The predominant pay model in physician compensation has traditionally been based on individual productivity. A recently released issues brief and news release by the Center for Studying Health System Change confirms the continued dominance of productivity incentives (7 in 10 doctors are paid in this manner) but also notes an increase in compensation based in part on quality measures (up from 17.6% of physicians in 2000-2001 to 20.2% of physicians in 2004-2005). This trend, the issues brief notes, is part of a bigger movement in improving healthcare quality and value:
Although the United States spends more per capita on health care than any other nation, numerous reports highlight deficiencies in the quality of care.5 Pay for performance is one approach under consideration as a way to garner greater value from the more than $1.9 trillion spent annually on U.S. health care. A number of health plans and other private payers have initiated P4P programs, and the Centers for Medicare and Medicaid Services (CMS) has several demonstration projects underway to investigate whether P4P can be incorporated into Medicare. Congress in December 2006 passed Medicare legislation to pay a 1.5 percent bonus to physicians who report on quality measures in 2007.
As physician practices are challenged to incorporate quality and value into their measurement and reward systems, it is also important that they begin looking at compensation in a more strategic manner. My colleague Teresa Daly of the Prouty Project and I recently co-authored an article "A Practical Step Toward Clinical Excellence" for Minnesota Physician Magazine (see link to download article below) in which we urge physicians to develop and implement more comprehensive compensation programs which reinforce their practices' missions, values and key objectives.
