Compensation Methodology Best Practices: True-Up Payments
- October 5, 2021
More often than not, compensation strategy discussions start with a conversation about best practices. Are you following a compensation methodology only because it was the best option at the time?
In the Compensation Methodology Best Practices series, we’ll highlight common compensation methodologies we see and best practices around those methodologies.
The Infrequent True-Up
The ProCARE team has seen time and again when working with physician enterprises that they have established their compensation methodology to be a year-end true-up, or they’re running true-ups on an infrequent scale or timeframe.
Infrequent true-ups can create significant problems for large health systems.
Year-end, or infrequent, true-ups tend to be incredibly inefficient because organizations often owe each provider a large sum of money. As a result, organizations are unable to forecast effectively, and cash payout is unpredictable.
True-Up Best Practices and the Compensation Conundrum
The idea of the healthcare compensation conundrum makes it understandable why organizations are truing up so infrequently.
Most health systems choose this model because it is less complicated and less burdensome for the operations team to calculate true-ups annually. Without technology, individuals are manually updating these numbers, making it nearly impossible to keep that up on a frequent, routine basis for thousands of providers.
However, you want your organization to forecast accurately and control your cash flow more effectively. Truing up more frequently is the logical answer and the more efficient methodology.
Unfortunately, this option is a distant dream for organizations that aren’t leveraging technology.
Using a provider compensation automation platform, such as ProCARE Portal, allows operational teams to offload the burden of manual processes associated with compensation management. Compensation automation software also improves both cash flow and forecasting by eliminating the infrequent true-up model.
The graphic below illustrates shifting from an annual year-to-date true-up to a rolling 12-month true-up.