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Survey Says… How 2020 Will Impact Market Survey Data

Survey Says… How 2020 Will Impact Market Survey Data

  • March 31, 2021

In the healthcare industry, provider compensation and production surveys are ubiquitous. They are frequently used to benchmark performance, develop compensation arrangements, test fair market value, and much more. Albeit not perfect, these surveys have been widely used for many years for these purposes, providing valuable insights that otherwise are difficult to ascertain.

Then came 2020.

During 2020, productivity cratered for many providers, as droves of elective procedures and non-emergent visits were canceled to avoid COVID exposure. This phenomenon was particularly true in the spring of 2020, but the impact lasted even longer for numerous providers. We won’t know precisely how 2020 will impact surveys until we start receiving results later in 2021. However, we can make some reasonable assumptions based on observations from group practices, hospitals, and health systems we have worked with over the last year.

We expect productivity measures (e.g., work RVUs, total RVUs) to decline compared to prior years. We will also likely see significant declines in professional collections due to reduced volumes for much of 2020.

Total compensation is a bit more complex. Overall, we might expect some declines in compensation values. However, these will likely not be as pronounced as the declines in wRVU productivity and professional collections for several reasons. Many providers have only a small portion of their compensation tied to productivity measures. Others may be fully salaried, paid hourly, have compensation guarantees, or receive compensation via alternative payment models, such as a fixed amount per member per month (PMPM) for managing a patient population pool. Further, many employed providers on wRVU or collections-based compensation plans received one-off compensation adjustments during the pandemic months to offset some or all of the negative impact from reduced production.

With wRVUs and collections down and compensation flat or down by a lesser percentage than wRVUs or collections, it is easy to see those compensation ratios could see a drastic rise in the coming survey releases. By way of example, we recently reviewed a compensation arrangement for an allergy/ immunology physician. The physician earned 4,400 wRVUs in 2019 and just 3,600 wRVUs in 2020. If the physician’s compensation was down only slightly year over year ($310,000 in 2019 and $300,000 in 2020), the result is as follows:

 

2019 compensation per wRVU = $310,000 ÷ 4,400 = $70.45

 

2020 compensation per wRVU = $300,000 ÷ 3,600 = $83.33

 

One-year increase in compensation per wRVU = ($83.33 – $70.45)÷ $70.45 = 18.3 percent

 

Of course, this is just one example. Each specialty and each office or facility location will have varying impacts on compensation and production measures during 2020. However, if other providers experience similar results, those results may become aggregated into the upcoming 2021 survey results.

Consequently, organizations could see a significant increase in compensation expense if they default to compensating providers at a given benchmark percentile of current compensation surveys (something we occasionally see in compensation arrangements that we review).

The point is that if your organization has compensation arrangements tied to current year survey benchmarks, we recommend you start considering how this year’s compensation surveys may impact those arrangements and start conversations with your providers early about potential adjustments.

But wait, there’s more! 👇

If the 2020 pandemic impact wasn’t enough, the Centers for Medicare and Medicaid Services (CMS) made significant changes to the Medicare Physician Fee Schedule (MPFS), effective January 1, 2021. Among other things, these changes include substantial increases to the RVUs for evaluation and management codes and a reduction in the Medicare conversion factor used for reimbursement, both of which may impact survey benchmarks going forward, starting with the surveys released in 2022. We also expect a further drop in the Medicare conversion factor in 2022 with the expiration of government stimulus from the December 2020 COVID Relief Bill that offset the original cut to the 2021 conversion factor. We list several Coker resources on the MPFS changes at the end of the post.

Overall, we expect that at least the next three survey releases will potentially be more volatile than in years past. We will be providing further analysis and content on an ongoing basis as we receive survey data later this year and in the coming years.

 

What can you do?

First of all, don’t panic! If you are having trouble wrapping your head around all these changes, we are here to help. Here are some other recommendations for where to start.

  • Proactively engage in open and honest dialogue with providers early about these changes, what they mean, and obtain feedback regarding potential solutions.
  • When new survey data becomes available, don’t just go with “survey says!” Over the next few years, a greater need will exist to consider historical data trends, actual collections, and ability to pay given compensation rates, and potentially combining other benchmark metrics beyond a limited set, you may have considered in the past.
  • Especially regarding documentation of fair market value (FMV) and commercial reasonableness (CR), consider obtaining the advice of FMV specialists (such as Coker Group). Using 2020 survey data and 2021 wRVU values will be like comparing apples to oranges. Just because a survey has a number does not mean it drives a compliant compensation arrangement.
  • Consider engaging Coker to analyze the impact of the new MPFS in 2021, 2022, and beyond. These analyses can use your providers’ actual historical claims data to develop a more precise estimate of how the changes may affect your organization directly. Further, we can include reports that you can share with the providers highlighting their data and specific impact.
  • Lastly, consider the current situation as a potential catalyst to pursue alternative payment arrangements. Many providers fared better in 2020 when they had more significant revenue amounts tied to capitated payments versus traditional fee-for-service revenue. A change in compensation structure should balance any change in revenue.  In other words, we recommend that if a shift in revenue further towards value-based models occurs, the compensation model should follow, so incentives are aligned.

 

2021 MPFS Resources

  • MATTHEW JENSEN, ASA

    MATTHEW JENSEN, ASA

    Senior Manager

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