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Quality incentives become bigger factor in physician compensation

Pay-for-performance measures, including patient satisfaction and quality improvement, have gained prominence in determining incentive pay.

By — Posted Oct. 27, 2011

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The percentage of organizations offering physicians a salary combined with a bonus structure has stopped increasing after several years of growth. These plans are placing a greater emphasis on factors that probably will play a role in reimbursement under health system reform.

Those facts come from a survey of 182 health care organizations released Oct. 17 by the Hay Group, a management consulting firm in Philadelphia.

"Pay-for-performance used to be a human resources issue. Now, it's a payer issue," said Ron Seifert, vice president of the Hay Group.

Sixty-four percent of health care organizations offer an annual incentive plan to physicians, according to the organization's "2011 Physician Compensation Survey," which has been carried out annually for the past decade. This was lower than the 69% who did so in 2010.

Researchers say, however, that differences in the survey structure and population mean this is not a statistically significant decline, although it does indicate that the number of entities offering this pay structure is no longer growing. A total of 63% offered an incentive type of pay structure in 2009, 49% did so in 2008 and 42% in 2007.

Key factors

Quality and patient satisfaction, which public and private insurers are pushing as an incentive over productivity, were key factors in determining incentive pay. The Hay survey found that 66% incorporated quality measures into determining an annual incentive, and 62% used patient satisfaction. Group performance was used to determine 52% of doctors' annual incentives.

"There's a clear movement towards inclusion of quality measures, because these are becoming part of the clinical transformation initiatives," Seifert said.

The survey, which was answered primarily by integrated health care systems and hospitals representing 30,012 physicians, mirrors trends documented by other physician compensation surveys.

The "2011 Review of Physician Recruiting Incentives" released June 13 by Merritt Hawkins & Associates, a national health care search and consulting firm in Irving, Texas, found that 74% of searches carried out by the firm in 2010 and 2011 came with a salary and bonus. This was true of 67% of searches that took place from 2006 to 2007.

The Hay Group did not track what percentage of total compensation derived from annual incentives.

"At-risk pay can be a critical factor in driving performance at health care organizations," said Jim Otto, senior principal in the health care practice of the Hay Group. "If designed correctly, annual incentive plans will have profound positive effects on culture, behaviors and the success of the organization."

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