Provider Compensation Rose 3.79% But Is Low Productivity a Problem?

September 04, 2020 - Once again, provider compensation increased last year while productivity remained stagnant in a troubling trend according to members of the American Medical Group Association (AMGA).

AMGA’s 33rd annual 2020 Medical Group Compensation and Productivity Survey surveyed 317 medical groups, representing over 127,000 providers, as well as 139 physician specialties and 28 other provider specialties.

The responses showed overall provider compensation increasing by 3.79 percent in 2019, up from a 2.92 percent increase the previous year.

However, overall production increased by just 0.56 percent in 2019 versus a 0.29 percent increase the previous year, indicating stagnation according to the report.

Compensation per work relative value unit (wRVU) ratio, therefore, rose by 2.14 percent, representing a decrease from the 3.64 percent growth observed in 2018, the report stated.

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The trend was observed in primary care in which median compensation increased by 4.46 percent, while median productivity rose by just 0.44 percent, and medical specialties in which median compensation increased by 3.52 percent and median productivity rose by just 0.93 percent.

“We have now seen this same trend of divergent key metrics for several years in a row, and we have to wonder how long it can continue, given that the vast majority of revenue is still, by and large, generated via work RVU productivity,” Fred Horton, MHA, president of AMGA Consulting, said in the press release.

The trend is a cause of concern, especially in light of the COVID-19 pandemic.

At the start of the pandemic, healthcare organizations had to delay or cancel nearly all elective, non-emergent services in order to effectively respond to surges of the positive coronavirus cases. The move helped to protect patient, provider, and community safety, but it came at a high price for providers.

Patient volumes nosedived by 60 percent during the early phases of the pandemic, previous AMGA research showed. As a result, revenues were cut in half.

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Volumes and revenues are starting to recover as communities come out of shelter-in-place orders, but levels are generally still below pre-pandemic volumes and many worry about a possible second wave of the virus, which could coincide with the upcoming flu season.

With already low productivity growth, production-based revenue may pose an even greater challenge to practice operations in the coming months.

Many providers are also paid based on production. The latest survey from AMGA found that 85 percent of the 84 organizations compensating their providers based on production used wRVUs as a metric for determining pay. And for these providers, at least half of their compensation was based on work or financial contribution.

Other metrics used included net collections (14 percent), panel size (14 percent), gross productivity (11 percent), and cost accounting (6 percent).

But wRVUs remained the dominant measure of productivity for determining pay though, AMGA noted.

READ MORE: Addressing Productivity, Labor to Bend the Healthcare Cost Curve

“Certainly, a need for a call to action has been heightened, as this market trend persists,” Horton stated. “Add in the many ramifications and unknowns of COVID-19, and medical groups are operating in unfamiliar and uncomfortable territory.”

As concerned as AMGA members are about this ongoing trend, COVID-19 may accelerate efforts to mitigate the pattern, Horton said.

Providers are already engaging with revised care models and telehealth services in response to COVID-19, the industry expert explained. Telehealth has especially taken off, with telehealth claim lines increasing 4,132 percent nationally from June 2019 to June 2020, according to FAIR Health.

However, about three-quarters (76 percent) of medical groups responding to the AMGA survey said their reported salary did not include expectations for telehealth or e-visits in 2019. About half (52 percent) also said they did not capture production wRVUs for telehealth or e-visits.

Furthermore, 59 percent of respondents were not reimbursed for telehealth or e-visits by payers, the survey found.

Public and private payers have granted relief for providers during the pandemic, including telehealth reimbursement and even payment parity for the services. However, the relief is temporary and whether telehealth reimbursement will continue beyond the pandemic is still up in the air.

Regardless, virtual care services do not seem to be going away anytime soon. Patients are becoming used to the convenience of telehealth and many are preferring e-visits over in-person appointments for routine care.

How medical groups calculate compensation and productivity may need to adapt to a post-COVID reality in order to remain operational in the face of lower in-person volumes.

“The pressure for more operational efficiency is greater than ever, and the concern is that payers, facing some of the same pressures, will push for more managed expense models, rather than profit/risk sharing through two-sided risk,” Horton concluded. “The epic challenges of today will force new thinking and, hopefully, breakthroughs needed for not simply sustaining compensation levels, but leading to organizations that are truly resilient.”