Incentive pay prevalence echoes boom in employed physicians

As more physicians opt for employment, annual incentive plans have been on the rise for the last five years, and employment contracts are increasing, according to the Hay Group, a global management consulting firm in Philadelphia.

The number of hospitals that use incentive plans increased 23% since 2008, and integrated health care systems jumped from 43% to 61% in the same period. Physician practices went up from 70% to 80%, according to Hay’s 2012 Physician Compensation Survey, which was released in December.

The boost in incentive plans is related to more doctors selecting employment with hospitals and groups, said C.J. Bolster, vice president of specialized industry for the Hay Group. Ninety-five percent of the largest health systems use incentive plans, he said.

Growth in employment contracts also reflected physicians’ move away from independent practice. Seventy percent of hospital-based physicians had employment contracts in 2012, compared with 64% in 2011, while 67% of group-based physicians had contracts, up from 56% the year before.

The findings about doctor employment dovetailed with those reported in October by Accenture, a New York-based global management consulting, technology services and outsourcing company. Accenture said 57% of physicians worked in independent practice in 2000. That proportion was about 39% by 2012. Accenture predicted that 36% of doctors would be independent by the end of 2013.

Doctors cited the cost of running practices and medical record requirements as reasons to opt for employment with hospitals and groups.

Hay found that employers are stressing certain attributes for doctors in incentive plans, shifting more heavily toward quality of care rather than the number of patients physicians see, said Ron Seifert, vice president in the health care sector of the Hay Group.

Hay reported that standards for individual incentive pay depended heavily on quality and patient satisfaction, with 77% of surveyed organizations saying they used quality as a primary metric, and 66% using patient satisfaction to determine incentive packages. That compares with 39% that used outcomes as a performance metric.

Although there appears to be a clear shift toward incentive plans, how to tailor them is a major challenge, Seifert said.

Hay’s report covers 132 physician specialties and 35 nonphysician positions. The data were reported as of March.