Risk adjustment needed when doctor pay is based on patient load

Primary care pay at large practices can be based on panel size but also should factor in severity of patient illnesses, a new study says.

By — Posted Aug. 2, 2012

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If the number of patients assigned to a primary care physician is a factor in determining his or her total compensation, this figure should be adjusted to take into account how sick the patients on the panel are, according to a study in the July American Journal of Managed Care.

“Some physicians, for various reasons, seem to have patient panels that do require more time,” said Harold S. Luft, PhD. He’s one of the study authors and director and senior investigator with the Palo Alto (Calif.) Medical Foundation’s Research Institute. “For payment or evaluation purposes, you would want to control for that and do it in a fairly standard way.”

Researchers analyzed data on 190 primary care physicians working in 2007-08 for the affiliated Palo Alto Medical Group, a multispecialty practice with more than 1,000 doctors.

Part of the pay these physicians received was based on panel size, which was assessed by counting the numbers of work resource value units, or wRVUs. The researchers then adjusted for the age and sex of the patient populations and found that this method resulted in panel weighting that varied by a factor of 1.9. When also taking into account the severity of patients’ medical conditions, the weighting varied by a factor of 2.6.

When broken down by age, panels of children were very similar, no matter what method was used, the study found. Panels with adults differed significantly when severity of illness was involved in the calculation. The authors suspected this was because health status for those older than 18 varies much more widely than for children, and they concluded that adjusting for medical conditions more closely reflects the amount of work physicians actually must do to care for this age group. For children, age and sex adjustment usually was sufficient.

Panel size is one of the many factors, along with quality metrics and patient satisfaction scores, that are playing an increasing role in physician compensation. This is particularly true at large groups, as the health system moves away from fee for service in the hopes of improving quality and lowering health care costs through accountable care organizations and other models, the study said.

The Palo Alto Medical Group announced July 17 that it was forming an ACO with the insurer Cigna, although currently it is not participating in the Medicare program. Panel size is not a factor that would earn the group bonuses from an insurer, but it can be a determinant in how an ACO shared savings bonus is distributed to physicians. Luft said that in response to the research, the Palo Alto Medical Group is considering taking severity of illness into account when assessing panel sizes that affect compensation.

The study, which involved no outside funding, is available online (link).

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