PHYSICIAN COMPENSATION AND PRODUCTIVITY MODELING

1. PHYSICIAN COMPENSATION AND PRODUCTIVITY MODELING Marvin Berkowitz BHC Consulting October 24, 2011

2. PHYSICIAN PRODUCTIVITY AND COMPENSATION MODELING • Why benchmark physician compensation and productivity? • Key components of benchmarking programs • Benchmarking approaches for alternative types of practices Physician Compensation and Productivity Modeling

3. Why Benchmark Physician Compensation and Productivity • Assess fairness and effectiveness of compensation plans • Align compensation with performance • Increase practice volume and revenue • Improve practice efficiency • Improve patient access Physician Compensation and Productivity Modeling

4. Key Components of Compensation And Productivity Modeling • Type of practice – private vs. academic • Understand physician job roles • Full time clinician • MD combines clinical work with other roles: • Administration, • Teaching, • Research • Understanding MD’s work effort critical to understanding productivity Physician Compensation and Productivity Modeling

5. Key Modeling Components • Compensation Benchmarks • Productivity Benchmarks • Approaches to link compensation to productivity performance Physician Compensation and Productivity Modeling

6. Compensation Benchmarks • MGMA – private practice and academic surveys • AMGA – private practice survey • AAMC – academic survey • Individual specialty surveys Physician Compensation and Productivity Modeling

7. Compensation Benchmarks – Endocrinology – 2010 Data Physician Compensation and Productivity Modeling

8. Productivity Benchmarks • Alternative Benchmarks Exist to Measure Productivity • Gross charges • Net collected revenue • Work RVUs • Gross charges difficult to benchmark • Net collections driven by payor mix and different payor markets • Work RVUs consistent across payors and markets Physician Compensation and Productivity Modeling

9. What Do Work RVUs Measure ? • Relative Value Units (RVUs) are components of the Medicare RBRVS physician payment system • RVUs consist of 3 components: • Work RVUs – Physician Patient Care • Practice RVUs – Practice Support Operations • Malpractice RVUs – Professional Liability Ins Physician Compensation and Productivity Modeling

10. Work RVUs – An Example Physician Compensation and Productivity Modeling

11. How to Calculate an MD’s WRVUs • Calculating an MD’s WRVUs includes 3 steps: • Capture physician’s billed units, i.e., number of visits and procedures actually billed • Classify all volume into individual CPT codes • Assign Medicare work RVUs to each CPT code • Calculate total weighted work RVUs associated with billed volume. Physician Compensation and Productivity Modeling

12. Physician Work RVU Calculation Physician Compensation and Productivity Modeling

13. Work RVU Benchmarks • MGMA – Academic and Private Practice • AMGA – Private Practice • UHC – FPSC - Academic Practices Physician Compensation and Productivity Modeling

14. Work RVU Benchmarks Endocrinology – 2010 Data

15. Combining Compensation and Productivity Benchmarking

16. Incentive Compensation Program Combining Compensation and WRVU Benchmarks

17. Productivity Benchmarking- Documenting Physician Effort Physician Compensation and Productivity Modeling

18. Measuring Physician Productivity– Normalizing The Clinical Work Output For A Sample Physician • 1-Physician A FTE Status 1.00 • (Based on 40 Hour Work Week) • 2-Billable Clinical Effort % 60% • Physician A Clinical FTE 0.60 • (Line 1 X Line 2) 1-Physician A Total Annual 3,109 Work RVUs 2-Physician A Clinical FTE 0.60 Physician A WRVUs 5,182 Normalized for 1.0 Clinical FTE (Line1 / Line 2) Physician Compensation and Productivity Modeling

19. Measuring Physician Productivity – The Importance of Accurately DocumentingClinical Effort Work Percentage • Physician A Total Annual WRVUs 3,109 3,109 3,109 • Physician A Billable Clinical Effort % 60% 50% 70% • Physician A WRVUs Normalized for 5,182 6,218 4,441 • 1.0 Clinical FTE • Percent Variance- Change in % Effort +20% -14% Physician Compensation and Productivity Modeling

20. PHYSICIAN PRODUCTIVITY AND COMPENSATION MODELING • Some takeaways from presentation: • Understand what you want to accomplish: • Compare staff compensation levels; • Calculate staff productivity; • Assess fairness of staff compensation and alignment with productivity levels; • Create an incentive compensation plan • Work RVUs is commonly used productivity metric; • Multiple benchmarking data sources are available to practices Physician Compensation and Productivity Modeling