Hearings on healthcare issues amount to little more than political theatre. In this one, four key themes emerged:

  1. Consolidation among hospitals has adversely impacted quality of care and affordability of healthcare. Prices have gone up without commensurate improvements in quality harming consumers.
  2. Larger organizations use horizontal and vertical integration to strengthen their positions relative to smaller competitors. Physician employment by hospitals is concerning. Rural and safety net hospitals are impaired most.
  3. Anti-trust efforts, price transparency mandates, data sharing and value-based programs have not been as effective as anticipated.
  4. Physicians are victims of consolidation and corporatization in U.S. healthcare. They’re paid less because others are paid more.

While committee members varied widely in the intensity of their animosity toward hospitals, a consensus emerged that the hospital status quo is not working for voters and consumers.

My take:

Consolidation is part of everyday life. Last Tuesday’s bombshell announcement of the merger of the PGA Tour and the Saudi Arabia’s Public Investment Fund caught the golfing world by surprise. Anti-trust issues and monopolistic behaviors are noticed by voters and lawmakers. Hospital consolidation is no exception festering suspicions among lawmakers and voters that the public’s good is ill-served. And studies showing that charity care among not-for-profit hospitals is lower than for-profit confuse and complicate.

As I listened to the hearing, I had questions…

  • Were all relevant perspectives presented?
  • Was the information provided by witnesses and cited in Committee member questioning accurate?
  • Will meaningful action result?

But having testified before Congressional Committees, I find myself dismissive of most hearings which seem heavy on political staging but light on meaningful insight. Many are little more than political theatre. Hospital consolidation seems different. There seems to be growing consensus that it’s harmful to some and costly to all.

Sadly, this hearing is the latest evidence that the good will built by hospital heroics in the pandemic is now forgotten. It’s clear hospital consolidation is an issue that faces strong and increased headwinds with evidence mounting—accurate or not– showing more harm than good.

Special Report: Physicians on the Brink or At the Starting Line?

Posted on by • Posted in America's Physician Groups (APG), American Medical Association (AMA), Caregiver Workforce, Center for Medicare and Medicaid Services (CMS), Consumerism, Health Policy, Medicaid, Medicare, Physician, Physician Burnout, Physician Compensation, Private Equity • Leave a comment
Special Report: Physicians on the Brink or At the Starting Line?

Tomorrow, America’s Physician Groups (APG) will kick-off its Annual Spring Conference “Going the Distance” in San Diego with breakout sessions focused on wide ranging operational issues and 3 general sessions that address restoring trust in the profession, lessons from the pandemic and Medicare Advantage.

Next Thursday, the American Medical Association (AMA) will kick off its 5-day House of Delegates session in Chicago with a plethora of resolutions and votes on the docket and committee reports on issues like the ethical impact of private equity on physicians in private equity owned practices, health insurer payment integrity and much more.

These meetings are coincident with the expected resolution of the debt-ceiling dispute in Congress which essentially leaves current Medicare and Medicaid payments to physicians and others in tact through 2025. So, for at least the time being, surprises in insurer payments to physicians are not anticipated.

Nonetheless, it’s a critical time for APG and AMA as their members face unparalleled market pressures:

  • Trust in the profession has eroded. Media attention to its bad actors has expanded.
  • Settings have changed: the majority now work as employees of large groups owned by hospitals or private equity sponsors.
  • Consumer (patient) expectations about physician quality, access and service are more exacting.
  • Technologies that improve precision in diagnostics and therapies and integration of social determinants in care planning have altered where, how and by whom care is delivered.
  • Affordability and lack of price transparency are fundamental concerns for U.S. consumers (and voters), employers and Congress. While drug PBMs, hospitals and health insurers are a focus of attention, physicians are not far behind.
  • Private equity and retail giants are creatine formidable competition in primary and specialty care.
  • Media coverage of “bad actors” engaged in fraudulent activity (i.e. unnecessary care, medications, et al) has increased.
  • Operating losses in hospitals remain significant limiting hospital investments in their employed medical practices.

Both organizations remain steadfast in the belief that the future for U.S. healthcare is physician centric:

  • For APG, it’s anchored in a core belief that changing payer incentives from fee-for-service to value is the essential means toward the system’s long-term sustainability and effectiveness. (APG represents 335 physician organizations)
  • For AMA, “true north” is the profession’s designated role as caregivers and stewards of the public’s health and wellbeing. (AMA’s membership includes 22% of the nation’s 1.34 million practicing physicians, medical students and residents).

But market conditions have taken their toll on physician psyche even as CMS has altered its value agenda.

Physicians are highly paid professionals. Per Sullivan Cotter and Kaufman Hall, their finances took a hit during the pandemic and their finances in 2022-2023 has been stymied by inflationary pressures. Thus, most worry about their income and they’re hyper-sensitive to critics of their compensation.

Fueling their frustration, virtually all believe insurance companies are reimbursement bullies, hospitals spend too much on executive salaries (aka suits) and administration and not enough on patient care and patients are increasingly difficult and unreasonable. Most think the profession hasn’t done enough to protect them and 65% say they’re burned out. That’s where APG and AMA find themselves relative to their members.

My take:

The backdrop for the APG and AMA meetings in the next 2 weeks could not be more daunting. Inflationary pressures dog the health economy as each advances an advocacy agenda suitable to their member’s needs.

But something is missing: a comprehensive, coherent, visionary view of the health system’s future in the next 10-20 years wherein physicians will play a key role.

That view should include…

  • How value and affordability are defined and actualized in policies and practice.
  • How the caregiver workforce is developed, composed and evaluated based on shifting demand.
  • How incentives should be set and funding sourced and rationalized across all settings and circumstances of service.
  • How consumerism can be operationalized.
  • How prices and costs in every sector (including physician services) can become readily accessible.
  • How a seamless system of health can be built.
  • How physician training and performance can be modernized to participate effectively in the system’s future.

The U.S. health system’s future is not a repeat of its past.  Recognizing this, physicians and the professional associations like APG and AMA that serve them have an obligation to define its future state NOW.

Some physicians are on the brink of despair; others are at the starting line ready to take on the challenge.

Which physician specialties are most targeted for corporate roll-ups?  

Posted on by • Posted in Health System, Hospital, Hospital Industry, Outpatient Care, Physician, Physician Aggregator, Physician Compensation, Physician Employment, Physician Independence, Physician Practice Management, Physician Practice Valuation, Physician Workforce, Private Equity • Leave a comment

https://mailchi.mp/6f4bb5a2183a/the-weekly-gist-march-24-2023?e=d1e747d2d8

In the last edition of the Weekly Gist, we illustrated how non-hospital physician employment spiked during the pandemic. Diving deeper into the same report from consulting firm Avalere Health and the nonprofit Physicians Advocacy Institute, the graphic above looks at the specialties that currently have the greatest number of physicians employed by hospitals and corporate entities (which include insurers, private equity, and non-provider umbrella organizations), and those that remain the most independent.


To date, there has been little overlap in the fields most heavily targeted for employment by hospitals and corporate entities. Hospitals have largely employed doctors critical for key service lines, like cancer and cardiology, as well as hospitalists and other doctors central to day-to-day hospital operations.

In contrast, corporate entities have made the greatest strides in specialties with lucrative outpatient procedural business, like nephrology (dialysis) and orthopedics (ambulatory surgery), as well as specialties like allergy-immunology, that can bring profitable pharmaceutical revenue.

Meanwhile, only a few specialties remain majority independent. Historically independent fields like psychiatry and oral surgery saw the number of independent practitioners fall over 25 percent during the pandemic.

While hospitals will remain the dominant physician employer in the near term, corporate employment is growing unabated, as payers and investors, unrestrained by fair market value requirements, can offer top dollar prices to practices. 

Fewer medical students pursuing emergency medicine

Posted on by • Posted in Emergency, Emergency Care, Emergency Room Staffing, Labor Spend Management, Medical School, Physician, Physician Aggregator, Physician Burnout, Physician Compensation, Private Equity, Profit Motive • Leave a comment

https://mailchi.mp/6f4bb5a2183a/the-weekly-gist-march-24-2023?e=d1e747d2d8

With recent residency match data showing a 26 percent drop in applications to emergency medicine training programs since 2021, this article in the Washington Post grapples with why the once sought-after profession is now struggling with recruitment. 

Some point to high rates of pandemic burnout and the unappealing nature of the work: emergency departments (EDs) are increasingly overcrowded, understaffed, and violent—turning ED docs into “the cops of medicine,” as one ED residency program leader put it. Others suggest that residents are simply following the money elsewhere, discouraged by reports of an impending oversupply of ED physicians in coming years.

The Gist: The days of the television drama ER, which inspired a generation of would-be doctors to pursue emergency medicine, are gone—most  medical students graduating today weren’t even born when the show first aired in 1994. The article fails to note the changes in EDs brought on by investor-backed staffing companies, which now staff anywhere from an estimated quarter to half of the nation’s EDs. 

They’re accused of cutting costs by hiring fewer ED docs, as well as funding more ED residency spots in an attempt to flood the market and drive down their future labor costs even further. In the wake of COVID, emergency physicians find themselves in EDs largely staffed by advanced practice providers.

While in the near-term hospitals will surely face challenges in staffing these critical roles, shortages may drive momentum to refine and expand technology- and team-based care models. 

Be Ready for the Reorganized Healthcare Landscape

Posted on by • Posted in Board, Business Model, CEO, Change, Change Management, Change Mindset, Leadership, Medicare Advantage, Mindset, Physician Compensation, Physician Employment, Physician Leadership, Physician Network, Physician Practice Acquisition, Physician Practice Management, Private Equity, Strategic Issue, Strategic Leadership, Strategy, Value Based Care Model, Value-Based Care Functions, Value-Based Contracting, Value-Based Healthcare • Leave a comment

Click to access Industry_Insights_1.25.23.pdf

Running a health system recently has proven to be a very hard job. Mounting losses in the face of higher operating expenses, softer than expected volumes, deferred capex, and strained C-suite succession planning are just a few of the immediate issues with which CEOs and boards must deal.


But frankly, none of those are the biggest strategic issue facing health systems. The biggest
strategic issue is the reorganization of the American healthcare landscape into an ambulatory care
business that emphasizes competing for covered lives at scale in lower cost and convenient settings
of care. This shift in business model has significant ramifications, if you own and operate acute care
hospitals.


Village MD and Optum are two of the organizations driving the business model shift. They are
owned by large publicly traded companies (Walgreens and UnitedHealth Group, respectively). Both
Optum and Village MD have had a string of announced major patient care acquisitions over the past
few years, none of which is in the acute care space.


The future of American healthcare will likely be dominated by large well-organized and well-run
multi-specialty physician groups with a very strong primary care component. These physician
service companies will be payer agnostic and focused on value-based care, though will still be
prepared to operate in markets where fee-for-service dominates. They will deliver highly
coordinated care in lower cost settings than hospital outpatient departments. And these companies
will be armed with tools and analytics that permit them to manage the care for populations of
patients, in order to deliver both better health outcomes and lower costs.


At the same time this is happening, we are experiencing steady growth in Medicare Advantage.
And along with it, a stream of primary care groups who operate purpose-built clinics to take full risk
on Medicare Advantage populations. These companies include ChenMed, Cano Health and Oak
Street, among others. These organizations use strong culture, training, and analytics to better
manage care, significantly reduce utilization, and produce better health outcomes and lower costs.


Public and private equity capital are pouring into the non-acute care sectors, fueling this growth. As
of the start of 2022, nearly three quarters of all physicians in the US were employed by either
corporate entities (such as private equity, insurance companies, and pharmacy companies), or
employed by health systems. And this employment trend has accelerated since the start of the
pandemic. The corporate entities, rather than health systems, are driving this increasing trend.
Corporate purchases of physician practices increased by 86% from 2019 to 2021.


What can health systems do? To succeed in the future, you must be the nexus of care for the
covered lives in your community. But that does not mean the health system must own all the
healthcare assets or employ all of the physicians. The health system can be the platform to convene these assets and services in the community. In some respects, it is similar to an Apple iPhone. They are the platform that convenes the apps. Some of those apps are developed and owned by Apple. But many more apps are developed by people outside of Apple, and the iPhone is simply the platform to provide access.


Creating this platform requires a change in mindset. And it requires capital. There are many opportunities for health systems to partner with outside capital providers, such as private equity, to position for the future – from both a capital and a mindset point of view.


The change in mindset, and the access to flexible capital, is necessary as the future becomes more and more about reorganizing into an ambulatory care business that emphasizes competing for covered lives at scale in lower cost and convenient settings of care.

FTC proposes banning noncompete agreements

Posted on by • Posted in American Hospital Association (AHA), Competition, Federal Trade Commission, Federal Trade Commission (FTC), Health System, Hospital, Hospital Industry, Non-Compete Agreements, Physician, Physician Compensation, Physician Employment, Private Equity • Leave a comment

https://mailchi.mp/59374d8d7306/the-weekly-gist-january-13-2023?e=d1e747d2d8

Last Thursday, the Federal Trade Commission (FTC) released a proposed rule that would ban employers from imposing noncompete agreements on their employees. Noncompetes affect roughly 20 percent of the American workforce, and healthcare providers would be particularly impacted by this change, as far greater shares of physicians—at least 45 percent of primary care physicians, according to one oft-cited study—are bound by such agreements.

The rulemaking process is expected to be contentious, as the US Chamber of Commerce has declared the proposal “blatantly unlawful”. While it is unclear whether the rule would apply to not-for-profit entities, the American Hospital Association has released a statement siding with the Chamber of Commerce and urging that the issue continue to be left to states to determine.

The Gist: Should this sweeping rule go into effect, it would significantly shift bargaining power in the healthcare sector in favor of doctors, allowing them the opportunity to move away from their current employers while retaining local patient relationships.

The competitive landscape for physician talent would change dramatically, particularly for revenue-driving specialists, who would have far greater flexibility to move from one organization to another, and to push aggressively for higher compensation and other benefits.

Given that the FTC cited suppressed competition in healthcare as an outcome of current noncomplete agreements, the burden will be on organizations that employ physicians—including health systems and insurers, as well as private equity-backed corporate entities—to prove that physician noncompetes are essential to their operations and do not raise prices, as the FTC has suggested.

Payer contracts, physician pay still anchored in fee-for-service

Posted on by • Posted in Fee for Service Reimbursement, Healthcare Reform, Payment Models, Payor Contracting, Performance Metrics, Performance-Based Incentives, Physician, Physician Compensation, Quality Incentives, Quality Measures, Quality Reporting, Risk-Based Compensation, Value Chain, Value Creation, Value-Based Contracting, Value-Based Healthcare • Leave a comment
https://us17.campaign-archive.com/?e=d1e747d2d8&u=526c5e99ee0439b6f83f7c051&id=5b1b015fbd

The healthcare industry has made some strides in the “journey to value” across the last decade, but in reality, most health systems and physician groups are still very much entrenched in fee-for-service incentives.

While many health plans report that significant portions of their contract dollars are tied to cost and quality performance, what plans refer to as “value” isn’t necessarily “risk-based.” 

The left-hand side of the graphic below shows that, although a majority of payer contracts now include some link to quality or cost, over two-thirds of those lack any real downside risk for providers. 

Data on the right show a similar parallel in physician compensation. While the majority of physician groups have some quality incentives in their compensation models, less than a tenth of individual physician compensation is actually tied to quality performance. 

Though myriad stakeholders, from the federal government to individual health systems and physician groups, have collectively invested billions of dollars in migrating to value-based payment over the last decade, we are still far from seeing true, performance-based incentives translate into transformation up and down the healthcare value chain.  

Rand: Most health systems pay physicians based on volume, not quality

Posted on by • Posted in Health System, Hospital, Hospital Industry, Physician Compensation, Physician Practice Management, Quality Measures, Quality of Care, Value-Based Healthcare, Volume-Based Compensation • Leave a comment
https://www.beckershospitalreview.com/compensation-issues/rand-most-health-systems-pay-physicians-based-on-volume-not-quality.html?origin=BHRE&utm_source=BHRE&utm_medium=email&utm_content=newsletter&oly_enc_id=2893H2397267F7G
Rand: Most health systems pay physicians based on volume, not quality

Physicians employed by group practices owned by health systems are mostly paid based on the volume of care, despite recent insurance companies’ efforts to pay based on quality, a Jan. 28 Rand study published in Jama Health Forum found.

Seventy percent of practices follow a volume-based compensation plan, according to the analysis. For more than 80 percent of primary care physicians and more than 90 percent of physician specialists, volume-based compensation is the most common.

Although many health systems have financial incentives for quality and cost, only 9 percent of primary care providers and 5 percent of specialists have compensation based on those criteria.

“Despite growth in value-based programs and the need to improve value in healthcare, physician compensation arrangements in health systems do not currently emphasize value,” Rachel Reid, the study’s lead author and a physician policy researcher at Rand, a nonprofit research organization, said in a news release emailed to Becker’s. “The payment systems that are most often in place are designed to maximize health system revenue by incentivizing providers within the system to deliver more services.”

The study looked at physician payment structures for 31 physician organizations affiliated with 22 health systems across four states. The researchers interviewed leaders, examined compensation documents and surveyed physician practices.