Providence Health Network: Formula Follows Form Bill Gil, Chief Executive Providence Health Network

Multi-specialty group 200 MDs 160K patient population 2/3 capitated, at-risk HMO patients 1/3 non-HMO 80% revenues capitated 20% fee for service (FFS)

Economic Principles for Compensation Structure 80% of revenues capitated “More you do, the less we make” “The less you do, the more MDs we hire” “The more MDs we hire, the less we make” High Productivity-  GOOD High Churning-  BAD MGMA Studies: Excellence through high productivity

After the Double Talk, What Gives? 4 Pillars of a Compensation Formula – Productivity RBRVS (units of productivity as compared to MGMA) Audit for churning (visits per patient, per year) – Efficiency Hospital utilization (admits, readmits, length of stay, ASC) Resource consumption (MRIs, CTs) – Quality Patient satisfaction (pick 1 or 2 measures) Clinical measures (pick 3-5 measures, per year) – Citizenship Board evaluation Peer evaluation What NOT to Measure – Seniority (that’s what pension is for) – Frivolous stuff (Measure What You Treasure)

Structure: Haves & Have Nots Employee Physicians – 3-year minimum “incubation period” – 2X annual reviews; let them know the score – Add 10% “at risk” bonus payment Shareholders – Pay yourselves last – Take a draw; repeat, it’s a draw!!! – 50% to 100% earned (see 4 pillars measures) – Don’t equalize, it’s not a democracy – Shareholder status must be EARNED, can be LOST – Transparency KEY to compensation formula sustainability – Board decision, not populous vote

Potholes to Avoid “Death by a Thousand Measures” – HEDIS measures everything; comp shouldn’t – If you measure 50 items, each is worth NOTHING Incompatibility between how group is paid (insurers) and how group pays itself – Revenue Based/Focus-  Productivity is KING – Efficiency Focus-  Do something, not EVERYTHING Sustainability vs Popularity – Total cost of care is final frontier; compensation formula has to coexist with that reality