Physician Compensation Trend In 2022

Dr. Adam Tabriz

An uneven fad from Fee-for-Service Reimbursement to Value-Based Compensation

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The concerns for human existence and health have reached back centuries. Since the ancient Greek epoch, when only the elite and the privileged enjoyed personal cleanliness and sanitation, the concept of public health has been growing. It is one of the most critical challenges for almost every community.

Every era had its experimentation with how physicians and healers would be reimbursed. For instance, It was typical for Greek physicians to be employed annually by their respective metropolis. Then, average physicians received reimbursement from funds allocated to them by their municipality. The standard payment disbursed to physicians for incidental visits was very small, with no more than two "goats."

Even though varied reimbursement models throughout history by location, all had one thing in common. They were all Fee-for-service, a model in which physicians charge apiece per medical service they render. In other words, in a fee-for-service scheme, physicians are compensated based on the number of services and procedures they provide. Based on the criteria mentioned, later on, until today, insurance payers reimbursed physicians as well.

Today the physician reimbursement climate is shifting from Fee-for-service to the one that sets the payment amount based on the value perceived by the payer for the service. That is the Value-based (or Merit-Based) reimbursement system. I use the term "Payer" because, in the prevailing sense, the consumer or patient is not the one who determines the quality and fair value of the service rendered to them. Instead, the 3rd party payers like private insurance or Medicare often decide how much and under what condition a physician should be reimbursed.

Value-based reimbursement requires a set of references or indicators to allow payers to measure the quality of service. They do so using a predetermined level of task references called Key Performance Indicator (KPI) that physicians must fulfill to get reimbursed.

Although all industries are historically familiar with the concept of KPI, it is relatively new to Healthcare, particularly to physician practices.

Applying the Key Performance Indicators and Value-based Reimbursement model has strained Physicians' Practices.

The recent inevitable increasing administrative tasks associated with the transition to value-based reimbursement have significantly strained Physician productivity. As a result of the physicians' burden of dealing with satisfying payers, KPIs have resulted in physician burnout.

According to the MGMA stat report on May 25, 2022, 42% of physicians in medical groups confirm that quality performance metrics like KPI are part of their physician reimbursement schedules. The MGMA's Physician compensation benchmarks deeply likened the metamorphosis from volume to a value-based payment system.

In 2016 when the Value-based reimbursement system was introduced, only about 26% of medical practices payments were (at least partially) tied to performance and KPI. That increased to 38% by July 2018. Amid the COVID-19 pandemic of 2020, the MGMA poll indicated an additional 35% increase in the portion of compensation concatenated to quality in the previous two years.

Whether physicians are employed or practice independently, the overall compensation was comparable even if they get reimbursed partially or 100% under a value-based reimbursement scheme. But, with two significant differences:

  1. To earn the same amount, physicians under Value-based reimbursement naturally must have put in additional time only to be able to satisfy the KPIs set by the payor.
  2. Hospitals and more extensive health systems employ almost twice as many physicians paid at least partly through value-based models.

The uptake of the Value-based Reimbursement Model seems to be Inevitable

One conclusion we can quickly draw from the MGMA report is the growing number of physicians' compensation towards a value-based reimbursement model.

Physicians may run by vacating independent medical practices, but they can not run as they will fall into the trap of larger systems. They will lose independence, but they will still face administrative burdens even though they may be more unpretentious.

Independent physicians are not immune from the value-based payment model. That is the reason for their overwhelming complaints, burden, and burnout.

The solution for physician burnout and administrative burden amidst Value-based practice reimbursement, thus survival, is in the modernization of the healthcare infrastructure. That is with particular emphasis on small clinics. While physician practice survival needs reform, it also demands physician attitude rectification, which has been challenging amongst the babyboomers.

Survival of Independent medical practices is vital to Healthcare, particularly those in the rural and underserved neighborhoods.

Reforming the healthcare infrastructure generally involves synchronizing virtual and in-person experiences using a hybrid system. It requires decentralization yet creates a collaborative environment that does not infringe on the intellectual property of others and ensures data security. The modern medical practice system needs full transparency and accountability driven by the clearness of workflow.

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Adam Tabriz is a Physician, Writer, Entrepreneur, and public health policy, expert. He is an advocate for Personal liberty. The combination of his experience and expertise underlines his passion for advocating true “Personalized Healthcare” and “Healthcare without Borders.” His favorite slogan is: “Peace of mind would come to all people through the universal respect for the basic human rights of everyone”

San Francisco, CA
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