Report

White Paper: Medical Group Assessment–Client Example

Project Goals and Objectives

The primary goal of this project is to conduct an independent assessment of the Medical Group’s current compensation structure and methodology given the organization’s current journey to value and offer recommendations as to priority areas for improvement.  With the organization and Medical Group’s continued evolution as evidenced by the merger discussions with perspective partner health system, and the recent appointment of a physician executive for the Medical Group, this assessment is focused primarily on compensation, but secondarily offers observations on other domains important to successful Medical Group development including but not limited to organizational structure, culture, leadership/decision making, infrastructure, and population health preparedness.  

Specific project objectives include:

  • Provide an independent assessment of the Medical Group’s compensation design and fit with System strategy through key initiatives (contracting, developing high-value network, CIN, growth, etc.);  
  • Enhance the Medical Group’s shared accountability for an evolving revenue model that includes greater performance and population-based insurance risk; and
  • Identify and agree on imperatives for changes relative to key System initiatives (e.g., value and population health).  Produce a comprehensive white paper outlining these recommended changes.

Process Highlights

Health Care Futures worked closely with System and Medical Group leadership throughout this engagement leveraging the following inputs and analytics: 

  • Completed approximately 25 interviews across a cross section of representative Medical Group 2 (MG2) and Medical Group 1 (MG1) primary and specialty care practice providers, physician participants in internal Medical Group committee structures, operational leadership and key staff positions, including IT and quality areas. 
  • Ongoing interactions with a Project Work Group, consisting of Medical Group and CIN leadership to review findings and process questions.
  • Analysis of a comprehensive data/information set including but not limited to Medical Group financial detail, employment agreements, incentive goals and performance summaries, MSA and PSA agreements, organizational charts, ACO and CIN background material, and Health System strategic plan.
  • Collaborated with Value IQ to determine its findings and ongoing work effort. 

 

Key Findings and Observations 

Health Care Futures developed a scoring matrix on several Medical Group domains relative to compensation, infrastructure, provider engagement, and other areas in which key findings were made throughout our process.  Table 1 highlights an overall scoring for the Medical Group domains related to Heath Care Futures’ experience with other integrated delivery systems/ medical groups.  Additional supporting detail relative to these domains is provided on pages 8 – 17 of this report.

Table 1:  Summary Matrix 

Level of Development/Maturity
Domain Under Developed  Developing  Average  Maturing   Mature 
  1. Compensation: Equity
  1. Compensation: Market Competitiveness
  1. Compensation: Performance Alignment Programs
  1. Infrastructure: Data, Analytics and EHR 
  1. Vision/Provider Engagement/Culture
  1. Communication
  1. Funds Flow & CIN Structure
  1. Standardized Work Definitions

Based upon Health Care Futures’ completion of interviews, analysis of requested information and provider compensation strategy and design work nationally, the following represents a summary of findings and observations.  

 

  • Medical Group vision is not commonly understood.  MG1 shows clear tenets of a vision to develop a high functioning medical group aligned to health system goals and success in value-based reimbursement and population health environment.  The recent addition of a physician executive to lead the Medical Group enterprise, planned investments in a common electronic health record and associated data and analytics systems, partial governance committee structure (MG2) developing quality performance compensation elements and emerging CIN plan combine to represent the tenets of an organizational vision for a high functioning and aligned “health system medical group”.  Having said this, such a vision is not readily apparent or articulatable across the Medical Group, contributing to inconsistent understandings of Medical Group direction, imperatives, and expectations and ties to compensation design.     
  • Compensation design and implications.  Review of Medical Group current compensation design remains reflective of legacy MG2 and MG1 models respectively.  The following are key, summary observations: 

 

    1. Alignment to Emerging Health System Strategy not Transparent – Medical Group compensation designs remain largely production focused and transaction oriented.  Current clinical and management systems are limited largely to accurate wRVU tracking and basic quality performance, though compensation for quality performance is currently limited to MG2 practices and further limited in the magnitude of importance it plays in overall compensation.  

Medical Group compensation design also lacks ties to empanelment strategies fundamental to successful population health performance.  Key empanelment elements are lacking (e.g., consistent approach to panel definition, measuring provider work through panel management, risk adjustment methodology, tracking in terms of cost and quality) in terms of what we increasingly see in high functioning medical groups.  Similarly, other complementary provider work behaviors, such as asynchronous virtual visits, patient interactions through patient portals such as MyChart and curbside consults with specialists that preclude unnecessary face to face visits, are not currently compensated and thus not yet embraced by providers nor seen as valuable to emerging population health initiatives.

    1. Lack of competitiveness a concern – Health System operates in an extremely unique market in terms of provider compensation.  Nationally, provider compensation is becoming increasingly homogeneous due to standardization of available benchmark information and continued movement to common health system employment models and compensation designs.  This national phenomenon, coupled with highly competitive markets and national physician shortages continue to drive year over year growth in most specialties.  However, the State area is somewhat unique in that given somewhat depressed physician compensation levels relative to the nation, Medical Group physicians appear largely satisfied with current compensation levels, largely due to increases over independent practice levels.  Our concern is that this situation will not be sustainable as recruitment is increasingly a nationally competitive process, especially with those coming directly out of training.  This will be exacerbated by the fact that Medical Group composition is specialty heavy and is in need of aggressive primary care growth.  To the degree that such growth will need to come through providers new to the area rather than acquisition of existing practices, current compensation levels will likely present significant challenges to successful primary care recruitment and needed growth.  The importance of the CIN should be contemplated as to whether the utility of CIN alignment will suffice both in terms of substance and timing in staving of need for additional Medical Group employment of primary care providers. 
    2. Lack of equity will become a distraction – Compensation in and of itself will never solely drive or influence physician behavior.  However, compensation can and does become a significant distraction to physician performance and satisfaction, and inequities currently exist across MG2 and MG1 among specialties and within given specialties in each group.     
    3. CIN and population health vision provide great hope, but funds flow important – This System strategy will require a robust primary care base and high functioning employed group to manage the majority of contracted lives.  A common characteristic we have observed of successful CINs (and aligned medical groups) is the issuance to and receipt of incremental shared savings or similar payments by employed providers in order to most effectively incent desired population health behaviors.  For the Medical Group, this will mean that such payments be transparent and visibly incremental to other elements of compensation and not merely an offset to practice subsidies by the System.
  1. Medical Group operations currently support a status quo mentality.  Essentially, Medical Group practice operations reflect the caution of the System to not allow the Medical Group’s supporting infrastructure to get out ahead of and potentially stymie overall System integration.  To this end, Medical Group management has focused (and has done so rather effectively) on quickly onboarding as many physicians as possible, often requiring less focus on immediate conformity to common compensation or practice constructs.  This has resulted in a current state with absence of or significant variation in:
    1. compensation equity within specialties and across practices
    2. practice management structures and support infrastructure
    3. clear physician leadership 
    4. standard operating procedures
    5. commitment to a common Health System patient experience
    6. data acquisition and analytics 
    7. EMR 
  2. Medical Group culture development is only just beginning.  The relatively young and continued evolution of Health System and a desire for a more cautious approach to practice integration and Medical Group formation explains a current culture largely reflective of legacy affiliation.  MG2 has a somewhat developed culture reflective of initial group governance/committee structures, and functionality associated with more advanced ACO experience.  MG1 conversely has a less evident group structure and practices largely express practice specific attributes.  The inclusion of perspective partner health system physicians will add another cultural dimension and consideration for a combined Medical Group requiring efforts to align focus and affinity to a common Medical Group vision and model of care.  

It was further observed that practices retain silo versus group perspective and focus relative to practice needs, opportunities and decision making.  Lack of clarity as to group vision, structure, decision making and upstream and downstream communication/information flow together contribute to the lack of a common culture in the Medical Group as a whole.

Recommendations

Based upon our observations outlined above, Health Care Futures believes that several foundational priorities should be pursued prior to or coordinated with any substantive changes in compensation design.  Absent such an approach, the tendency will exist to extend fragmentation in execution and development efforts and not provide the context that is essential for Medical Group provider understanding of the rationale for needed change in compensation philosophy and design. 

Similarly, the combination of new physician leadership and pockets of strength (e.g. quality management on MG2 side) provides a unique opportunity to approach Medical Group development with a fresh perspective while leveraging existing capabilities and resources.  Doing so will better enable new leadership to engage existing physician thought leaders in definition of needed Medical Group vision, structure, culture, and as defined, compensation design changes can be more clearly envisioned. 

 

To this end, Health Care Futures recommends the following priority initiatives:

 

 

  • Build the medical group (foundation first mentality) … minimize short cuts.  Establish clarity as to the medical group’s purpose and vision related to Health System.  Initial focus should include: 

 

      1. Vision development (unified medical group)
      2. Physician and operational leadership structure (inclusive of CIN and integration of MG2 and MG1)
      3. Determine “yes” or “no” to formal governance structure
      4. Utilize interim Physician Steering Committee (consisting of 8-10 MG1 and MG2 physician thought leaders) to help guide development of integrated system Medical Group business and integration plan 

 

  • Finalize timing, budget and value proposition related to both EMR and data and analytics enterprise wide solutions.  While these decisions may be made independent of medical group leadership structure to encapsulate the entire health system, clarity of implementation scope and commitment (timing) are required for providers.  
  • Conclude on utility of available alignment strategies (in the short term) to stave off missed integration opportunities with consolidating primary care community.  Determine realistic timing associated with CIN execution based upon community provider feedback and evaluate in context of ongoing, full integration opportunities (e.g., employment and/or PSA).  
  • Develop working construct of provider compensation.  While compensation redesign is not an immediate driver of work, obtaining focused feedback from primary and specialty care providers should be advanced to assure informed data and analytics specifications. 
  • Assure CIN funds flow aligns with long range projected structure of employed provider compensation.  Simply put, funds flow for employed providers, the engine of the CIN, must be engineered to afford employed providers a share of any earned incentive/ shared savings dollars. 
  • Develop interim and sustainable communication and engagement strategies.  While the solution may not be elegant in the short term, new evolving leadership structure (as recommended above) must include functional ability to push and receive communication with front line providers that is consistent and informative.  Ongoing planning efforts should be socialized with documented timelines and expectations. 

 

Next Steps

Based upon Work Group input and needed refinement, Health Care Futures recommends inviting back interview participants to debrief on consultant observations and recommendations and offer opportunity for additional input as to where Medical Group development goes from here.  We believe this to be an important contributor to building physician engagement.  

Supporting Detail – Key Findings and Observations

 

The following sections of this report provide supporting detail on the aforementioned eight domains relative to key findings.  

 

The Health System physician enterprise has been constructed through the amalgamation of the MG2 and MG1.  On the whole, the System is operating with two separate medical groups that possess significant, core differences.  The MG2 is a more organized group with a singular compensation plan built organically through a vision of a local physician leader.  In addition, multiple physician committees, such as the Specialty Advisory Committee and QI Committee, serve to create a more unified culture and work to support physician compensation.  Additionally, MG2 operates under the declaration of being a Group Practice under Stark, resulting in at least one ancillary pool (known to Health Care Futures).  The MG1 operates in an entirely different manner, as the group primarily cultivated through multiple economic arrangements (e.g. separate MSAs, PSAs, etc.).  Consequently, the MG1 does not possess a single, equitable compensation philosophy, but instead utilizes numerous compensation models (largely production based, with different compensation rates within these frameworks).  

Differences in provider compensation “opportunity” were made apparent through provider interviews and data made available.  Table 2 highlights multiple compensation methodologies, as well as differences in compensation rates, across three specialties.

Table 2: Compensation Equity

 

Further, there is variation in affording providers, to a varying degree, access to other ancillary alignment options including but not limited to Professional Services Agreements and Management Services Agreements.  This variation also creates perceived and real differences in the total opportunity of compensation among providers. 

The above differences in compensation rates and methodologies illustrate the absence of a System-driven, unified provider compensation philosophy.  Compensation equity in and of itself will not drive high performance; however, too much inequity almost certainly creates hurdles that preclude other more system-oriented work (integration, care model advancement, etc.) from being completed. 

While the MG2 possesses a number of signs of a mature medical group with an equitable approach to compensation, an opportunity exists for the System to further align the two medical groups through a singular compensation philosophy.

 

The State and the broader Northeast markets are typically much different than many other parts of the country in terms of provider compensation.  There are several facts which have historically supported provider compensation to be different and often much lower than other markets, including: 

  • Suppressed physician incomes have contributed to significant independent practice migration to health system employment.  Interviews suggest that competing employment options are aggressively investing in “buying share” of the aligned provider market.  
  • Leadership interviews suggest that the State provider reimbursement for large commercial insurers may be below Medicare.  
  • There are ample training programs throughout the region creating a historical perceived over-supply of physicians.  However, the State is currently ranked 12th in the country in terms of active patient care physicians per 100,000 population, and 18th for active primary care physicians (source: AAMC 2017 State Physician Workforce Data Report).  

Health System physician current alignment strategy includes both employed and PSA relationship structures, in addition to other considerations (e.g., MSA, separate concierge practices) in an effort to offer greater flexibility and differentiate its value proposition.  This is, however, contributing to fragmentation in practice operations, management and patient experience.  Anecdotally, physician compensation levels are competitive and reflective of market rates, though inequities exist between newer and legacy practices. 

Additionally, Health System recruitment priorities are currently focused on primary care growth and/or alignment via the CIN as the medical groups are disproportionately specialty and subspecialty oriented.  This is described as reflective of the historically “hospital based” strategic orientation.  It is envisioned that primary care will be challenged to maintain the “relatively lower” rate structure as recruitment continues.  Over time, it is likely there will be additional market corrections locally and regionally that pressure the magnitude of compensation.  The opportunity to shift towards other compensation drivers in a population-based environment may be helpful in resizing the magnitude of compensation.  Representative compensation comparisons and benchmarks can be found in Table 3.

Table 3: Compensation Benchmarking

Specialty Total Compensation Benchmark Compensation per wRVU Benchmark Representative Health System Compensation Plans
Family Medicine
  1. Fixed salary of $210K per year
  2. Guarantee of $200K with bonus of $40/wRVU in excess of 5,000 wRVUs
  3. Fixed salary of $185K per year
  4. Production model of $40 per wRVU
Internal Medicine
  1. $185K salary; $38/wRVU in excess of 4,605 wRVUs
  2. $170K salary; $38/wRVU in excess of 4,474 wRVUs
  3. $180K salary; $40/wRVU in excess of 4,050 wRVUs
  4. $162K salary; $38/wRVU in excess of 3,125 wRVUs
Pediatrics
  1. $160K salary; $40/wRVU in excess of 3,900 wRVUs
  2. $180K salary; $36/wRVU in excess of 3,753 wRVUs
  3. $150K salary; $40/wRVU in excess of 2,800 wRVUs

Source:  1) Medical Group Management Association, 2) American Medical Group Association, and 3) Sullivan Cotter.

 

Based upon a qualitative review through interviews and detailed assessment of current methodologies, the following facts and observations are noted: 

  • Current Medical Group compensation methodologies are largely production/RVU based, though MG2 does provide incentives for up to an additional 10% of compensation based upon provider specific performance against defined quality, patient satisfaction, financial and citizenship criteria.  
    • Quality, patient satisfaction, and financial performance incentive elements are weighted equally (3% each) while the citizenship element is weighted at 1%. 
  • Quality performance management is handled separately by MG2 and MG1, and efforts are at different levels of maturity and not yet integrated.  Provider confidence in ability to succeed in value based and population health initiatives is significantly greater among MG2 providers interviewed than among MG1 providers interviewed largely due to respective ACO performance.   
  • Health System’s strategic plan recognizes a highly competitive health care provider landscape in the State coupled with a changing dynamic in reimbursement models and care delivery, contributing to an increasing focus on the shift from volume to value.  Belief exists that the environment is exponentially migrating with inflationary and performance gates becoming the norm in the commercial environment. 
    • Shared savings models exist with United Healthcare’s Medicare Advantage product and is in process with Horizon Health as part of the emerging CIN.  
    • Champions exist across both practice groups relative to participation in innovation initiatives including CMS’s CPC+ and Accountable Care Organization programs.  However, significant differences exist in terms of how performance related benefits are shared, with MG2 factoring benefits into the 10% quality incentive, while MG1 states that the use of potential benefit will be used to offset practice subsidies. 
  • A consistent theme of our interviews was that physicians embrace a move to greater value-based contracting and compensation methods provided needed support resources are in place including a common and functional EHR.  However, physicians expressed reservations with any move to two-sided economic risk models absent improvements in information capture, accuracy/reliability, analytics and reporting.  A bigger opportunity of putting primary care in a capitation or sub-capitation position may be viewed more favorably if the value proposition of the CIN can be demonstrated.
  • Health System strategic vision reflects this shift and conveys organizational focus on top level clinical performance, effective operational and clinical integration and contributions to the health of communities served.
  • In support of the System’s vision, several core strategies are defined that have direct implications for the Medical Group’s approach to provider compensation as highlighted below.  Table 4 highlights these core strategies.

 

Table 4: Core Strategies

Core Strategies Provider Compensation Considerations
Improve the health of its communities
  • Provider specific performance expectations and incentives relative to care model design that target population health and wellness (e.g., empanelment, medical home)  
Create an integrated care delivery system
  • Methodology should encourage in-network care management and demand infrastructure that affords providers necessary data to guide clinical decision making 
Develop an aligned physician network
  • Funds flow model that aligns direct financial incentives with system/CIN performance 
  • Desire for group interdependency and shared risk among all providers 
Deliver high-quality care
  • Compensation incentives tied to individual performance relative to reducing unnecessary care delivery variation and the total cost of care
  • Infrastructure that readily provides risk adjustment and credible cost data to inform provider decision making 
  • Compensation incentives tied to individual performance that balance resource efficiency goals with disease management and other population-based metrics
Continue to reduce the overall cost of care
Partner with payers on value-based care initiatives/models
  • Methodology that encourages provider behaviors in concert with total cost of care and quality goals/metrics 

Source:  Health System’s strategic plan; Health Care Futures.

 

Health System utilizes several data analytics and EHR technologies throughout the System, with significant segmentation and limited compatibility between the two medical groups (e.g., MG2 use of Allscripts product and MG1 use of Cerner product).  The System is in the process of developing a vision for Information Technology and has justifiably identified the need for the Medical Group to migrate onto one EHR platform (interviews suggested that an RFP is in place for a System EHR replacement project).  While no definite timeline has been identified for both the selection of a new EHR and its implementation, interviews with management indicated that this will be an immediate priority item for Medical Group leadership.  The integration of Gaps in Care and Care Management into the System EHR is envisioned to be part of the EHR replacement project. 

While individual physician champions for EHR technology are apparent, more so within the MG2 because of the presence of physician committees (e.g., Primary Care IT Committee), many providers expressed frustration about limited operational support and available analytics during interviews.  Commonly-voiced concerns in provider interviews included:

  • Lack of information on patient panels through Cerner EHR
  • Poor understanding/use of patient portals
  • Absence/shortage of quality data for individual practices
  • Hesitation to utilize value and outcomes-based compensation absent an increased level of System investment in Information Technology infrastructure

Despite the concerns, providers expressed on data, analytics and EHR technology, many providers also made note of an appreciation for the supreme effort of management to create data solutions despite a lack of technological infrastructure.  This was exemplified by MG2 physicians expressing appreciation for an internally-created quality dashboard that management developed in collaboration with the State Innovation Institute.  This dashboard has allowed physicians the ability to access their own practice’s quality data metrics and is produced on a monthly basis; results have been positive, with a noted improvement in quality since implementation.  Furthermore, this quality dashboard has increased the MG2 providers’ comfort level with the current 10% of total compensation tied to performance metrics.  Table 5 illustrates a summary report of information made available to providers.

 

Table 5: Health System Internal Quality Dashboard

Source:  MG2 reports

While the System is currently in the process of developing an Information Technology vision and lacks a unified IT system for data, analytics and EHR technologies, building blocks are in place for further development of infrastructure capabilities.  These foundational elements include:

  • Evidence of leadership’s ability to overcome lack of technological infrastructure and produce a solution for quality data measures
  • Partnership with perspective partner health system and previously demonstrated ability to collaborate on IT initiatives
  • System agreement on transition to unified IT solutions across both medical groups and all individual practices

From Health Care Futures’ conversations with the ValueIQ team and internal interviews, we understand that an optimal analytic environment, with respect to data and tools, in support of the System’s vision of population health management does not exist today.  Selection and implementation of a platform will provide the longer-term solution.  However, this must be complemented with the discipline to limit enhancement to many of the existing reporting systems and modify as needed.  Per ValueIQ recommendations, this will include but not be limited to:

  • Establish controls that eliminate, to the greatest extent possible, acquisition or creation of additional single-purpose cost or clinical databases
  • To reap full value from the acquisition and installation of this new platform, the System should deliberately review each of the current health system analytic and reporting systems and define a transition plan that would move any additional required data and the related reporting to the new environment.  While this will not likely eliminate all the special purpose databases, this movement to a single source of truth for enterprise analytics and reporting is of significant value.

 

The Health System Medical Group largely represents two different cultures:

  • MG2 reflects a more developed group practice culture with practice affinity to the Medical Group, recognized committee structure, and acknowledgment of group leadership and strategic efforts such as the ACO and quality initiatives.  However, group culture has matured minimally post-merger as Medical Group integration efforts continue. 
  • MG1 practices appear more siloed in their thinking around their respective practice and/ or the hospital to which their practice is aligned.  Interviews reflect little affinity to a “medical group” culture in terms of group value, expectations or decision-making processes.  Providers feel greater administrative affinity to hospital administrators based on how practice integration occurred.      

No integrating Medical Group governing or administrative structure is currently in place and organized communication cascades, both upward and downward, are lacking.  The lack of Medical Group physician leadership/champion has been recognized as a critical gap in group development.  The addition of a physician CEO is optimistically expected to contribute to a unified culture.

 

The aforementioned cultural differences between MG1 and MG2 contribute to communication issues between administrative leadership and providers.  During interviews, providers generally expressed an affinity for individual administrative leaders, who were described as hard-working individuals.  However, providers within both medical groups noted multiple examples of poor communication processes that have led to increased workflow issues.  

A lack of timely communications in Medical Group composition changes was described by multiple physicians.  This has led to a state of confusion for physicians on which providers are “in network” and leads to difficulties in referrals.  In addition, multiple providers expressed dissatisfaction in the communication processes necessary for making simple changes to front office staffing.  For example, one physician within MG1 mentioned a lengthy process for the hiring of a medical assistant for his practice; this process was described as having to go through multiple upstream levels of communication before it was ultimately denied.  A need for clarity in how communications cascade up and down within the developing Medical Group structure is clearly indicated.

 

Based on ongoing migratory changes in the environment, Health System has been developing a new value proposition for community and employed physicians whereby: 

  • A CIN is envisioned as a structural vehicle to support migration towards value
  • The strategy is pluralistic in supporting both employed Medical Group and aligned community providers
  • Significant infrastructure is under development, including but not limited to a bridge agreement, rate differentials with care management funding, and communication/ subscription materials
  • A compelling, initial value proposition exists through a CIN Horizon and Medicare Advantage offerings

The initial focus on primary care under the CIN is consistent with most implementation strategies, and a 50 percent sharing pool based on the Horizon straw framework is attractive to participants.  As it relates to compensation, any potential shared savings or returns from performance under CIN contracts are not currently accretive to employed Medical Group physicians.  Without a change in compensation methods, there is no direct payment inclusion for CIN distributions.  The CIN success beyond initial provider enrollment requires alignment with the Medical Group and a supporting funds flow that is direct and transparent to employed medical group providers.  Without such linkage, the utility of the CIN is sub-optimized. 

 

The decentralized nature of the various practices within the MG2 and MG1 has contributed to providers possessing a great deal of freedom in establishing work schedules.  Provider sentiment from interviews was generally positive in regard to the flexibility gained through the decentralized structure of the two medical groups.  However, inconsistent with a mature, singular system of care, the System lacks consistent policies on the following work standards:

  • Work hours
  • Patient contact time (e.g. patient contact hours)
  • General work availability (call, hospital rounding, vacation, CME, etc.) 
  • Access standards 
  • Effects of geographic positioning of practice sites on provider availability (minimum evening/weekend coverage)

The System has generally ceded the decision making on these issues to the medical group (MG2) or individual practice (MG1).

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