Discuss why managing a physician practice

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Pay for Performance
This case requires the development of a physician compensation
scheme for a four-physician family
practice. The model uses historical data for inputs along with
information regarding the amount and
type of compensation to be based on performance and how
performance is measured.
The model consists of a complete "base case" analysis--
no changes need to be made to the existing
MODEL-GENERATED DATA section. However, some values in the
student version INPUT DATA
section have been replaced with zeros. Thus, students must determine
the appropriate input value and
enter them into the cells colored red. When this is done, any error
cells will be corrected and the
base case solution will appear. Note that the model does not contain
any risk analyses, so students
will have to create their own if required by the case. Furthermore,
students must create their own
graphics (charts) as needed to present their results. INPUT DATA:
KEY OUTPUT: Compensation System Parameters: Physician
Compensation: Total amount in base pay $300,000 Total amount in
performance plan
Total amount in profit distribution
Multiple Factor Distribution:
Percentage based on financial performance
Percentage based on noneconomic factors Based On A B C D Total
300,000 Net revenue $177,509 $174,010 $177,443 $191,039
$720,000 120,000 Work RVUs
### 174,436 180,208 186,457 178,899 720,000 $720,000 Net income
###
Mult. factors* 179,620
180,929 165,304
192,865 170,005
174,817 205,071
171,388 720,000 50%
50%
100% 720,000 *Multiple factors plan includes non-economic factors
plus work RVUs Historical Physician Data: # Patients
# RVUs
Professional procedures
Gross charges
Net collections
Total support staff cost
Total facilities costs
Total supplies cost
Revenue reinvested in practice
Physician base compensation A
4,023
4,667
6,255
$527,820
$422,256 Physician Identifier
B
C
3,567
3,966
5,055
5,475
6,972
7,287
$535,841
$602,675
$401,881
$421,872 D
4,244
4,967
6,742
$576,312
$501,050 Total
15,800
20,164
27,256
$2,242,648
$1,747,059
$522,388
$298,351
$136,257
$78,892
$600,000 Historical Support Staff Data: Practice Manager
Receptionist
Nurses
Medical assistants
Billing clerk
Laboratory technician
Other costs
Total Number
of
Employee
s
1
2
4
2
2
1 Total Compensation
$75,168
48,652
175,264
52,615
62,165
46,788
61,736
$522,388 Non-Economic Data:
A
Average patient satisfaction score
Number of committee meetings
Continuing education credits
Professional assn. leadership B
91
12
15
1
182 C
90
8
10
0
128 87
4
18
0
130 Total
361
40
55
3
661 Physician Identifier
B
C
$401,881
$421,872 D
$501,050 Total
$1,747,059 93
16
12
2
221 D MODEL-GENERATED DATA:
Compensation Based on Net Collections (Revenue) Net collections A
$422,256 Notes: (1) The RVUs listed are work
RVUs, which are only one of the three
component RVUs used in Medicare
physician reimbursement. (2) Over the
past five years, the average annual
amount reinvested in the preactice was
$80,000. (3) In 2005, each physician
received a bonus of approximately
$28,000. Proportion of revenues
Performance compensation
Base pay
Profit distribution
Total compensation 24.2% 23.0% 24.1% $69,010##
75,000
###
30,000
###
$174,010 $72,443##
75,000
###
30,000
###
$177,443 5,055
25.1% 5,475
27.2% $69,436
75,000
30,000
$174,436 $75,208##
75,000
###
30,000
###
$180,208 $422,256
119,883
74,588
31,270
$196,515
24.9% $72,509
75,000
30,000
$177,509 28.7% 100.0% $86,039
75,000
30,000
$191,039 $300,000
300,000
120,000
$720,000 4,967
24.6% 20,164
100.0% $81,457##
75,000
###
30,000
###
$186,457 $73,899
75,000
30,000
$178,899 $300,000
300,000
120,000
$720,000 $401,881
133,625
74,588
34,854
$158,814 $421,872
139,663
74,588
36,429
$171,193 $501,050
129,217
74,588
33,704
$263,541 $1,747,059
522,388
298,351
136,257
$790,063 20.1% 21.7% 33.4% 100.0% $60,304##
75,000
###
30,000
###
$165,304 $65,005##
75,000
###
30,000
###
$170,005 $100,071
75,000
30,000
$205,071 $300,000
300,000
120,000
$720,000 Total should equal $300,000
Total should equal $300,000
Total should equal $120,000
Total should equal $720,000 Compensation Based on Work RVUs
Work RVUs
Proportion of revenues
Performance compensation
Base pay
Profit distribution
Total compensation 4,667
23.1% Total should equal $300,000
Total should equal $300,000
Total should equal $120,000
Total should equal $720,000 Compensation Based on Net Income
Net collections
Support staff allocation
Facilities allocation
Supplies allocation
Net income
Proportion of net income
Performance compensation
Base pay
Profit distribution
Total compensation $74,620
75,000
30,000
$179,620 Total should equal $300,000
Total should equal $300,000
Total should equal $120,000
Total should equal $720,000 Compensation Based on Multiple
Factors
Base pay
Profit distribution
Noneconomic compensation
Based on net collections
Total compensation $75,000
30,000
41,212
36,254
$182,466 $75,000
30,000
50,261
34,505
$189,766 $75,000
30,000
29,088
36,221
$170,309 $75,000
30,000
29,439
43,019
$177,458 $300,000
120,000
150,000
150,000
$720,000 Base pay
Profit distribution
Noneconomic compensation
Based on work RVUs
Total compensation $75,000
30,000
41,212
34,718
$180,929 $75,000
30,000
50,261
37,604
$192,865 $75,000
30,000
29,088
40,729
$174,817 $75,000
30,000
29,439
36,950
$171,388 $300,000
120,000
150,000
150,000
$720,000 Base pay
Profit distribution
Noneconomic compensation
Based on net income
Total compensation $75,000
30,000
41,212
37,310
$183,522 $75,000
30,000
50,261
30,152
$185,413 $75,000
30,000
29,088
32,502
$166,591 $75,000
30,000
29,439
50,035
$184,474 $300,000
120,000
150,000
150,000
$720,000

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