Practice Owners, Employed Docs Struggle With Allocation of Incentive Money

As America's health care system moves into a payment arena that makes new money, such as bonuses, incentive payments and shared savings, available, the way physicians get paid is changing, opening up a whole new world of payment opportunities and pitfalls.

Take Deborah Higer, M.D., for example. Higer runs a solo practice in Mount Shasta, Calif., a small town with about 3,000 residents. After nearly 15 years in practice, she decided late in 2011 that it was time to move to an electronic health record (EHR).

It cost her close to $50,000 to implement the system, and she borrowed nearly half of that amount assuming that federal money -- available through CMS' Medicaid EHR meaningful use program -- would soon flow back into the practice to pay off the loan.

Higer and the nurse practitioner (NP) whom she employed both attested as meaningful users in January 2012, and both earned incentive checks through the California Medicaid program called MediCal. But Higer was shocked when her employee walked away from the practice after refusing to sign a legal document that would assign the money to Higer.

"It took time to implement the EHR; it didn't happen overnight," said Higer. "Everything in the practice slowed down, and I saw fewer patients during that implementation period. Expenses still had to be paid, including employee salaries," said Higer, noting that her NP shouldered none of those financial burdens.

The experience temporarily shook the practice's financial stability. "I'm running the practice off of credit cards right now," said Higer.

Jane Cho, manager of medical practice affairs at the California AFP, investigated the situation on Higer's behalf and discovered that the NP acted within the legal limits of the California program.

"There was no loophole, as we originally suspected," Cho told AAFP News Now. "She (the NP) got the money as an eligible provider. It was perfectly legal -- but not OK -- because a small practice put up all the upfront costs," Cho added.

"In Dr. Higer's case, we are unaware of any legal way to recoup her money," said Cho. However, the CAFP is exploring ways to help other members avoid similar trauma.

Cho made it clear that the CAFP supports family physician participation in the federal EHR incentive programs. "We've seen California providers receive about $743 million in incentive funds. However, we're realizing that with the money comes added responsibilities around auditing, documentation and validation."

Higer's experience represents just one side of a dilemma that could snag not only physician owners but employed physicians, as well.

One family physician, who asked to remain anonymous, told AAFP News Now that it only made sense that physicians who do the hard work should expect to receive some of the additional revenues earned.

"We already are stretched to the limit most days. We are caring for more elderly patients with multiple, chronic illnesses. We have less time than we want and need with each patient. As reimbursement changes, physicians are going to be even more discouraged if hospitals and employers are the only ones capturing these incentives," she said.

This physician said she had been engaged in ongoing discussions with her current employer about how meaningful use incentives would be handled. "Unfortunately, my employer tried to argue that I did not pay for the EHR, and somehow that excludes me from sharing incentives. There was some vague agreement that as new contracts are explored in the future, this would be a topic of discussion."

Employed physicians, soon-to-be employed physicians and physician practice owners likely would all benefit from up-front conversations about how money coming into a practice from incentive programs is disbursed.

Mark Estroff, C.P.A., a principal at the Atlanta office of PYA GatesMoore, a Tennessee-based health care consulting and accounting firm, said that the employer -- whether a small family medicine practice or a big organization such as Kaiser -- should be the recipient of enhanced payments earned by employees.

"We're assuming the practice is going to get the money and is entitled to it. The question then becomes how you reallocate that money back to the physician," said Estroff. "And here is one of my famous accounting answers: It just depends.

"Ten years ago, money didn't follow quality the way it does now. A growing part of physician compensation is a quality component and pay-for-performance incentives," said Estroff.

He noted that a pure production-based compensation model is becoming somewhat old-fashioned in the new world of health care payment. "If I'm the owner (of a practice), I need to arrange compensation for non-owner providers, as well," said Estroff. "I need everybody from co-partners to NPs to get on board by offering them financial incentives."

On the other hand, physicians entering into an employment arrangement should have a complete understanding of the activities and metrics that affect their compensation. Barbara Stahura, M.P.A., a senior consultant at PYA GatesMoore offered several recommendations to employed physicians.

"If joining an existing practice, physicians need to find out what's available from an incentive perspective," said Stahura. They also need to understand how they could end up on the losing end if they're not participating in quality programs. If they don't have knowledge about the quality programs in which an organization is participating, physicians should ask to be brought up to speed right away.

Employed physicians also should have an understanding of the events that have already taken place within any organization they are considering joining. Ask pertinent questions, said Stahura -- for example,

Inquire about any shared savings that may be on the horizon. It's also important for a prospective employee to know if that money will be put back into the organization, and if so, what portion is earmarked for technology improvements.

"However the money gets disbursed, it has to be within a legal framework," said Stahura. "But if I were young and looking to do this, hearing the right answers to the right questions would tell me that I am considering joining a forward-thinking, well-run practice."

Sidney Welch, J.D., M.P.H., is a partner specializing in health care practice at the Atlanta law firm Arnall Golden Gregory, LLP. Welch said a physician can ask for bonus and incentive payments to be included in any employment contract. "After a physician has determined an organization's revenue sources and the role he or she will play in generating those revenue sources, it may lead a physician to negotiate a payment that reflects those amounts in his or her own employment agreement," said Welch.

"At least inquire about it, and if it's not possible to have immediate access to that revenue, then maybe the agreement with the employer is that it's considered over time."

And what about a contract that was signed in haste or a situation that has drastically changed and left a physician feeling underpaid and underappreciated?

"You can always amend the employment agreement," said Welch, but amendment provisions usually require the agreement of both sides. It will mean a sit-down conversation with the employer, and when the physician has that chat, it's very reasonable for the employer to expect to hear a business case with real facts and figures as to why an adjustment is being requested, said Welch.

Bottom line, be prepared. Know what you're asking for and be able to state the economic factors to justify your request. Step back, put yourself in the employer's shoes and consider how you would react to the request if you were sitting on the other side of the table, particularly if the employer practice and its owners have made a financial investment in an EHR.