Cases in Healthcare Finance, 5
th
Edition
Copyright
2014 by FACHE
12/13/2013
Case 11 - 1
CASE 11 SOLUTION
ORLANDO FAMILY PHYSICIANS
Pay for Performance
Case Information
Purpose
This case analyzes alternative pay for performance compensation plans for group practice
physicians. Several different approaches are used to measure economic (financial) performance. In
addition, compensation can be based on both financial and non-economic factors. Students must
not only consider the impact of various approaches on compensation amounts, but also consider
the issues of fairness and creation of incentives that benefit the practice as a whole.
Complexity
The case is moderately complex, especially for students who have little actual work experience and
hence a limited understanding of “real world” compensation. There is a lot of number crunching, but
the model does most of the work.
Model Description
The model takes much of the busywork out of the case, so it enables students to spend more time
on interpretation and evaluation. Like most case models, the student and instructor versions differ
only in regards to the input data. The instructor’s version contains the complete base case inputs,
while these inputs are zeroed out in the student version of the model.
The model uses historical cost data along with choices about what proportion of physician
compensation should be based on performance and whether performance should be defined in
economic or non-economic terms. The model's (instructor version) Input Data and Key Output
sections are shown on the next page.

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Cases in Healthcare Finance, 5
th
Edition
Copyright
2014 by FACHE
12/13/2013
Case 11 - 2
Case Solution
1.
As a starting point, use last year’s allocation of $600,000 for base salary and $120,000 for
bonuses. What would be the total compensation of each physician if performance pay is based
solely on a
productivity measure
only? That is, 100 percent of performance pay based on
patient visits (0 percent for all other productivity, financial, and quality measures), 100 percent
based on work RVUs, or 100 percent based on professional procedures. Are the results
consistent among measures?
Here is the compensation for each physician based on the three measures of productivity. Note that
these are based on a starting amount of $720,000, which includes both the historical base pay
amount of $600,000 plus an expected profit-sharing bonus of $120,000.
Physician Identifier
Based On
A
B
C
D
Total
Patient visits
180,554
177,091
180,122
182,233
720,000
Work RVUs
177,774
180.083
182,583
179,560
720,000
Profess
procedures
177,539
180,696
182,082
179,683