It is all too common, at a quarterly hospital board meeting, a hospital CEO faces tough questions regarding the financial loss of the employed physician group. The discussion ends with the board placing the CEO on notice - "you need to reduce the loss of the employed physician group this fiscal year!"
We were engaged to work with one organization to reduce this loss. Case in point, the CEO addressed the problem by engaging the physicians to drive financial improvements, then aligned the physician compensation with their respective individual, as well as the group's performance.
The work included three steps:
- Establishment of an Executive Physician Practice Committee (EPPC) and alignment of goals
- Development of an action plan
- Redesign of the compensation model
1. Establishment of an Executive Physician Practice Committee (EPPC)
A five physician EPPC was established with the following goals.
- To establish a culture where providers feel valued and appreciated
- To reduce the employed physician group loss
2. Action Plan
An action plan was established by the EPPC to improve the culture of the employed physician group.
- A multiple-step action plan was established to address physician concerns
- Management presented a list of financial improvement opportunities including driving patient revenue which were adopted by the EPPC
- Monthly meetings were held with each physician to ensure identified improvements were implemented
- Financial goals were established for each physician pod and the overall group
3. Compensation Model Redesign
A new physician compensation model was implemented with two components:
- Compensation based on individual collections
- Additional incentive compensation based on financial and quality measures
Physicians received a percentage of individual practice collections. Additionally, an incentive component was included which allowed physicians to share 50% of the financial improvement above the budgeted loss.
The Impact
The turnaround plan resulted in a reduction in the loss per physician of $50,000 in the first year. The plan succeeded since the physicians were incentivized to be productive and drive revenue.
As a result of these incentives, primary care visits increased by an average of three visits per provider per day. Also, the EPPC made tough decisions - employment agreements for several unproductive physicians were either revised or terminated.
The board was very satisfied with the financial improvement and the CEO built credibility to significantly expand the group. The group has grown to be one of the largest groups in the Midwest.
To learn more or to request a complementary assessment, email Jeff directly at jpeters@luminahp.com or visit www.luminahp.com/medical-group-strategy.