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Sometimes 1% Reward Can Change Behavior - Sometimes it is Not Worth the Effort


By Carol Alexander/Friday, August 8, 2014
Carol Alexander imageThree thoughts occur when reading the Medicare plan for transitioning the current physician fee-for-service compensation model to paying for the quality of their care. The first is the notion of paying, or in this case rewarding or penalizing physicians for the quality of their care. The use of the term “quality” would indicate to most that the physician has measurable clinical outcomes, or that a patient’s health improvement can be measured through the physician’s treatment plan. Although the Medicare measures have not been finalized, it appears what will be measured will be process rather than clinical outcomes. They will be measuring how the physician manages basic medical screenings, documentation, and other tasks associated with prevention quality indicators. Many physicians have been actively submitting Physician Quality Reporting System (PQRS) data for several years — particularly the larger group practices that have been encouraged to track and report the data and also gain access to the incentives associated with reporting at the time; which brings me to my second thought. 

Focusing at the group level has it merits. Larger groups will be positioned better to implement, monitor, and encourage physicians within the group to earn these incentives. Although a 1% to 2% incentive does not sound like much and may not persuade an individual physician to change behavior, a true group practice — where the whole is greater than the sum of its parts — will strive to reach the aggregate reward of 1% of Medicare payment. In a group size of 100 or more physicians of multiple specialties, 1% can be enough to gain the attention of management or physician finance committees and have them make an effort to reach and achieve these dollars to help offset other rising practice expenses. 

However, to get the attention of the individual physician, it is true that the percentage of reward or penalty needs to be much higher. We have seen many compensation plans that try to drive a different behavior through physician compensation formulas that put more than 10 percent of pay at risk; these tend to not be effective. The rule of thumb is that to achieve changes at the individual level, the incentive/risk should be greater than 15%-20%.

Lastly, the small groups will have difficulty adapting to these changes. The lack of incentive for an individual practitioner does apply here. The amount of effort needed to redesign care, track outcomes, and monitor performance internally may not be worth a 1% or 2% reward or penalty, and if too onerous can even lead to more physicians — particularly the small, independent practices — dropping out of the Medicare coverage pool.

Carol Alexander
Senior Consulting Manager

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