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An Array of Compensation Models to Align Oncologists’ and Hospitals’ Interests

February 2012, Vol 2, No 1

Chicago, IL—Comanagement ar­range­­ments between hospitals and physicians must be structured properly to avoid violation of federal healthcare statutes and regulations. The basic principles of comanagement agreements were covered during a session on compensation models to align hospital and oncologist interests delivered at the 2011 Cancer Center Business Summit.

A comanagement agreement differs from hospital employment of a physician in that in a comanagement agreement both entities usually have shared involvement in daily operations of a service line. This definition can vary and will depend on a review of appropriateness by legal counsel, according to Terri U. Guidi, MBA, FAAMA, President and CEO, Oncology Management Con­sulting Group, and editorial advisory board member of Oncology Practice Management.

The hospital usually pays physicians a fixed-base rate plus a performance-based bonus, but the performance cannot be tied to volume of business, charges, or revenue, said Ms Guidi.

Base compensation covers the management of the service line, such as oversight of operations, leadership, and development and implementation of strategy.

Performance incentives reward the leadership of the service line to specified targets or goals that may be based on the overall growth of the program or improvements in operational efficiencies (ie, staffing cost per new patient encounter to encourage physicians to staff more efficiently), budget performance, and quality indicators (ie, creating quality programs or meeting quality targets).

“A lot of issues pertain to those who are thinking long-term. You have a target to improve operational efficiency by x percent. Each year you need to reestablish those targets,” she said. “How much more can you improve something before it becomes a meaningless measure?”

Targets must be measurable and reproducible, with an established baseline. “If you don’t get reports that measure operational efficiency, don’t put it in there as a measure or you can spend months just trying to figure it out,” said Ms Guidi.

The payment for a medical directorship may be a stipend or another arrangement but there must be a means of justifying the payment through defined duties or time and effort expended. The duties must not duplicate other arrangements. “Using incentives for a medical directorship are extremely rare, and it is very difficult,” she said.

Compensation parameters for clinical research oversight are similar to those for a medical directorship. The bottom line is to “compensate physicians for what they’re actually doing at a reasonable value and you should be fine,” said Ms Guidi.

Service Line Staffing
If a practice is going to provide staff to the hospital, a key consideration is whether the hospital is going to manage all or some of the service line or whether it will be outsourced to a capable entity. Oncology practices usually have the experienced staff to operate outpatient oncology services, said Ronald Barkley, MS, JD, Managing Director, Cancer Center Business Development Group, and editorial advisory board member of Oncology Practice Management.

Examples of programs for which the practice would assume responsibility are billing and collections, implementing and managing pathways programs, implementing and managing quality oncology practice initiative (QOPI) programs, and implementing and managing an oncology medical home.

For service line billing and collections, a typical compensation of staff members ranges from 4% to 6% of collections. “It’s probably one of the most difficult management services to implement at the hospital because you have a tremendous amount of issues around information technology and identifying best classes of services so that it fits in with the hospital’s level of admission,” Mr Barkley said. “When it can be accomplished, the lion’s share of the billing collection responsibility lies with the practice billing personnel that are familiar with the codes.”

Rather than have the staff change employers (from the practice to the hospital), the staff can be leased. In such cases, it is typical for compensation to be structured as payroll plus a 5% to 10% management premium.

Two approaches to managing clinical pathways programs are the formation of practice disease committees to refine guidelines (such as those from the National Compre­hensive Cancer Network) and the  purchase of turn-key pathway programs from providers as a “plug-in” to hospital services, said Mr Barkley. The most common approach to compensating physicians for developing and managing pathways programs with a hospital service line is in the $40,000 range annually.

The QOPI has been established by the American Society of Clinical Oncology and has 89 oncology-specific measures that can also serve as a plug-in for the hospital service line. Such a program can be established by different hospitals. Compensation for managing such a program is typically about $100,000 annually.

The oncology medical home is a developing model that is designed to aggressively manage symptoms, with resulting reductions in emergency department visits, hospitalizations, and drug costs. Health plans are actively experimenting with oncology medical home payment methodologies with enhanced payment to participating providers.

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