Physician Compensation Still Hinges on Volume at System-Owned Practices

Despite a decades-long push toward value-based payment, physician compensation arrangements at health system-owned practices still primarily revolves around the volume of services delivered, according to a new study from RAND Corporation.

The study recently published in JAMA Health Forum examined physician compensation structures at 31 physician organizations affiliated with 22 health systems in four states. Researchers interviewed practice leaders, reviews compensation documents and surveyed the practices to determine what drives physician compensation for both primary care and specialty doctors.

They found that volume of services was the most commonly included physician compensation mechanism for both primary care and specialty physicians. More than 80 precent of primary care physicians and over 90 percent of physician specialists had volume has the primary metric driving their base pay, researchers reported.

Additionally, volume comprised most of a physician’s total compensation at physician organizations using volume as a metric for physician compensation. The study showed that volume accounted for an average of 74 precent of total compensation for specialty physicians and 66 percent of total compensation for primary care physicians.

Value-based metrics were commonly used in physician compensation arrangements. However, payments to individual physicians for performance on clinical quality, patient experience, total cost of care, access to care, and the like represented a small portion of physician compensation, researchers stated.

“Despite growth in value-based programs and the need to improve value in [healthcare], physician compensation arrangements in health systems do not currently emphasize value,” Rachel O. Reid, the study's lead author and a physician policy researcher at RAND, a said in a press release. “The payment systems that are most often in place are designed to maximize health system revenue by incentivizing providers within the system to deliver more services.”

The study’s findings are in contrast to overall value-based reimbursement progress, which shows that hospitals and health systems lead the transition to value-based payment arrangements with payers. That shift from fee-for-service to value-based payer contracts does not seem to be trickling down to individual physician compensation arrangements, which could be a missed opportunity for the value-based care journey, the study indicated.

About 70 percent of physician organization leaders told researchers at RAND Corporation that increasing volume of serviced delivered is the top way that primary care and specialist physicians can increase their compensation.

Meanwhile, researchers stated that the small fraction of compensation based on value-based metrics is “thus likely to only marginally affect physician behavior.”

More than half of physicians worked for a hospital or health systems as of 2018, including in system-owned physician practices, according to the latest and most complete dataset from the American Medical Association (AMA).

“For the U.S. [healthcare] system to truly realize the potential of value-based payment reform and deliver better value for patients, health systems and provider organizations will likely need to evolve the way that frontline physicians are paid to better align with value,” Reid said.