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Answers CASE 11 Solution 5th edition.pdf

Answers CASE 11 Solution 5th edition.pdf - Cases in...

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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