How Are Doctors Paid? Learn the Incentives in Physician Compensation

Summary

In this 'A Healthcare Z' video, Dr. Eric Bricker discusses a recent study revealing that despite value-based reimbursement incentives, physician compensation is still largely volume-based, maximizing health system revenue rather than focusing on quality and cost-effectiveness. The study, published in the Journal of the American Medical Association, analyzed 31 physician practices and found that 84% of primary care physicians and 93% of specialists are paid based on patient volume and procedures performed. Only a small percentage of their compensation is linked to quality and cost effectiveness, highlighting a disconnect between government and insurance initiatives and actual physician incentives.

Takeaways

• 📰 The script discusses a new article from RAND Corporation and Harvard published in the Journal of the American Medical Association on January 28, 2022, focusing on value-based doctor pay.
• 🏥 The research analyzed 31 physician practices owned by 22 different hospital systems and found that 84% of primary care physicians and 93% of specialists were paid based on patient volume and services provided, not on outcomes.
• 💼 The compensation structure is primarily fee-for-service, meaning doctors are paid for the quantity of services rendered rather than the quality or cost-effectiveness of care.
• 🔢 Only 9% of primary care physician compensation and 5.3% of specialist compensation were based on quality and cost-effectiveness, indicating a minimal focus on these aspects.
• 🌐 Half of the doctors in America work for practices owned by hospitals, which is a significant portion of the healthcare system.
• 📉 The article concludes that despite value-based reimbursement incentives, compensation for primary care physicians and specialists is still dominated by volume-based incentives aimed at maximizing health system revenue.
• 🤔 The speaker questions the effectiveness of value-based payment models when the actual compensation for doctors does not align with these models, calling it 'window dressing'.
• 💡 The script highlights the importance of observing actions rather than words, suggesting that despite claims of value-based payment, the actual compensation practices have not changed significantly.
• 👥 A quote from a hospital-owned physician practice leader suggests that the pressure to maximize specialist referrals can limit innovation in payment models.
• 🏆 The speaker advocates for the independence of physicians, implying that independent practices may be more likely to focus on quality and cost-effective care rather than just volume.
• 📈 The script concludes by emphasizing the importance of watching what healthcare systems and practices actually do in terms of physician compensation, rather than just listening to their stated goals.

Q & A

What is the main topic discussed by Dr. Eric Bricker in the video?

The main topic discussed is value-based doctor pay and how it often equates to window dressing, with a focus on a new article that reveals most physician compensation is still volume-based rather than based on quality and cost-effectiveness.

What is the source of the article Dr. Bricker references?

The article is from RAND Corporation and Harvard, published in the Journal of the American Medical Association on January 28th, 2022.

How many physician practices did the researchers examine in their study?

The researchers examined 31 physician practices owned by 22 different hospital systems across multiple states.

What percentage of primary care physicians were found to be paid based on the volume of patients and services they saw?

84% of primary care physicians were found to be paid based on the volume of patients and services they saw.

What does the term 'RVUs' stand for, as mentioned in the script?

RVUs stands for Relative Value Units, a measure used to determine how much physicians are paid for the services they provide.

What percentage of primary care compensation is based on quality and cost-effectiveness according to the RAND study?

According to the RAND study, 9% of primary care compensation is based on quality and cost-effectiveness.

How does the current compensation system for physicians affect the relationship between doctors and their patients?

The current compensation system, which is largely fee-for-service and volume-based, incentivizes physicians to perform more services rather than focusing on quality and cost-effective patient care.

What does Dr. Bricker suggest is the impact of the disconnect between hospital compensation and physician compensation on patient care?

Dr. Bricker suggests that the disconnect leads to a continued focus on volume-based reimbursement for physicians, which can limit innovation and does not align with value-based care principles.

What is the significance of the quote from the leader at a physician practice owned by a hospital?

The quote highlights the internal pressure within hospital-owned practices to maximize specialist referrals, which may override other goals such as innovation and value-based care.

What does Dr. Bricker recommend as an alternative to the current compensation system for physicians?

Dr. Bricker recommends the importance of independence for physicians, suggesting that independent practices may be better positioned to prioritize cost and quality over volume.

What is the role of the new editor-in-chief of JAMA in relation to the discussed topic?

The new editor-in-chief of JAMA has a background in researching financial conflicts of interest in publications and with doctors, which makes the publication of the serious article on physician compensation and fee-for-service more significant.

Outlines

00:00

📚 Value-Based vs. Volume-Based Physician Payment

Dr. Eric Bricker introduces a recent study from RAND Corporation and Harvard, published in the Journal of the American Medical Association, examining physician payment structures. The study focused on 31 physician practices owned by 22 hospital systems across various states. It revealed that 84% of primary care physicians and 93% of specialists were paid based on patient volume and services provided, rather than on quality or cost-effectiveness. The study also found that only 9% of primary care and 5.3% of specialist compensation was linked to quality and cost-effectiveness. Dr. Bricker discusses the implications of this fee-for-service model, which incentivizes patient volume over quality of care, and how it contrasts with the value-based payment models promoted by the government and insurance carriers.

05:00

🏥 Hospital Systems and Physician Payment Disparity

In the second paragraph, Dr. Bricker emphasizes the disconnect between the value-based payment models promoted by the government and insurance companies and the actual payment structures within hospital-owned physician practices. He points out that despite the push for value-based care, the compensation for primary care physicians and specialists is still largely volume-based, aimed at maximizing hospital revenue rather than improving patient outcomes or cost-effectiveness. Dr. Bricker also highlights the importance of watching what organizations do, rather than just listening to what they say, as the continued use of fee-for-service models indicates a lack of alignment with the stated goals of value-based care. He concludes by suggesting that the independence of physicians, with 50% not employed by hospitals, may offer a more promising avenue for innovation and quality-focused care.

Keywords

💡Value-based doctor pay

Value-based doctor pay refers to a compensation system where physicians are paid based on the quality and outcomes of the care they provide, rather than the quantity of services. In the video's context, it is highlighted as a new approach that is being promoted by government and insurance carriers but is not yet fully implemented, as the study reveals that most doctors are still paid based on volume of services.

💡Fee-for-service

Fee-for-service is a payment model where healthcare providers are paid for each service or procedure they perform. The video discusses how this model is still dominant, with doctors paid for the number of patients and procedures, which can lead to over-treatment rather than focusing on quality and cost-effective care.

💡Relative Value Units (RVUs)

Relative Value Units are a measure used in healthcare to determine the amount of payment a physician should receive for a specific service. The video mentions that doctors are paid based on these units, which incentivizes them to perform more services rather than focusing on the quality of care.

💡Volume-based incentives

Volume-based incentives are rewards given to healthcare providers for the number of services they perform. The video emphasizes that despite the push for value-based care, the majority of physician compensation is still tied to these incentives, which prioritize quantity over quality.

💡Quality and cost effectiveness

Quality and cost effectiveness in healthcare refer to the provision of services that are both high in quality and economically efficient. The video points out that only a small percentage of physician compensation is based on these factors, indicating a disconnect between payment models and desired healthcare outcomes.

💡Health system revenue

Health system revenue refers to the income generated by a healthcare system. The video discusses how the current compensation models for doctors are designed to maximize this revenue, often at the expense of quality and cost-effective patient care.

💡Hospital-owned physician practices

Hospital-owned physician practices are medical groups that are owned and operated by hospitals. The video script reveals that half of the doctors in America work for such practices, and their compensation is primarily volume-based, which may not align with value-based care initiatives.

💡Specialist referrals

Specialist referrals are instances where a primary care physician recommends a patient to see a specialist for further evaluation or treatment. The video suggests that the current payment model may incentivize excessive referrals to specialists, potentially leading to unnecessary treatments.

💡Payment innovation

Payment innovation refers to new methods of compensating healthcare providers that aim to improve patient outcomes and reduce costs. The video criticizes the lack of such innovation in physician compensation, despite efforts by government and insurance carriers to promote value-based care.

💡Independent physician practices

Independent physician practices are medical groups not owned by hospitals or large healthcare corporations. The video suggests that these practices may have more flexibility to focus on quality and cost-effective care, as they are not influenced by the same revenue-maximizing incentives as hospital-owned practices.

💡Window dressing

In the context of the video, 'window dressing' refers to superficial changes or appearances that are made to give a false impression of progress or improvement. The term is used to criticize the healthcare industry's approach to physician compensation, which still primarily focuses on volume despite the rhetoric of value-based care.

Highlights

Dr. Eric Bricker discusses the topic of value-based doctor pay, which he argues is often just 'window dressing'.

A new article from RAND Corporation and Harvard published in the American Medical Association journal on January 28th, 2022 is being reviewed.

The study examined 31 physician practices owned by 22 different hospital systems across multiple states to understand pay structures for primary care doctors and specialists.

84% of primary care physicians and 93% of specialists were found to be paid based on the volume of patients and services, not outcomes.

Payment structures are often measured by Relative Value Units (RVUs), which incentivize doing more services rather than focusing on cost-effectiveness.

Only 9% of primary care compensation and 5.3% of specialist care were based on quality and cost-effectiveness.

Approximately 50% of doctors in the U.S. work for practices owned by hospitals, indicating a widespread issue with current compensation models.

The article concludes that despite value-based reimbursement incentives, compensation is still dominated by volume-based incentives to maximize health system revenue.

The disconnect between government and insurance carrier payment models and actual physician compensation practices is highlighted.

The article suggests that the current fee-for-service model is still dominant and not aligned with value-based care initiatives.

A quote from a hospital consultant's newsletter emphasizes the pressure on maximizing specialist referrals over other goals within hospital systems.

The leader of a hospital-owned physician group admits that the focus on specialist referrals limits innovation in payment models.

Dr. Bricker emphasizes the importance of watching what hospitals and practices do rather than just listening to their stated values.

The fact that 50% of doctors are still independent may offer an alternative to the hospital-owned practice models and their compensation structures.

The importance of independence in physician practices to potentially foster a shift towards cost and quality-based care is noted.

Dr. Bricker concludes by advocating for the need to observe actual practices over stated intentions in the healthcare industry.

Transcripts

hello this is dr eric bricker and thank

you for watching a health care z today's

topic is

value-based doctor pay

equals window dressing

that's right what do i mean there is a

brand spanking new article

from rand research and development very

famous think tank out in santa monica

california

and harvard

that was published on january 28th of

2022 so this is hot off the presses in

the journal the american medical

association now i did a video last week

reviewing an article from the journal of

the american medical association so like

jama is on fire they're like very much

focused on like health care finance

issues right now so i want to bring with

you this amazing article so

these researchers looked at 31 physician

practices

that were owned by

22 different hospital systems across

multiple states

and they wanted to say okay well what

type of pay structures do the primary

care doctors and specialists have at

these physician practices that are owned

by hospital systems and this is what

they found they found that the pay

incentivized

patient

volume

more specifically

84

of the primary care physicians were paid

based upon the volume of patient and

services that they

saw likewise 93 of the specialists were

paid based upon the volume of patients

that they saw and the volume of

procedures that they did now within the

hospitals and the practices themselves

they measure that with these rvus

relative value units and i'll leave a

link in the show notes explaining in

more detail what an rvu is so in other

words they're paid for doing stuff

they're not paid for outcomes they're

not paid for being cost effective

they're paid for doing services that's

why it's called fee for service now i

want to tell you right now i'm not 100

against some degree of physician

competition compensation being based on

doing stuff i mean you can't have a

doctor just sitting there collecting a

salary not doing anything right so to a

certain extent just like in any other

job to a certain extent like your pain

needs to be based upon you actually like

doing something as opposed to just

sitting there right so some of it has to

all right fine now

let's look at the amount of pay that the

physicians received based upon being

high quality and cost effective in other

words what portion of their compensation

was based upon

quality and cost effectiveness well the

rand study looked at that too and they

said look

nine percent of primary care

compensation was based upon

quality and cost effectiveness and only

5.3

of specialist care was based on quality

and cost effectiveness what's that

called

not that much now keep in mind

this is for phys they look at physician

practices that were owned by hospital

systems

now

50 i'll leave a link in the show notes

50

of doctors in america now work for

physician practices that are owned by

hospitals okay so it's half all right so

if you go to see a doctor like there's a

50 50 chance that they work in a

practice that's owned by a hospital

system that's called like a high

percentage okay now

the article makes a very interesting

conclusion and i'm gonna read it

straight from the article so let me get

so

they said

the results of this cross-sectional

study suggest that pcps and specialists

despite receiving value-based

reimbursement incentives from payers

the compensation of health system

primary care physicians and specialists

was dominated by volume-based incentives

designed to maximize health system

revenue i'm going to read that last part

again

pcps and specialists

compensation was dominated by

volume-based incentives designed to

maximize health system revenue so

there you have it

from the researchers in

the journal of the american medical

association again one of the most

preeminent journals in the world they

have a very vigorous review board

interestingly jama has a new

editor-in-chief who has also done a lot

of research about financial conflicts of

interest in publications and financial

conflicts of interest with doctors so

here you have the editor of jama now who

is very attuned to financial issues in

health care and they've published a very

serious article about the implications

of fee for service still being the

dominant mode of payment for doctors why

is this important i got a picture to

show that okay so we've got the federal

government and state medicaid programs

and health insurance carriers that are

saying look we've got all these

value-based payment and alternative

payment models etc etc etc we call this

payment innovation that's going to

hospitals okay fine so you got it the

point of this article is that the

relationship between the doctors and how

the hospitals and how they be doctors is

not value-based it is not consistent

with the way that the government the

insurance carriers are trying to

compensate the hospitals instead you've

seen that i've gone around there's a big

x here at this area they've basically

blocked that compensation uh

relationship between the hospitals and

the doctors and instead they're doing an

end around with still fee for service

volume based reimbursement

why is that important how the government

insurance company like how they pay the

hospital that's not really what matters

what matters is is how the doctor

performs patient care it's this

relationship here between the doctor and

the patient so as far as that

relationship between the doctor and the

patient goes it's still a

fee-for-service environment it is not a

volume-based environment and those

doctors are still incentivized for

volume for doing stuff for rvus and not

for quality and not for cost

effectiveness so essentially all this

stuff that's why i said window dressing

all this stuff up here between the

government and the insurance carriers

and the hospitals that's just window

dressing when it comes to the actual uh

behaviors and decisions by doctors with

their patients let's just call a spade a

spade that art this article points out

that disconnect now i want to read you a

quote from the gist

newsletter that i've mentioned before

it's a fantastic newsletter i'll leave a

link to it in the shows and this is by

hospital consultants and they published

a quote by a leader at a physician

practice owned by a hospital that is

very much in line with this research

article i'm going to go to that as well

so we're doing we're doing multimedia

here so let me actually read this quote

from a leader at a physician practice

that's owned by a hospital

it's very interesting the honest answer

is that we need different things from

our primary care docs and specialists

and if we're all in one group tied to

the system i.e the hospital system the

pressure will always be there to

maximize specialist referrals over other

goals it undoubtedly limits our ability

to innovate there you have it

the quote-unquote honest answer that's

what the leader of that now keep in mind

this was a this was said anonymously i

don't know if he or she would like put

their name out there in terms of saying

this but here you have the leader of a

hospital um physician group

essentially saying the same thing that

look that specialist referrals is the

ultimate goal of the physician practice

and that blocks innovation like payment

innovation okay so fine

well it's a the reason i'm telling you

all this is because it's important for

us to follow the andrew carnegie quote

of not listening to what people say but

watching what they do and what these

practices and hospitals have done is

they have continued to pay their

physicians the same way they have in the

past in other words it has not changed

okay so we need to watch what they do

not just listen to what they say now

what else is important about this i'm

not just here to present problems

without solutions that mean 50 of

doctors are employed by hospitals that

means that 50 of doctors are still

independent so arguably

now

having an independent physician doesn't

guarantee that they'll do things based

on cost and quality and not based upon

volume but i'm just saying obviously i'm

biased because i'm the chief medical

officer of an independent physician

practice it happens to be a virtual

practice but it's a practice nonetheless

that

we're independent it's important to be

independent it's important not to have

these types of relationships set up

and that's my point for today thank you

for watching a healthcare z