Should Physician Productivity Drive Compensation?

Productivity drives profits in many industries. Improving productivity on the assembly line can boost the bottom line for manufacturers, for example. This improved productivity means they can sell more products while paying less for the resources to produce them. To optimize their profits, many companies compensate workers who produce more. Even medical practices and Medicare now compensate healthcare workers based on productivity.

This begs the question: Should productivity drive physician compensation? More specifically, should productivity affect how gastroenterology clinics compensate their GI doctors in a post-pandemic world?

Compensation Remained the Same for Physicians during the Pandemic while Productivity Dropped

Despite dire predictions and seemingly against all odds, physician salaries held steady throughout 2020, according to the 2021 Medscape Physician Compensation Report: The Recovery Begins. Stability was largely due to the increased use of telehealth, leveraging government programs and reducing staff to minimize the effects of closed offices. This was alongside mandated restrictions on all elective procedures during the pandemic.

Despite steady earnings for doctors, patient and procedure volume were down. About 44 percent of physicians replying to the survey said they saw reductions in patient volume; nearly a quarter reported a decrease in hours. Government pandemic relief programs, reductions in staff, reimbursement for telemedicine, and capitation plans that continued to pay physicians prevented a big dip in income that might have otherwise accompanied decreases in volume and hours. Only about 13 percent of physicians said they experienced months with no income. Nearly half (45 percent) said they lost no income at all.

Recovery in patient and procedure volume and hours are rebounding, albeit slowly, with 58 percent of primary care physicians and 65 percent of specialists said that their income and hours have returned to pre-pandemic levels. If productivity were the only factor driving physician compensation in the upcoming year, 2021 will be a dreary financial year for doctors. Compensation based solely on productivity would also make it harder for young gastroenterologists hoping to go into private GI practice rather than starting their careers in hospitals, as it takes significantly longer to build a patient base in private GI practice.

History of Productivity and Pay for Doctors in the United States

Both pay and productivity standards for doctors have changed over the years. In the earliest days of healthcare in the US, doctors received direct payments from their patients. The typical fee in the early 1800s was 25 to 50 cents per visit; they may have earned up to $1 for an overnight stay. In many cases, payments were in the form of goods, services, and promises, rather than in cash.

Productivity standards were different in the late 19^th and early 20^th century medicine too. Doctors in Eastern cities hung their shingles outside busy practices and could see several patients in a day. However, physicians in rural areas often undertook long trips on foot, boat or horseback to see patients. For these clinicians, a productive day might involve seeing only one patient.

In 2018, most physicians saw between 11 and 20 patients per day; only 1.3 percent saw between 51 and 60 patients per year. A majority of doctors spent between 17 and 24 minutes with each patient that year. This was before the pandemic, of course. This changed the number of patients a doctor would provide care for. Additionally, it changed the way the doctor would provide that care.

The average number of in-person office visits plummeted from 97 to 57 per week during the COVID-19 outbreak, according to a new survey by the American Medical Association (AMA). The significant reduction in patient volume and revenue hit practices hard. This was  particularly noticeable against the backdrop of rising cost for PPE and other supplies. Healthcare use and spending did rebound as the year progressed. However, health services revenue still fell by 1 percent in 2020 compared to 2019.

Productivity in Practice

Most practices offer a base salary plus a productivity bonus. Some practices use productivity along with other measures when considering a physician for partnership. This comes with its own productivity-boosting benefits, such as access to ambulatory surgery centers (ASCs) and anesthesia, pathology, and infusion services.

Most practices use relative value units (RVUs) to measure productivity. First developed by Medicare to determine the amount to pay physicians according to productivity, RVUs define the volume of work performed for all services and procedures covered under the Medicare Physician Fee Schedule. Under this fee schedule, RVUs reflect the relative levels of time, skill, effort, and stress associated with providing each service.

So should physician productivity drive compensation?

Because of delays and cancellations of elective surgery and some other types of care, RVUs and collections could be significantly lower than predictions based on earlier models, and this could put gastroenterology and other practices in financial peril. Compensation guarantees offered by many practices means physician wages will likely remain stagnant. Together, the lower RVUs and collections combined with steady doctor pay could drive compensation-per-wRVU and compensation-to-collections ratios past the typical 1 to 3 percent annual growth.

Calculating the reimbursement from an RVU involves several components and a significant amount of complex math. RVUs is a complex system. It involves calculating the time and effort required for a procedure, GI practice expenses that include rent and supplies, global feels that cover initial visits and follow-ups, and malpractice insurance.

Furthermore, clinics and hospitals should be wary of making drastic changes to physician compensation. Recently, 14 doctors left Transylvania Regional Hospital, which is part of the Asheville, N.C.-based Mission Health that has seen a large number of physician exits since its 2019 takeover by HCA Healthcare. In a letter to the attorney general, city leaders said, “it appears that the main reason the providers are leaving is because HCA Healthcare changed the method of compensation in the hiring contract”. The new contracts reportedly offered 10 to 25 percent less pay.

Productivity-driven approaches to medical care can also lead to physician burnout. This is always a concern but especially so in the wake of the COVID-19 pandemic. Productivity-based compensation often leads to overwork and spending less time with patients, which in turn leads to increased burnout.

The future of compensation?

But will productivity-based compensation be the downfall of today’s gastroenterology clinic? Probably not – at least not right away. Patient volume is returning to normal after the pandemic. This is driven by vaccinations and the need to address treatment and screening put on hold by COVID-19. Furthermore, practices do better when their physicians do well.

“Practices have right to refuse bonuses for doctors who consistently fall short of productivity measures, of course, but practices rarely exercise this right because most physicians meet or exceed set productivity levels and receive bonuses for exceeding their goals,” says Kevin Harlen.  What’s more, practice partners will usually offer mentorship or other forms of support to doctors who are not pulling their weight. Practices do this because they know success after the pandemic can only come when all their doctors are as productive as possible.”