Compensation and the Patient-Centered Medical Home

Compensation for a PCMH team must achieve the following outcomes: 1) Reward improvements in outcome, 2) Drive decreases in the utilization of healthcare resources; 3) Encourage cooperation among team members.  Compensation structure should be simple enough for everyone to easily understand, measure their performance and calculate their expected compensation.  In other words, compensation should be evidence- and value-based rather than based on piecemeal work.

Of course, this is easier said than done.  Compensation is the most difficult issue associated with the patient-centered medical home (PCMH).  Understandably, no one wants their income to decrease and everyone wants to be compensated for the work they do (or don’t do).  Primary care physicians want compensation for coordinating the PCMH provider team.  Specialists and institutional providers, such as hospitals, don’t want to see a drop in their current income levels, even if their workload decreases. 

Compensation systems should be based on improved outcomes, both in the short term and the long term.   In many instances, short-term markers will be substituted for more appropriate long-term outcomes.  For example, measuring improvements in HbA1c scores for diabetes patients is more practical than measuring reductions in cardiovascular events and other co-morbidities.

As well, the PCMH should share the cost savings that insurers realize, without double-counting the cost savings associated with improved outcomes.  If the PCMH can realize the same outcomes with a comparable level of risk but fewer diagnostic exams or specialist referrals, the PCMH team should share those savings.  Sharing the cost savings will encourage providers to reduce the services they provide as the impact on their income will be softened.

Measuring the risk associated with reduced levels of care is as important as measuring short-term improvements in outcomes.  For comparison, many US corporations focus on short-term results as that drives their bonuses.  However, the long-term risks rise.  For example, Wall Street executives recognized significant profitability from derivatives and other risky trading and money management strategies in the years leading up to 2008 and the Great Recession.  We must avoid similar behavior with our healthcare status.

Developing a value- and evidence-based system that provides compensation based on improved outcomes, cost savings and acceptable levels of risk is a complex, time-consuming and costly endeavor.  It is predicated on the widespread implementation of EHR, the funding of comparative effectiveness research, and gaining consensus on outcomes, risk and cost-savings metrics and their measurement.  Therefore, compensation systems that enhance the effectiveness of PCMH will be phased in over time and increase in scope, complexity and benefit to the healthcare system over time.

As hinted at above, effective compensation systems requires sharing of rewards among the PCMH team.  That argues for further integration of providers to facilitate such sharing.  We’ll explore that issue next week. 

Take care and have a fun holiday weekend.

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