Using Physician Incentive Programs to Enhance Care Delivery and Improve Margins

Key takeaways:

• Confronted by escalating financial pressures, health systems and hospitals are looking for additional ways to control costs without compromising care quality.
• Physician incentive programs are proving successful in increasing operational efficiencies, improving patient outcomes and generating revenue.
• With the help of Premier’s PINC AI™ experts, Baptist Health established a physician incentive program and was able to reduce their Left Without Being Seen emergency department metric by 33 percent within five months of implementation, resulting in close to $4 million in estimated additional revenue for the system.

As health systems and hospitals continue to face financial challenges, they must employ strategies to reduce costs and increase revenue while continuing to provide high-quality patient care. Physician engagement is a key element in achieving success since physicians are the enablers of change within the healthcare system.

Over the past two years, the experts at PINC AI™ – the technology and services brand of Premier – have observed a resurrection of physician incentive programs as a vehicle to compensate physicians for improving quality and cost of care based on achievement of metric goals and participation in governance structures. There is a wide variety of physician alignment vehicles available to consider, but three physician incentive programs have direct ability to impact service line advancement and address the value equation:

• Co-management arrangements.
• Hospital quality and efficiency programs (HQEPs).
• Traditional gainsharing.

Co-management and HQEPs have two main compensation levers: fixed duties and performance metrics. Fixed duties are activities completed by physicians such as committee involvement, day-to-day management, strategic plan development, clinical care management and quality improvement, typically paid at an hourly rate based upon submission of timesheets which tie back to activities outlined in the contract. Performance metrics provide payments for improvement on outcome-driven metrics such as clinical outcomes, patient safety, operational processes and financial performance.

Traditional gainsharing compensates physicians within a defined scope for tangible financial improvement against an internal historical baseline, and thus is primarily cost-focused (though many gainsharing agreements include quality gateways impacting the rate of shared savings available for distribution to program participants).

These physician incentive programs are most often considered in procedural service lines (such as orthopedics, cardiovascular services and general surgery) with a blend of employed and independent physicians.

We believe that by bringing historically disparate groups under a physician incentive program with common goals and an emphasis on collaboration across providers, health systems could likely recognize near immediate impact to margins, operational efficiency and patient experience.

For example, when correctly aligned, physician incentive programs can help address the crowding and overflow issues seen at many emergency departments (EDs) across the healthcare system nationally. By increasing throughput and efficiency, health systems can achieve better patient outcomes and satisfaction and increase revenue.

Physician Incentive Program in Action at Baptist Health

At Baptist Health, a nine-hospital system in Kentucky and Indiana, there was a need for a forum to discuss challenges in delivering leading care, capturing operational efficiencies and providing an enhanced patient experience in a consistent manner across eight emergency departments. This is important in today’s healthcare climate, where efficiency is necessary to reduce the financial burden of the healthcare labor shortage and increase the number of patients able to receive care.

The health system turned to the PINC AI™ Advisory Services team to analyze opportunities for improvement within the service line, organize the governance structure of the program, set goals for performance metrics and educate the physicians on the opportunity and program design. Through the work completed as a part of this engagement, Baptist was able to implement a highly effective Co-Management Physician Incentive program with rapid results.

Baptist’s Co-Management Physician Incentive program includes a multi-layered governance model, where physicians are paid an hourly rate for participating in committees designed to be a vehicle for sharing best practices at the system, regional and local facility levels. Each of Baptist’s hospitals had varying levels of performance in key strategic and financial ED metrics, including Left Without Being Seen (LWBS), Door to Doc time, and batch sign up percentage. These metrics were determined to have the greatest opportunity for improvement and financial impact across the health system.

For each of the included metrics, a strategic target was set for each hospital based on historical performance, as well as a group target to encourage collaboration across the system. In addition to the performance metrics, the program includes two milestone-based strategic goals designed to implement processes that will improve performance on the metrics. Each of these components are weighted based on strategic priority and financial ROI for the health system.

Baptist Health was able to reduce their LWBS metric by 33 percent within the first five months of implementing the physician incentive program. This results in close to $4 millionin estimated additional revenue for the system.

The system also saw improvement in the other performance metrics the program is targeting for most hospitals. Also notable, the physicians can collaborate and communicate more strategically about how to improve efficiency and quality through the governance structure and there is less of a divide between departments at different hospitals.

“Across all our markets we have been laser focused on improving quality and patient experience in our EDs as the front door of our nine hospitals. We have certainly found that our physicians are similarly interested in constant improvement, and the HQEPs have been an extremely helpful vehicle for aligning us further. The key is engaging the physician in a way that they feel truly empowered, which this achieves, but the aligned incentives are an extremely effective way to accelerate key initiatives. Working with Premier to kick start this program has been a key for our improvements across the board.” – Jody Prather, Chief Strategy and Marketing Officer, Baptist Health

The Power of Physician Incentive Programs

Physician incentive programs are not limited to EDs and can be deployed across any service line. Incentivizing physicians has demonstrated positive results for all involved parties in the form of decreasing costs, increasing collaboration with health system administration, improving relationships among independent physician groups and increasing sense of ownership in the continuum of care.

Specialties that are typically high in independent physicians have a tremendous opportunity to improve outcomes with physician incentive programs. These include surgical subspecialties like Orthopedics and General Surgery, Women’s Health and Radiology.

Physician incentive programs can be evolved over time by enhancing the level of physician involvement in service line efforts and annually adjusting metrics to match the overall maturation of the program and position providers for success in an increasingly value-driven payer environment. Overall, physician incentive programs are highly effective as a dynamic vehicle for physician engagement and collaboration with the health system.

Are you ready to put the power of physician incentive programs to work in your health system? Learn more about PINC AI™ Consulting capabilities and contact us today.

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