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Physician Compensation Methodology Must Change!


In our current health care environment, most professional services are paid on a fee-for-service basis. The payment is usually from a third-party administrator or an insurance company. Many only supply a partial payment, expecting the remainder to be billed to the patient. Although much in our lives have similar processes (ie fee for service), these are generally brief transactions, such as auto repair, home services, and so on. The relationship between the physician and patient is crucial to the prevention and treatment of disease, and this transactional model deters building that relationship. Primary care providers are asked to see more and more patients per day, and specialists are expected to increase the volume of their expensive procedures. None of this benefits the patient experience or the patient outcome.

Please note that this is not a discussion regarding reimbursement. Reimbursement means “being repaid,” which is not applicable in a discussion regarding compensation. Reimbursement occurs when you lay out money for travel and then are reimbursed by your employer. The term has entered the lexicon of health care payment, but it minimizes the issue of appropriate compensation for services provided. Fee-for-service payment can be an appropriate method of physician compensation, provided the service is defined as an ongoing process with a definable outcome.

Many organizations that employ physicians have moved to the relative value unit (RVU) model of productivity and payment. An RVU is a value placed on the procedure being performed, including office visits, hospital visits, and procedures. This model is no better in terms of the relationship between the patient and the provider. Surgeons who operate do get paid a global fee for preoperative, operative, and postoperative care. Obstetricians are paid global fees for prenatal care and delivery. These models are an improvement, but they still do not consider appropriateness criteria or outcome. Therefore, if obstetricians perform ultrasounds at every prenatal visit, they do not get paid for the office visit, they receive a fee for each ultrasound performed. A surgeon who repairs a hernia collects the same payment whether or not the repair is successful. If the hernia is repaired using a robot, the surgeon may get paid more because of the higher RVU. The whole process may not be the most beneficial to the patient, but it is most beneficial to the doctor.

Flat salaries to physicians eliminate any incentives. Although physicians clearly do not only work for monetary reasons, it is difficult to imagine them getting out of bed and driving to the hospital in the middle of the night when their income will not be affected. The expenses of college, medical school, and residency dictate that a young physician enter the work force at a later age and with approximately $750,000 of debt. This debt forces the physician to work longer hours to generate enough income and leads to significant burnout and dissatisfaction with the profession. This coincides with a time in which there is a shortage of physicians.

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-Morey Menacker, DO (President, Hackensack ACO)

This article originally appeared in the May 2019 issue of The American Journal of Medicine.

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