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What’s in your incentive plan?

The debate around how to design bonuses

November 2018
incentive plans for hospitalists

WHEN ANDRES F. SOTO, MD, MBA, was helping design a new bonus and incentive program for the hospitalist group at Baptist Hospital and West Kendall Baptist Hospital in Miami, he wanted to make sure that some money would reward those doctors everyone agrees deserve thousands of dollars of extra compensation.

The group’s first payout of this new “high-performance bonus” will come later this fall. And while Dr. Soto, who’s chief of hospital medicine, doesn’t know exactly how it will play out, he predicts that between 10 and 15 physicians in the 80-member group will receive the additional bonus.

Dr. Soto’s group already awards bonuses to all its members based on productivity and quality, but the new incentive will reward physicians for efforts that go above and beyond. To qualify for that bonus, hospitalists need to be free of medical record delinquencies and patient or staff grievances or complaints.

“Everybody knows who the high performers are, but sometimes I worry we aren’t recognizing them properly.”

~ Andres F. Soto, MD, MBA
Baptist Hospital

They also need to regularly volunteer to work the kinds of emergency extra shifts “that nobody wants”—and perform at a higher level than their peers.

“What motivates high performers is not the money,” says Dr. Soto, who worked on the incentive plan with Deborah Svenson, director of physician compensation. “But it sure is nice when they are recognized financially. Everybody knows who the high performers are, but sometimes I worry we aren’t recognizing them properly.” Giving bonuses for exceptional effort, he adds, can only encourage retention.

That new bonus exemplifies the constant innovation that hospitalist programs bring to incentive plans. And according to the 2018 Today’s Hospitalist Compensation & Career Survey, bonuses for hospitalists are booming.

The average incentive and bonus payment reported this year by full-time hospitalists who treat only adults came to a hefty $41,955. That represents 14.5% of the $290,089 average total compensation that hospitalists reported. (That total compensation figure represents a one-year increase of 2.4% and a five-year jump of 15%.)

While nearly two-thirds of hospitalists say they receive some form of bonus in addition to a base salary, how they earn that money varies considerably. There seem to be as many different ways to calculate and award incentives as there are hospitalist programs.One factor in designing incentive plans is ever-changing hospital priorities. Other factors are the program’s location, hospital size and the level of local market competition. The more difficult it is to recruit hospitalists, the thinking goes, the more likely programs are to use aggressive incentives.

But while programs are perennially updating and redesigning incentive plans, constant debates remain. How complicated, for example, is too complicated when it comes to incentive plans? How difficult should it be to achieve incentives, and should physicians be rewarded individually or as a group? And what works better to incentivize professional behavior: a carrot or stick?

“There have to be regular updates to the group about how we are doing so there is no shock at the end of the year that we are not going to get anything.”

~ Roy Sittig, MD
Sound Physicians

And finally, should doctors be financially rewarded for being “good” or—as with Dr. Soto’s new high-performance bonus—should rewards be for being “great?”

Size counts
A substantial majority of hospitalists—a mean of 62%, according to this year’s Today’s Hospitalist survey—receive a combination of base salary plus bonuses and incentives.But regional variations apply, with 71% of hospitalists in the South reporting that type of hybrid compensation vs. only 55% in the Midwest.

Moreover, 40% of Midwestern hospitalists say they receive a straight salary without any bonus, a type of compensation reported by only 33% of hospitalists nationwide.

That trend in the Midwest may also reflect how hospital size affects the use of incentives. In smaller hospitals with fewer than 250 beds, 56% of hospitalists reported receiving salary plus incentives compared to 70% of those in larger hospitals. And incentive plans are offered to only a slim majority of doctors in rural programs: 50%, compared to 66% of urban or suburban hospitalists.

Leslie Flores, MHA, founding partner of the La Quinta, Calif.-based Nelson Flores Hospital Medicine Consultants, explains that hospitalists in small hospitals can find it tough to collect the bonus money they may be offered.

Productivity incentives can be a challenge in smaller hospitals, she explains, because hospitalists have little control over how many (or how few) patients are admitted or transferred. And more nuanced quality and performance incentives can be a problem because those data often require more “manpower and decision-support systems” than small hospitals can muster.As a result, smaller hospitals often turn to incentives that use data already being reported to the Centers for Medicare and Medicaid Services (CMS).

Metrics might include HCAHPS scores and core measures, or something simple that hospitalists can pull from their EHRs like the timeliness of discharge summaries, response time to ED doctors or replies to queries on clinical documentation.In fact, says William Hunter Housman, MD, a regional medical director for TeamHealth who’s based in Lexington, Ky., crafting effective incentive plans is one big reason why small hospitals approach multistate organizations like his to manage their hospitalist programs.

“Just because the CMS says sepsis metrics are a big thing doesn’t mean that it’s an issue at your particular hospital at this time.”

~ Kenneth R. Epstein, MD
KRE Consulting

No one-size-fits-all 

“Some of these shops come to us for help benchmarking themselves,” Dr. Housman says. “They might not know how to interpret their data and define appropriate measures.”

Small hospitals that are part of multi-facility health systems can also run into problems creating an incentive plan that works for colleagues at some—but not all—sites.

“We are part of a big network, but we are not all the same” in terms of doctors’ ability to meet performance and productivity thresholds, says Corinne Sundar Rao, MD.

She is one of only two hospitalists at the 47-bed Mercy Hospital-Lebanon in rural southwestern Missouri.She’s also found herself missing out on more than $15,000 in incentive payments over the last two years because of what she says are unrealistic incentive targets she has little control over. According to Dr. Rao, she can earn 10% of her income as a bonus.

But another 10% is at risk as a withhold, depending on hitting certain targets that include handwashing, patient satisfaction, meeting attendance and whether the health system as a whole has hit financial targets.Given her hospital’s short staff over the years, productivity incentives have mitigated her performance losses. But because her system recently increased the minimum number of RVUs to qualify for a productivity bonus, Dr. Rao worries that the new target may not be achievable.

Tiers and staging
While such withholds aren’t unheard of, experts say that they’re rare. They also say that it’s better to have tiered payouts instead of all or nothing, especially for measures that are hard to achieve. TeamHealth’s Dr. Housman points out that one tiered strategy is paying “half of our bonus for a measure if we hit 82%, but if we hit 85%, we get it all.”

Another approach is what he calls “staging”: “For the first two quarters, the goal is X and in the subsequent two quarters, the goal is X plus something.”Ms. Flores agrees, saying that it is “disincentivizing” if targets are out of reach. “Create some sort of a tiered system or sliding scale so you can achieve part of the bonus for partial achievement.” At the same time, targets should be theoretically achievable, “but not so easy that they are seen as automatic.”

“We are seeing a shift back to people acknowledging that it is valuable to have a productivity component.”

~ Leslie Flores, MHA
Nelson Flores Hospital Medicine Consultants

Dr. Housman notes that some programs continue to offer incentives on core measures such as stroke and VTE prophylaxis, “but those end up being lay-ups” because they’re so easy for nearly everyone to achieve.

While such measures are important, they should probably be replaced with what he calls “stretch goals” that are more complicated. Stretch goals might include meeting the SEP-1 measure or having a sepsis mortality rate below a certain observed-to-expected ratio, or improving hospitalists’ annual performance on catheter-associated UTI rates.

How many is too many?
For Roy Sittig, MD, one lesson learned from more than a decade of hospitalist work is that the amount attached to incentives has to be significant enough to grab doctors’ attention.

Dr. Sittig, who is based in Northampton, Mass., is now a regional medical director in the Atlantic Region of Sound Physicians.What’s also counterproductive and is probably the No. 1 complaint people have about incentive plans is including too many measures.

Three to five at a time, Dr. Sittig says, seems to be the magic number, but it can be tough to achieve, given the long list of priorities that facilities have for their hospitalists.

“I have seen a fair number of incentive programs where there are 10 things and you can get $30,000 for the year,” says Kenneth R. Epstein, MD, MA, president of the Boulder, Colo.-based hospitalist consulting firm KRE Consulting. “That’s $3,000 a year for each measure, and if you pay out every quarter, it’s $750 per measure per quarter.”

If you achieve all the targets, “it’s real money, but the perception is that each one isn’t worth it for $750.”Dr. Epstein is a strong believer in changing incentives often, “up to once a year and giving the physicians three months notice before making any change” so they have time to buy in and adapt their practice.

If an incentive is designed to drive more early discharges, for instance, hospitalists probably need time to set up a new process for afternoon multidisciplinary discharge huddles to make that happen.

Once behavior becomes hardwired and performance shows sustained improvement, “we should replace that incentive with a different metric or put the money behind improving one of the others,” says Dr. Sittig from Sound Physicians. “Priorities typically depend on current health care trends and the goals and challenges of a hospital or health system, with an eye on always improving patient care.”

In addition, “there have to be regular updates to the group about how we are doing so there is no shock at the end of the year that we are not going to get anything.” At a minimum, Dr. Sittig says, “talk about how you’re doing on a quarterly basis, although some groups talk about incentive measures every month.”

Ms. Flores recommends that groups use a hospitalist dashboard that provides performance data across a wide variety of domains, including metrics that doctors are not being incentivized on.”You don’t want them to get information on only those measures that have money tied to them,” she says. “You want doctors to care about performance in a broader sense, but then tie money to only three to four things you really want them to focus on this quarter.”

Productivity vs. quality
Most hospitalists report having incentive models that reward both productivity and performance measures. But there is substantial variation in how productivity and performance measures are weighted, depending on where and for whom hospitalists work. (See “Our survey says … “). 

Over the last 20 years, for instance, the pendulum has swung back and forth between emphasizing incentives designed to increase productivity and those that encourage hospitalists to improve quality.

Right now, says Hardik Vora, MD, MPH, hospital medicine medical director at Riverside Health System’s Riverside Regional Medical Center in Newport News, Va., his employed group has opted to focus its incentive program on “efficiency” in addition to performance metrics.Group members can earn tiered rewards for bringing their risk-adjusted average length of stay closer to the “expected” one for their hospital and for optimizing professional billing.

And all financial metrics have built-in compliance-related qualifiers to avoid unintended consequences, Dr. Vora points out. To qualify for the “professional charges optimization” metric, for example, providers must pass a compliance audit to ensure that charges are appropriate and supported by documentation. The incentive plan, which is currently being redesigned, includes service bonuses for hospital committee work and community volunteering, as well as for core measures and transition of care metrics.

The current incentive plan, however, doesn’t give productivity as much weight as it used to. “I don’t care how many patients my hospitalists are seeing and if they are making enough RVUs,” Dr. Vora says. “A lot of the time when they make more RVUs, it actually hurts the hospital.” As an example, he points to doctors holding onto patients longer to boost their individual wRVUs, potentially driving up length of stay.

“Hospitalists bring a lot more value by being efficient and not by generating more wRVUs.”But in many parts of the country, the use of productivity measures appears to be on the upswing. That’s according to Ms. Flores, who bases her assessment on her consulting work.

“A few years ago, people were saying we are moving from volume to value payment, so it doesn’t make sense any more to pay hospitalists for productivity” she says. “They should just be getting a straight salary with a significant compensation based on performance on quality and service metrics.

But in the last couple of years, we are seeing a shift back to people acknowledging that it is valuable to have a productivity component.

“Why? “Some practices found that hospitalists weren’t working quite as hard,” she says. Also, most hospitalists still aren’t being paid according to a risk-sharing ACO model. “When we do get to value-based payment systems, the incentive plans will change across the country.”

Individual vs. group incentives
Hospitalists also point out that you have to pick the right measures and attribute them correctly.”Just because the CMS says sepsis metrics are a big thing doesn’t mean that it’s an issue at your particular hospital at this time,” Dr. Epstein says.

To succeed, hospitalists have to buy into the idea that an incentive is truly a priority for their group and hospital.Moreover, almost nothing is more disincentivizing that “getting penalized for things that were the responsibility of other people,” Ms. Flores says. HCAHPS scores is the classic example. That is why, she adds, “it’s reasonable to pay a lot of incentives based on group, not individual performance.” Nonetheless, TeamHealth’s Dr. Housman points out, all else being equal, “incentives are more powerful if they are individual.”

That may be why in this year’s survey, hospitalists who collect incentive pay only when the group as a whole does well, with no individual-incentive component, voice the most dissatisfaction with their “current annual compensation.”

Among this minority who report receiving only group incentives, 35% say that their “bonus targets are not attainable.” That’s twice the 18% of hospitalists overall who report that the bonus targets in their compensation plan are “not attainable.”

And to provide maximum motivation, experts say, financial incentives should be paid out frequently enough that physicians will link behavior with pay. According to our survey, nearly half—48%—receive bonus/incentive payments quarterly, while 30% get them only once a year. Because billing data are easier to access, sources say that productivity bonuses are typically paid quarterly; quality data, on the other hand, can be harder to collect.

Not always the solution
Finally, sources point out that financial incentives aren’t always the answer. Some physician performance problems need better leadership and management, not more money.Consultant Dr. Epstein recalls one practice that had too many patient complaints. Rather than creating an incentive for all the hospitalists, the solution was establishing an incentive for the group’s medical director, who would earn a bonus if the program reduced its number of complaints.

“The patient complaints were really about the care of specific doctors,” says Dr. Epstein. “The medical director was given an incentive to figure out those issues and work with those physicians.”

Deborah Gesensway is a freelance writer who covers U.S. health care from Toronto.

Our survey says …
INCENTIVE PLANS come in all shapes and sizes, according to the 2018 Today’s Hospitalist Compensation & Career Survey, with geography and employer type making a big difference. Here’s a look at some survey findings on hospitalist incentives:

• Urban/suburban vs. rural: Incentive payouts make up a bigger proportion of hospitalist pay in urban and suburban areas and in larger hospitals than they do in smaller hospitals and in rural America. Rural hospitalists reported earning $30,180 on average in bonuses and incentives this year, which accounted for 10% of their total average compensation ($289,161). By contrast, urban hospitalists reported mean incentive payments of $47,747, 17% of their total mean compensation of $284,520.

• Service work: This year’s survey found that around 40% of hospitalists overall have incentive programs that include “citizenship” or “committee work.” But the popularity of that incentive varies widely, depending on employer. While 47% of hospitalists employed by hospitals/health systems and 54% of primary care/ multispecialty groups can earn incentives for “citizenship,” that’s true for only 13% of hospitalists working for national hospitalist management companies.

• Productivity-quality mix: Nearly all hospitalists (85%) report that their incentives include quality measures, which cover satisfaction scores, guideline compliance and documentation. At the same time, 70% say their programs track and pay for performance on clinical measures (such as core measures) and productivity (number of admissions, shifts worked, RVUs).

But in a further breakdown, more than 90% of hospital-employed hospitalists say quality measures are used to calculate their bonus or incentive, while 68% say “productivity” is one of their metrics. By comparison, 81% of hospitalists working for national hospital medicine companies say productivity is most commonly incentivized, and less than three-quarters—72%—say quality measures make up part of their incentives.

And hospitalists employed by universities and medical schools were much less likely to be incentivized for meeting clinical measures (like CMS’s core measures) than hospitalists overall: 52% vs. 70%.

Published in the November 2018 issue of Today’s Hospitalist
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Sheryl Williams, LinkedIn
Sheryl Williams, LinkedIn
December 2018 9:45 am

Incentive plans are very complicated and should not be looked at as a slam dunk by hospitalists…but neither should the goals be structured so that they look good but are unattainable.