DECEMBER 16, 2017

Welcome to the Health Care Compensation Update eNewsletter
Editor: Benjamin R. Grant

Changing Health Care Compensation by Rewarding Value-Based Outcomes
Virtually every conversation about health care delivery and financing today includes a discussion about the need to change from volume-based incentives to value-based incentives in order to improve patient outcomes and move from the unsustainable cost structure of fee-for-service reimbursement. However, current payment methodologies do not support behaviors that lead to improved quality and efficiency in health care delivery and financing. There is a trend to change the way in which it providers are rewarded by taking dollars that are already available in the system and reallocating them to reward high-value outcomes (e.g., quality, efficiency, patient satisfaction). This approach involves incrementally reducing fee-for-service payment rates to a level that removes profitability from the provision of units of service and uses the savings to fund a "value pool".

Here is an example. Individual providers will earn value payments according to a scoring system that analyzes their practice patterns. This scoring system is based on an algorithm that incorporates 40 years of research on cost variability and quality from the Dartmouth Atlas, as well as measures created by C72 participating medical societies. Provider scores will also include a focus on the submission of information for the purpose of population risk identification and quality of care, important factors in public program funding. Performance scores are the basis for redistribution of health care dollars to high-performing providers, resulting in reduced payment for low-value care.

Primary care providers that are currently at the low end of the compensation model because of their reliance on evaluation and management-code reimbursement will receive proceeds from the value pool for creating successful patient-centered medical homes. While unit reimbursement for the provision of services will be reduced for primary care providers to the same degree as it will for all other providers, meeting agreed-upon population management measures and achieving high value scores will be rewarded by increased per-member per-month care coordination fees.

Specialist access to the pool will be based on expectations related to quality, resource utilization, appropriateness of care decisions, pharmaceutical choices, and admitting patterns, among other things. A specialist's ratings will be shared with primary care physicians because each PCP's value rating will be impacted by the value rating of the referral specialist selected.

Hospital access to the value pool will be measured in much the same way. Quality and efficiency will be measured, as will the appropriateness of admissions and the elimination of preventable admissions, readmissions, and emergency room episodes. Hospital performance ratings will impact the value ratings of admitting physicians, making admission patterns more important than in the past.

Each of these pools initially will be separate and distinct, resulting in a redistribution of payments that will be favorable to providers who perform well according to the expectations of the stakeholders funding health care and potentially unfavorable to those who do not. While all providers will have the opportunity to achieve better financial results than in the past, it is likely that there will be winners and losers.

More Billing Codes, Demonstrations Help Bridge Physician Payment Gap
A new Robert Wood Johnson Foundation (RWJF) report analyzed how CMS has expanded billing codes and demonstrations focused on supporting primary care. The report said primary care providers (PCPs) involved in CMS demonstrations are getting higher monthly payments. The shift has meant more up-front payments rather than end-of-year bonuses. Those providers are also being held accountable for a wide range of outcomes, but often "not expected to independently influence the total cost of all care received by Medicare beneficiaries," according to the RWJF report.

Physician Compensation at Non-Academic Hospitals Up to $123K More
Non-academic hospital systems paid higher physician compensation rates across the board compared to academic systems, but the providers also worked more RVUs, a new Medical Group Management Association (MGMA) survey showed. Specialty care providers who were fully clinical experienced the greatest physician compensation difference, with those in non-academic settings earning $122,795 more than their peers in academic hospital systems. Non-academic hospital systems paid primary care physicians about $57,129 more, the survey of 120,000 providers across over 6,600 medical groups uncovered.

Non-academic Hospital Physicians Earn more than their Academic Counterparts: 5 Things to Know
Here are five insights: 1. The greatest compensation difference was between non-academic and academic specialty physicians. Full-time, non-academic specialty physicians earned $122,795 more, on average, than full-time, fully-clinical academic specialty physicians; 2. Primary care physicians at non-academic hospitals earned $57,129 more than their academic counterpart on average; 3. Starting salaries for physicians in non-academic settings across the board were higher than starting salaries for physicians in academic settings; 4. Non-academic primary care physicians in their first year post-residency, in some cases, earned upwards of $86,000 more than primary care physicians in academic settings; 5. Specialty care physicians who are full-time, fully clinical reported earning a base compensation $67,290 more than physicians who dedicated 67 percent or more of their time to research.

Executive Compensation in Healthcare
Healthcare organizations today find themselves in a vortex of competing priorities, making leadership difficult at best. Governing officials are taking red pens to policies established just eight years ago. Local governments threaten the funding of Medicaid and other programs that support our organizations. The public desires greater price and financial transparency in the wake of greater cost-sharing pressures and soaring premiums. This environment also makes hiring skilled leadership for organizations extremely difficult. Not only must we find leaders who can help us navigate through these difficult times, we must be extremely diligent in deciding how to compensate them. Whether your organization is a medical clinic, for-profit hospital, nonprofit hospital or integrated health system, executive compensation is a complex issue. Determining compensation for leaders of a healthcare organization requires taking three competing realms into consideration: 1. What are the needs of the executive? Your organization must compensate its leaders adequately to attract talent who can lead the organization effectively; 2. What are the needs of your patients? Your organization must take the public and patients' perception of its leaders' compensation into account; 3. What are the tax implications? All healthcare organizations must ensure that executive compensation does not trigger tax penalties with the IRS.

Public Company Healthcare CEOs see $25M Golden Parachute on Average: 5 Things to Know
Healthcare CEOs see an average of $25 million in benefits as a result of being dismissed during a merger or takeover, according to a recent Alvarez & Marsal and Equilar study. Researchers gathered data on the benefits received by CEOs and other named executive officers for the 20 largest public companies in 10 different industries, according to market capitalization. Here are five findings on how healthcare CEO benefits compare to other industries: 1. The 2017 average total separation benefit package for healthcare executives was approximately $25 million; 2. For healthcare, long-term incentives made up approximately $16 million of the $25 million total; 3. Severance payments comprised approximately $8 million for healthcare, which ranked second to highest; 4. CEOs frequently receive continuation of health and welfare benefits upon termination of employment in connection with a change in control; 5. In the healthcare industry, 45 percent of executives received outplacement services and 35 percent of executives received enhancement of retirement benefits.

What Now? 5 Steps to Take if your Probe Doesn't Corroborate Harassment Allegations
Whatever the reason, an investigation that yields a finding of "no harassment" still has the potential to expose your company to unnecessary legal risk if not handled appropriately, so here are five steps to follow when navigating this tricky situation: 1. Even if you don't find a violation, ask the alleged harasser to sign a copy of your company's anti-harassment policy. This will have the dual benefit of reminding the alleged harasser of the importance of appropriate workplace conduct and the consequences for violating the company's policy, and it will help the company defend against future claims by showing that the company's policy was made known to employees and the company made reasonable efforts to prevent and correct harassment in the workplace; 2. Thank the complainant for bringing the issue to your attention and assure him or her that your door is always open if problems arise in the future. The complainant will likely be discouraged or frustrated with the outcome of the investigation, but you can help lessen the sting by emphasizing that the company appreciates being made aware of the situation and takes all such complaints seriously; 3. Document your investigation thoroughly, including the various steps you took to reach your conclusion and the basis for concluding that there is insufficient evidence to establish a violation of your company's anti-harassment policy; 4. Stress that retaliation is prohibited. You should stress your company's non-retaliation policy to both the complainant and the alleged harasser. In addition, follow-up with both of them on a regular basis (such as in 15, 30, 60, and 90 days) to find out whether there have been any further issues or problems between them; 5. Develop a plan for avoiding future problems. Even if your investigation determines that no disciplinary action is warranted, you should develop a plan for avoiding future problems between the employees. Is the problem based on a personality conflict? Are there any steps that could be taken to improve communication and avoid misunderstandings between these employees? Would additional training help? If the relationship is beyond repair, is it possible to separate these employees in a way that would not trigger an accusation of retaliation or unfair treatment? Consider each of these issues, as well as the employees' input and suggestions, to determine how best to move forward after the investigation.

Misclassification of Independent Contractor is Violation of NLRA, ALJ Rules
The misclassification of an independent contractor is an unfair labor practice under the NLRA, according to Administrative Law Judge Dickie Montemayor. Intermodal Bridge Transp., No. 21-CA-157647 (Nov. 28, 2017). ALJ Montemayor said that, because such misclassification chills future concerted activity and necessarily "deprives and conceals available protections" afforded to employees under the NLRA, misclassification in and of itself is a violation of the Act. The ALJ directed IBT to cease and desist from misclassifying its employees and make employees whole for any losses of earnings and other benefits, including reimbursing employees for consequential harm as a result of the misclassification.



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Mercer and PayScale Announce Strategic Alliance for Compensation Data and Software Solutions

PayScale, the leading provider of compensation management software and real-time salary data, and Mercer, a global consulting leader in advancing health, wealth, and careers, and a wholly-owned subsidiary of Marsh & McLennan Companies, have formed a strategic alliance to bring together Mercer's expertise in compensation consulting and information products with PayScale's strength in technology and data science to advance compensation data and software solutions for clients and the future workforce. In connection with this alliance, Mercer will secure an equity stake in PayScale, which has built the world's largest crowdsourced database of salary profiles utilizing big data technologies. This investment builds upon the firm's leading position in reward consulting and information and its recent launch of Mercer Digital to support clients as they transition to new models of work that are enabled by digital technologies. For PayScale, this relationship enhances the company's portfolio and product capabilities with deeper consulting and data expertise to tailor solutions to customers' needs. As Mercer will provide a global channel for distributing PayScale's products, PayScale will provide a channel for Mercer's products. Together, they will collaborate to develop new, innovative compensation and workforce data products and solutions.

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Health Care Compensation Update e-Newsletter is one of a family of free e-Newsletters providing a complimentary video presentations and regularly updated news and key resources on major health care issues such as pay for performance, bundled payments and MACRA. To view and subscribe to other e-Newsletters go to www.HealthCareeNewsletters.com.


Benjamin R. Grant