Incentive bonuses, a longtime feature of most physician compensation packages, may be losing popularity in favor of straight salaries. That trend could prove distressing for physicians who benefit the most from them and a welcome change for some primary care doctors who feel penalized by them.
Geisinger, based in Danville, Pennsylvania, signaled that incentive bonuses might be problematic when they eliminated these bonuses in 2016 and moved their 1600-plus physician workforce to a straight salary.
The medical group was considered a pioneer of incentive bonuses. Geisinger’s top leaders once credited the compensation formula with supporting the healthcare system’s strategic goals of improving care quality and efficiency.
“While no compensation model is perfect, we found these bonuses were too cumbersome and too time-consuming to develop, administer, and track,” says Edward Hartle, MD, Geisinger’s executive vice president and chief medical officer.
Edward Hartle, MD
Physicians had to meet all the metrics to receive the full 20%, including volume, quality, patient satisfaction, professionalism, and market expansion. Hartle didn’t think that the volume metric (relative value units [RVUs]) was a major obstacle or concern for physicians because it made up only 25% of the total incentive criteria.
Physicians have responded positively to the change, he says. “They prefer having a straight salary than having 20% of their compensation at risk. They’d rather not be beholden to meeting metrics to get the full compensation.”
Last year, among US physicians, the average bonus incentive was 15% of their total compensation, according to the Medscape Physician Compensation Report 2022. The highest-paying specialties make out the best — orthopedists earned an average of $126,000, whereas lower-paying specialties earned much less; pediatricians earned an average of $28,000.
An associate professor of medicine at UC San Diego School of Medicine who asked to remain anonymous said she would rather not have 15%-20% of her salary withheld unless she meets certain metrics. A straight salary “would take the financial pressure out of the picture.” She also worries that physicians at academic medical centers will be incentivized to see more patients at the expense of teaching and research.
Other primary care physicians prefer to keep incentive bonuses and change how they are structured.
“The move to value-based care is important and incentives are one way to get there. We just need to be smarter about how we define the metrics and measures,” says Timothy Dudley, MD, who is a consultant to the Medical Group Management Association and has a 40-year career in family medicine.
He pointed to medication adherence measures as an example of what needs to be changed. “They are poorly conceived and executed. Just because I write a prescription for a 3-month supply with a year’s worth of refills that get delivered automatically to my patient does not mean the patient adheres to the medication or even is taking it at all,” he says.
“It’s frustrating because I don’t feel I am rewarded appropriately,” he says.
In addition, sick patients who don’t follow the physician’s treatment plan and don’t improve are less likely to rate the physician highly on patient satisfaction scores, which some doctors think is unfair.
Does This Signal a Larger Shift?
Other healthcare employers are also eliminating incentive bonuses, according to Merritt-Hawkins’s 2021 Review of Physician and Advanced Practitioner Recruiting Incentives. The percentage of large employers (hospitals, major medical groups, and academic medical centers) that paid physicians incentive bonuses last year declined to 61% from 72% in 2020.
This is the lowest number of contracts offering a salary plus production bonus in over a decade, says Michael Belkin, divisional vice president of recruiting for Merritt Hawkins, a company of AMN Healthcare, which conducted the review of nearly 2500 contracts.
Meanwhile, the percentage of employers offering straight salaries increased from 25% in 2020 to 35% in 2021.
“The fact that fewer hospitals and medical groups are offering a production bonus signals the difficulty of incentivizing physicians — trying to keep them both productive by encouraging volume but also rewarding them on quality,” says Belkin.
The various incentive formulas are proving problematic for some employers and some physicians, he says. It is simpler to just offer a straight salary.
Mayo Clinic and Cleveland Clinic say they pay physicians a straight salary because they are concerned that financial incentives can have unintended consequences. Mayo Clinic refers to “removing financial incentives for physicians to do more than is necessary or less than desired for the patient.” Cleveland Clinic says its physicians have “no financial incentive to provide unnecessary tests or treatments. They work as a team to give every patient the best outcome and experience.”
The fee-for-service model (which includes RVUs) provides physicians with the incentive to do more because they get paid for doing so, either through RVUs, net collections, or gross collections. But this can drive up overall medical costs, so payers are trying to shift to quality-based payments, says Belkin.
However, these payments can encourage physicians to do less — and even not enough — when they receive bonuses to keep costs under set levels — in which case, the patient may not get the care he or she needs. The question is, how do you keep physicians productive but also mindful of costs and utilization? The two motives work against each other, which makes coming up with an effective physician compensation structure difficult. Some facilities and groups have thrown in the towel by going to straight salaries.
Other employers feel that incentive programs may be too complex, with up to 40 metrics, says James Robinson, PhD, MPH, a professor of health economics at University of California, Berkeley.
“These fancy payment methods are complex to administer, to measure, and for doctors to understand. They’re facing multiple different incentive schemes from insurers so the general drift is toward recognizing the virtue of simplicity and comparability,” says Robinson.
How Do Doctors View Incentive Bonuses?
Incentive bonuses enable physicians to earn tens of thousands of dollars on top of their annual salaries, depending on their specialty.
Northwell Health is the largest healthcare employer in New York, with about 4900 employed doctors. “I think physicians here favor the competitive-based salary plus the opportunity to earn an incentive. They’re putting forth tremendous effort in achieving quality metrics and optimizing the patient experience, especially in the ambulatory setting,” says Deborah Schiff, executive vice president of ambulatory strategy and business development at Northwell Health.
Northwell doesn’t take a “one-size-fits-all” approach to its compensation model and “incorporates industry recognized, specialty-specific quality metrics aimed at improving the health status of the communities we serve,” says Schiff.
Massachusetts General Physicians Organization funds its quality improvement program with a 2% deduction from physicians’ revenue from payers. If doctors meet all the quality metrics, they can receive an average of 2% back, says Jason Wasfy, MD, MPhil, the organization’s medical director.
Wasfy says he believes that the program is popular. “Our metrics are clear and transparent, and in the vast majority of cases, physicians do the quality activities to receive the incentive. The program is a way to focus attention and pursue important organizational goals,” says Wasfy.
A 2010 survey of the organization’s clinically active physicians found that 78% believed the program was successful in focusing clinicians’ attention on quality-of-care issues, and 79% wanted the program to continue.
Dudley says he viewed incentive bonuses favorably when the metrics were clear and based on reliable evidence.
“Early in my career, bonuses were driven by production, which meant revenue produced. Revenue was relatively easy to understand and as long as the targets felt reasonable, I was happy to work toward an incentive bonus I could understand. I could see more patients, do more services, and so on,” says Dudley.
But that changed when payers measured productivity using RVUs, which favors specialists who perform a lot of “highly weighted procedures. RVUs devalued ‘cognitive care’ in favor of procedural care. Fee schedules became more rigid. As a result, primary care became relatively poorly compensated,” says Dudley.
Are Incentive Bonuses Effective?
Not everyone agrees that they are successful. But some incentive programs have helped physician organizations meet their goals.
The Massachusetts General Physicians Organization began its quality incentive program for salaried physicians in 2006. “Taxing physician revenue just 2% and then paying it back to the doctors in a quality improvement program allows us to pursue key organizational priorities in quality, safety, and equity. In recent years, some quality initiatives have helped us reform outpatient scheduling and spread clinical programs meant to improve quality while also reducing the total cost of care,” says Wasfy.
Andrew Hajde, MGMA’s director of consulting says, “I definitely think they work — whether the metrics used for incentives are RVUs, net collections, quality outcomes, or patient encounter volumes, they still help organizations to motivate physicians to see more patients.”
Having a productivity incentive increased the number of work RVUs (wRVUs) performed by family medicine physicians and their compensation by about $30,000 in 2019, according to the MGMA DataDive Provider Compensation tool. Doctors who reported earning straight salaries had a median compensation of $225,309 with 4012 median wRVUs, whereas their peers with half or more of their salary tied to a production bonus reported a median compensation of $256,892 with 5138 median wRVUs, the data show.
Belkin has a more nuanced view. “In general, incentives work in the short-term because employers of all kinds get the behaviors they reward, but not necessarily in the long-term,” he says.
But the concern is that without them, physicians will not see the number of patients or generate the volume of work needed for their employers to stay financially viable, he says.
In the meantime, Medicare and other payers have moved toward payment models based on quality measures, such as patient satisfaction scores, outcomes data, and others.
However, physicians can find it challenging to meet both patient volume and quality metrics. The time it takes to care for sicker patients and to document quality can be a barrier to meet volume metrics, says Belkin.
Quality metrics may have peaked in popularity last year among large healthcare employers. After rising steadily from 32% in 2015 to 64% in 2020, only 23% of employment contracts last year included quality metrics in their bonuses, the 2021 Merritt-Hawkins review shows.
RVUs still remain the most widely used metric, but their use also declined in 2021 by 16% over the previous year, to 57%. The only metric that grew in popularity was net collections, which makes up only 23% of all the metrics used.
Hartle says that Geisinger has maintained its focus on quality and productivity since it eliminated incentive bonuses.
It also increased physician salaries. “There are always nonfinancial alternatives to motivating behavior that are organizational, cultural, and behavioral ways of getting things done,” says Robinson, referring to the social compact.
Geisinger’s physicians saw their base pay increase by the same percentage that they were earning through their incentive bonus. So if a physician were earning 20%, that amount would be added to their base pay, explains Hartle.
Physicians can still earn an incentive bonus for “patient experience” that is on top of their higher salaries, says Hartle.
However, not all medical groups are in a position to offer physicians higher salaries when incentive bonuses are eliminated, says Belkin.
There was some initial resistance to the new arrangement from supervisors, says Hartle. “They have had to increase their oversight of associates to ensure they understand the expectations and how that is tracked compared with incentive measures. It requires more time and management skill of them,” says Hartle.
Christine Lehmann, MA, is a senior editor and writer for Medscape Business of Medicine based in the DC area. She has been published in WebMD News, Psychiatric News, and The Washington Post. Contact Christine at [email protected] or via Twitter @writing_health.
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