Written by Ben Minnis, Tyler Navarro, and Anthony Domanico

With significant changes to the Medicare Physician Fee Schedule (MPFS) in recent years and an aging physician population leading to potentially significant shortages of over 100,000 physicians by 2030,1 how organizations recruit and retain these key healthcare providers continues to evolve and become more competitive. As we hit the midway point of 2024’s first quarter, VMG Health’s experts have identified important trends in physician enterprise strategy that will impact the physician landscape in 2024 and beyond.

Recruiting Is Becoming More Creative

In today’s competitive recruitment landscape, organizations are innovating their approaches to attract and retain top physician talent. Beyond traditional compensation packages, which still include higher pay and signing bonuses in specialties facing shortages, institutions are prioritizing lifestyle enhancements like flexible scheduling and remote work options. Institutions are also promoting several non-traditional benefits and enhancements that attract and retain physicians:

  1. Enhanced Benefits: Organizations are increasingly offering comprehensive health insurance coverage, retirement programs with generous employer contributions, childcare assistance, and wellness programs.
  2. Physician Leadership Development Programs: Making the transition from a seasoned physician to a physician leader can be challenging to say the least. Organizations that offer and advertise strong leadership education opportunities can set themselves apart.
  3. Broader Loan Forgiveness / Retention Programs: While student loan forgiveness is not a new concept, VMG Health is increasingly seeing loan forgiveness offered as an all-purpose incentive— to buy a house, send kids to college, etc. In other words, the terms are being offered regardless of a physician’s student loan status.
  4. Hard-to-Recruit Model Adjustments: Recruiting can often be a time-sensitive operation. Many organizations are starting to implement hard-to-recruit question rubrics that allow compensation models modest flexibility without triggering committee pathways that can belabor a recruitment effort and lead to one-off compensation models.
  5. Investing in Technology and Infrastructure: Physicians are well aware of the importance technology and infrastructure has to the success and performance of their practice. Organizations that promote and invest in electronic health record (EHR) advancements and medical infrastructure will be in a better position to recruit physicians going forward.

One-Size-Fits-All Models No Longer Work

The era of one-size-fits-all compensation models in multispecialty healthcare is coming to an end. As service lines within healthcare delivery settings evolve, so do their operational dynamics and corresponding compensation structures. Each service line has unique requirements, such as call coverage, sub-specialization (e.g., heart failure, ERCP), and supervision of advanced providers, among others. Attempts to enforce rigid standardization across various specialties within a physician enterprise are increasingly impractical and counterproductive in today’s complex landscape. Instead, organizations are recognizing the need to tailor compensation models to suit specific circumstances. Striking a balance between innovation and standardization is key for organizations seeking to optimize their compensation frameworks, as evidenced by VMG Health’s experience working with a variety of organizations and approaches.

Models That Focus on Work-Life Balance

Physicians are placing an increasing emphasis on achieving a healthier work-life balance. This shift in priorities is prompting healthcare organizations to reassess and refine their compensation packages to better align with the needs of modern physicians. Flexible scheduling options, including compressed work weeks or part-time arrangements, are gaining popularity because they allow physicians to better manage their time and commitments outside of work. Moreover, the widespread adoption of telemedicine has opened new avenues for physicians to practice medicine remotely, offering them greater flexibility in how and where they work. Additionally, paid time off (PTO) allowances are expanding to ensure physicians have ample opportunity for rest, relaxation, and personal pursuits.

A 2023 survey by Merritt Hawkins2 asked final year medical residents, “What is important to you as you consider practice opportunities?” Notably, 82% of respondents marked “lifestyle” as very important, indicating a clear preference for work arrangements that afford them the time and freedom to pursue personal interests and maintain a healthy work-life balance. Similarly, 80% of respondents cited the importance of having adequate personal time. Financial considerations remain unsurprisingly significant, with 78% of respondents emphasizing the importance of a good financial package. However, it is more and more evident that the pursuit of a fulfilling lifestyle and sufficient personal time are increasingly taking precedence in the minds of physicians when evaluating practice opportunities. This trend underscores the importance for healthcare organizations to adapt their compensation strategies to meet the evolving needs and priorities of today’s medical professionals.

  • Understand the care models deployed by your organization and the level of burden associated with physician and provider work effort:
    • Which areas are ripe for burnout, disruption, and turnover?
    • Pay special consideration to on-call panels and shift models.
  • Consider how part-time and non-traditional schedules fit into practice and compensation models, especially when designing new compensation models.

Continued Bracing for Split/Shared Evaluation and Management (E/M) Changes

The Centers for Medicare & Medicaid Services (CMS) have continued to delay implementation of proposed changes to the time-only definition of “substantive portion” of a split/shared E/M visit in the facility setting until December 31, 2024. Delays are due to a reportedly large backlash by facilities, with concerns over care team disruptions and issues with integrating a time-based rule into billing and EHR systems.

While VMG Health anticipates additional delays or even changes to the policy, it would be wise for organizations to prepare inpatient care models and related compensation models to ensure a proper plan is in place—or could quickly be implemented—when final rule changes do take effect.

  • Catalogue all physician and APP models (employed and independent) where split/shared billing occurs today.
  • Document perceived challenges that may result from a time-based approach to capturing split/shared volumes, including workflows, billing, and compensation.

Aligning Compensation Models with At-Risk Incentives

In contemporary compensation structures, non-productivity incentives often include a substantial portion of compensation tied to high-quality metrics, ideally serving as a significant motivator and leading to better patient outcomes. While certainly not limited to a 2024 trend, forward-thinking organizations are continuing to leverage compensation design initiatives to bolster their ACO/CIN strategies, particularly those with health plans and/or substantial capitation risk within their payor contracts. As these organizations assume greater risk, compensation models can be tailored to distribute value-based earnings among physicians.

Remain Mindful of Regulatory Constraints

While physician shortages and increased demand continue to drive organizations to innovate compensation models and incentives, it’s crucial to operate within regulatory boundaries and adhere to laws governing healthcare practices. This point is underscored by recent cases, such as the one involving Community Health Network Inc., which agreed to pay $345 million to settle allegations of violating the False Claims Act by unlawfully submitting Medicare claims.3 The lawsuit alleged that Community Health Network overpaid specialists and awarded bonuses tied to referrals, ignoring warnings and providing false compensation figures. The settlement includes a five-year Corporate Integrity Agreement with HHS-OIG. The case originated from a whistleblower complaint filed in 2014. The government’s intervention underscores its commitment to combat healthcare fraud using tools like the False Claims Act.

In FY2022, the U.S. Justice Department collected $2.2 billion in settlements and judgments, the second-highest amount ever recorded in a single year. These statistics underscore the critical need for maintaining vigilance and compliance, particularly in an environment where regulatory scrutiny is significant.

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Continued Migration to APP Workforce

Health systems are increasingly turning to advanced practice providers (APPs) as a strategic solution to address the pervasive challenges of physician shortages. Unlike for physicians, where organizations are competing nationally for talent, supply and demand trends for APPs are driven by local factors.

The rise of nurse practitioners, physician assistants, and other APPs is seen as a pragmatic response to the growing demand for healthcare services. These providers bring advanced education and training, offering a multifaceted approach to patient care that aligns with the evolving needs of modern healthcare. Organizations are looking to APPs for cost-effectiveness and because APP training programs are generating a higher number of graduates than medical schools. This allows organizations to fill needed vacancies quicker while considering changes to the care model that will drive down the total cost of care.

With competitive recruitment strategies and tailored compensation packages, health systems recognize the crucial role that APPs play in ensuring the continued delivery of high-quality and accessible healthcare services. This collaborative model enhances patient access, care coordination, and overall efficiency and fosters a supportive work environment where professionals can learn from one another and leverage their respective skills and expertise.

Conclusion

The trends shaping provider compensation in 2024 reflect a strategic response to ongoing challenges like physician shortages, regulatory constraints, and evolving workforce preferences. Physician enterprises will continue to face these challenges from a care model and compensation model perspective. VMG Health’s experts in physician enterprise strategy and compensation design can help your organization establish and refine your physician enterprise strategy to ensure your organization’s continued ability to recruit and retain top physician and APP talent.

Sources

1 Chakrabarti, R., et. al.(2021). The Complexities of Physician Supply and Demand: Projections from 2019 to 2034. American Association of Medical Colleges. https://www.aamc.org/media/54681/download?attachment.

2 AMN Healthcare. (2023). Survey of Final Year Medical Residents. https://www.amnhealthcare.com/siteassets/amn-insights/surveys/survey-of-final-year-medical-residents-2023.pdf

3 United States Department of Justice. (2023). Indiana Health Network Agrees to Pay $345 Million to Settle Alleged False Claims Act Violations. https://www.justice.gov/opa/pr/indiana-health-network-agrees-pay-345-million-settle-alleged-false-claims-act-violations