Madison, Wisconsin – A change in compensation structures for physicians at a large Midwestern academic health center resulted in increased satisfaction and retention, according to a study published today in Family Medicine.

Lead author Dr. Jennifer Lochner, assistant professor of family medicine and community health at the University of Wisconsin School of Medicine and Public Health, said the compensation plans for UW Health residency teaching clinic faculty and community clinic faculty were changed from volume-based to quality-based with emphasis on patient satisfaction and value.

“Physicians who are paid to provide more services may do so and that may lead to increased health care costs without necessarily showing improved patient outcomes,” said Lochner. “The changes in compensation structure were also motivated by a loss of physicians to other local health systems that were paying better and a 2011 physician survey that showed overall low satisfaction with both the compensation plan structure and total compensation received.”

The study involved 32 faculty physicians at four residency training sites and 52 faculty physicians at 10 community practices in Dane County, Wisconsin. A template was developed that provided a salary for clinical work based on both patient panel size and a work metric called relative value units (RVU), in which each health care service in the fee schedule is scored to determine a payment.

A compensation committee created two new clinical compensation plans flexible enough to take into account different job descriptions and values. As part of the process, residency and community faculty members on the committee talked about their group’s core values and guiding principles for fair compensation.

The two main components in each compensation plan were salary based on panel size and RVU’s. The panel size was comprised of the number of patients assigned to a physician who had visits within the UW Health system within the past three years. The number of patients was then multiplied by a weighting factor based on age, gender and insurance status for each patient.

For residency faculty, total dollars available for clinical compensation is determined by pooling all patients assigned to residency sites. Eighty percent of the pool is distributed based on proportional clinical full-time equivalents (FTE) and 20 percent of the pool is distributed based on proportional RVU generation.

But for the community faculty, total dollars available for compensation is determined for each clinic based on panel size. At the individual clinic level, 50 percent of the pool is distributed based on the proportional panel size and 50 percent is distributed based on proportional RVU generation.

Before the new compensation plans were implemented, only 18 percent of residency faculty and 33 percent of community faculty were satisfied or very satisfied with compensation structure. After the plans were put in place, 47 percent of residency physicians and 74 percent of community physicians were either satisfied or very satisfied with the compensation structure. Resident faculty satisfaction with the amount of compensation also went from 33 percent to 68 percent and 26 percent to 87 percent for community faculty. The study found that for both groups, panel size per FTE increased and RVU’s moved closer to national benchmarks.

“Aligning the incentives within a physician compensation program with the goals of a larger health care organization as well as local physician culture is critical to create a fair environment to optimize physician satisfaction and retention,” said Lochner.

Full study: Family Physician Clinical Compensation in an Academic Environment: Moving Away From the Relative Value Unit

Published: July 2016