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How to create an effective compensation program: A healthcare Q&A

May 22, 2014

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Over the years, you’ve honed your skills as a healthcare provider, finding creative and effective ways to improve your bottom line while never sacrificing the needs of your patients. Clark Schaefer Hackett has been there right alongside you, providing expert counsel, sound advice and a suite of services designed specifically for your industry. Every great relationship is created from trust and understanding, and those traits will make it easier for you to create effective compensation programs and grow your business.

As a healthcare provider, you may have heard that a compensation program is all in the employment contract. With this document in hand, you’ll be able to keep your staff members happy and your enterprise solvent. However, this isn’t exactly true. Instead, your focus should be in other areas as well, such as with practice management, top quality indicators and additional financial components. This way, you’ll be able to cultivate a culture of support for all your physicians.

Don’t worry if this process appears complicated. To help shed some light on the key steps and common issues, Clark Schaefer Hackett’s William Clayton, a healthcare consultant and expert on compensation programs with more than 20 years in the industry, recently took the time to answer some questions about the creation of an effective compensation program.

Q: A number of healthcare providers misunderstand the benefits of a compensation program. What are some of the elements they are missing?

A: One of the best parts of a great compensation program is its ability to improve practice management. Not all physicians are created equal – and that should be taken into account. Hire the best doctors, not average or below-average ones. By placing strong leadership around these professionals, it will cultivate a better culture and grow the practice as a whole.

Q: Without in-depth data, implementing a new compensation program will be a challenge. How can a healthcare provider look inward and acquire the intelligence needed to proceed?

A: The most important first step is to find all existing weaknesses within the organization. These problems halt momentum before it ever takes hold. Look at patient volume, quality of patient visits, the skills of individual physicians and other factors. These areas will shed some light on potential solutions.

Q: Many compensation programs utilize relative value units to judge physician involvement. How did these become a factor in the healthcare industry?

A: Relative value units, or RVUs, began in an academic research environment. Physicians there would perform research and see patients in a more traditional setting at the same time. Without RVUs, it would be near impossible to gauge the performance of doctors in the research environment. Compensation programs take a long time, and a lot of it isn’t currently in the contract. In certain situations, with RVUs, it is easier to evaluate performance, and in other situations it is better to measure performance by counting the number of patient visits per provider, and using a profit and loss statement per each provider. Every situation is different and you need to develop your unique approach specific to your organizational culture.

Q: In addition to RVUs, there are also top quality indicators that further highlight physician performance. Which ones are best suited to ensure a program remains flexible and adaptable?

A: Top quality indicators allow a healthcare provider to figure out when it is the best time to make a change. These can include patient satisfaction, wait time, lag time, no shows, coding compliance and physician leadership, among others. It also helps to look at medical and financial operations to find additional opportunities to bolster revenue.

Q: Creating an effective compensation program isn’t a quick fix. Accountability, a benchmarking system and an improved culture all have to be involved, and a healthcare provider shouldn’t have to do it all alone. How can expert consultants help?

A: There are too many areas where a compensation program can miss the mark to not ask for help along the way. A trusted advisor will understand the subtle changes within the local market and the industry as a whole. Healthcare providers who have engaged with a team of experts have ended up with a quality, effective compensation program that is both fair and sustainable.

© 2014

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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