Business Consult | During the past several years, the specialty of cardiology has experienced singular and unprecedented economic disruptions. Driven primarily by reimbursement changes, cardiologist employment by hospitals and health systems dramatically rose.

Most of these transactions resulted in arrangements where work relative value units (WRVUs) are used to determine physician compensation.

New World, New Thinking

Fast-forward to today—many organizations face renewal of these employment contracts. As reimbursement shifts to reward value, cardiologists and hospital executives have come to the conclusion that WRVU-based models exacerbate inherent flaws in the fee-for-service (FFS) system, under which physicians are rewarded for performing services but not for managing care. These models also create disincentives to performing non-WRVU-generating activities that are beneficial to patients and the organization.

A Different Kind of Model

Spectrum Health Medical Group (SHMG), a large integrated multispecialty physician organization in Western Michigan, is exploring alternative ways to pay its physicians. SHMG is currently developing an enterprise-wide compensation framework that is patient centered, economically sustainable, and flexible enough to evolve with the industry. Within the medical group, several specialties have embraced new physician compensation arrangements.

SHMG’s cardiology practice consists of more than 30 physicians spanning all the major subspecialties and is closely aligned with the group’s surgical specialties to offer comprehensive cardiovascular services to the Western Michigan region. Until recently, the group compensated its physicians using a typical WRVU-driven model.

Beginning in 2015, the group shifted its compensation approach to an innovative model wherein physicians are rewarded for performing a variety of activities that are valuable to the organization, not just those that can be measured in WRVUs. Under the new plan, each cardiologist receives a base salary that is calibrated to industry benchmark levels.

Physicians can earn up to an additional 15% based on achievement of division, department, and organizational goals in areas such as clinical excellence, patient satisfaction, program development, scholarly activity, and patient access.

WRVU productivity incentives have not disappeared completely. Instead, they have been reframed in a way that rewards group-level productivity and decouples any direct links between individual productivity and compensation. The group is segmented into subspecialty pods (e.g., electrophysiology, invasive-interventional), and each pod receives funding for achieving group WRVUs that are above a predetermined threshold. Individual physicians are then paid based on their number of half days worked and not their individual productivity. This time-based distribution plays an important role in mitigating some of the perverse incentives associated with an FFS reimbursement system.

New Model, New Behavior

Darryl Elmouchi, MD, chief of cardiovascular medicine at Spectrum Health, has noticed material changes in the behavior of the cardiologists under the new compensation plan, even in a relatively short period of time. Previously, it was challenging to find sufficient coverage for certain valuable but low-WRVU-generating activities. “The issue wasn’t that physicians weren’t interested in participating in these activities,” said Elmouchi. Rather, “they faced real financial disincentives under the old plan due to the extra time requirements and reduced WRVU potential.”

One major concern shared by both physicians and hospital leaders was the implications of the new model on patient access and throughput. Early results appear to indicate that the group has not experienced a reduction in overall WRVU productivity. System leaders believe that this and other improvements have only been possible due to strong leadership and a group culture that is performance-based, values transparency, and encourages accountability.

Better, but Not Perfect

Despite the advantages of the new model, Elmouchi recognizes that certain plan components will continue to evolve. For example, he believes there will need to be embedded incentives to foster team-based care delivery models that utilize advanced practice providers (APPs) more effectively. He also questions how much longer the group WRVU incentives will need to be in place. “Depending on the pace of environmental changes, value-based components of the plan could eventually supplant some or all of the remaining volume-based components,” he said.

Overall, he says cardiologists have readily embraced the new model and that the group is better prepared to meet the evolving needs of patients, payors, and their community.

Could This Model Work for You?

The short answer is “it depends.” The ability of a group to successfully adopt value-based compensation models is dependent upon a host of internal and external factors, including but not limited to:

• The presence of a consistent high-performance group culture that encourages collegiality and accountability.
• The ability of current systems infrastructure to provide timely, accurate, and reliable reports on non-WRVU performance measures.
• The willingness of system leadership and local payors to enter into alternative risk-based reimbursement models.

Groups with wide variations in performance often find it difficult to implement alternative compensation methodologies without disproportionately impacting certain segments of their practice. When variation does exist, transitions away from WRVU-based plans are often incremental in nature so as to prevent large swings in compensation. Furthermore, there are fair market value (FMV) and other regulatory constraints that necessitate the close involvement of legal counsel. Regardless of whether a group is currently ready to make the switch, there is still merit to proactively exploring what it would take (culturally, operationally, and financially) to execute a value-based strategy.

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Joshua Halverson is a Principal, and Thomas Methvin is a Manager, at ECG Management Consultants. For more information, contact Thomas at tmethvin@ecgmc.com or Joshua at jhalverson@ecgmc.com.

Keywords: CardioSource WorldNews

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