How Practices Can Add Incentives to Physician Pay

More practices and hospitals are looking to tie higher portions of physician pay to incentives. But building an effective incentive program that has an impact on physician behavior - and, ultimately the health of patients and the organization - is no easy trick.

MGMA healthcare consultant Jeffrey Milburn provided some guidance Monday to a standing-room only audience at MGMA11.

Currently, most practices base about 5 percent to 10 percent of physician compensation on incentives, such as those for productivity, providing quality care, and getting high marks on patient satisfaction surveys, Milburn said. That amount could increase to about 15 percent to 20 percent in the future.

“I’m seeing more and more plans with incentives,” he said.

But to get physician buy-in, he said, the incentives need to be “meaningful enough to get the physician’s attention,” and based on metrics that the physicians accept as reasonable and accurate.

“If the doctors don’t believe in the numbers, you’re going to have a problem,” Millburn argued. And without physician buy-in, the program won't have any impact on how physicians work, which is the whole point. He suggests practices focus more on objective incentive measures, rather than subjective ones.

Some practices implement a subjective measure that Milburn calls “the good citizenship award,” in which a portion of the physician's salary is determined by her ability to “play nice in the sandbox with everybody else.”

Instead, he suggests practices develop incentive benchmarks by looking at established resources such as their specialty society, the MGMA, or the American Medical Group Association. The “data has to be accurately accepted,” he said.

It’s also essential that physicians have a clear understanding of the incentives, Milburn said. He suggests practices provide information to their physicians frequently (that means more than yearly) about where they stand in relation to their incentive goals.

In addition, if the money is available, reward physicians frequently for their incentive targets reached, he said. But don’t simply reward them with a deposited paycheck as you normally would.

“Go around and hand a separate check for the incentives,” Milburn said. “That’s going to mean something to them.”

The incentives also need to be of enough monetary significance that the physicians take them seriously. In other words, an incentive goal of $5,000 might not mean much to a surgeon, Milburn said, but it will mean a lot to a primary-care physician.

Finally, it’s important to ask for physician input regarding compensation models and make sure that they have a voice in the change process, Milburn said.

“Ask physicians to come up with goals and objectives,” he said. Ask them: “What’s a successful plan to you?”

Milburn, who has a background in financial analysis and practice management, said it’s a good idea for practices interested in higher incentive-based salaries to “start slow but over time migrate.”