Pay for Performance and Quality

According to the Medical Group Management Association, the Median Cost of Running a Physician Practice Nationwide is 120 percent of the Medicare Conversion Factor. This converts in most cases to 120% of Medicare Reimbursement. There are some well known exceptions such as Obstetrical Deliveries where market rates approximate 150% of Medicare in even the leanest of Fee Schedules.

In Central New Jersey, key fee codes have been cut dramatically by the major national carriers to 60%-70% of Medicare or roughly 50% of costs. This is not typical of most other parts of the country (including Connecticut and Boston which remain at levels higher than 130% of Medicare overall). As consultants, advisors, underwriters, and employers review these numbers they automatically result in lower premiums ... right?

Well, not exactly. We have seen instead an explosion of health care premiums ... why?

Physicians are the key decision makers in the system. They write all of the orders and they prescribe all of the treatments. We have fragmented the care delivery system to such an extent that utilization is increasing dramatically and there is little incentive, in fact there are significant Professional Liability disincentives, for Physicians to encourage reduced utilization.

At PIC we have a different philosophy. First, compensate physicians fairly at 120% of Medicare to start (with exceptions for Obstetrical Deliveries). Second, provide an opportunity to earn a bonus of up to 50% (yielding a fee schedule that can compensate up to 180% of Medicare) but only if preventive, quality, and cost targets are met. Third, work closely with Employers (especially self funded Employers) to provide more intensive Preventive services. Fourth, find creative ways to, as a system, share the risks and rewards inherent in employer self funding directly with local employers. Finally, be clear and unambiguous in communications with Physicians and with Contractual terms.

All of this is set against the culture of Six Sigma performance targets and an intensive focus on reduction of unnecessary administrative costs through education and data driven improvement.

We've heard all to often "Are you ready to put your money where your mouth is?". At PIC we welcome this challenge and have successfully welcomed it for over 10 years.

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