It is essential to first consider whether to pay physicians for supervision, and if so, to then consider the best practices for providing supervision payments in order to ensure such payments are reasonable and aligned with organizational objectives.

As the health care landscape in the United States moves towards controlling costs and ensuring patient access to care for newly insured patients, the use of Advanced Practice Clinicians (APCs) is playing a significant and steadily expanding role. According to Gallagher Integrated’s 2013 and 2014 Advanced Practice Clinician Survey, average growth in nurse practitioner and physician assistant staffing was approximately 10.5% in 2012 to between 12.0% and 16.7% in 2013.

As the APC workforce has grown, so too has the number of physicians providing APC supervision, and their time spent on supervisory activities. Many of our clients report that physician expectations for compensation for supervisory activities is increasing. To address these requests, as well as to promote a successful APC-physician relationship, it is essential to first consider whether to pay physicians for supervision, and if so, to then consider the best practices for providing supervision payments in order to ensure such payments are reasonable and aligned with organizational objectives.

Should my organization pay physicians for the supervision of APCs?

How does an APC supervision payment fit into your physician compensation philosophy?

The best compensation models are easy to administer and understand, typically paying for a few key objectives, while leaving overall performance to be driven by management—not just by the compensation model. Especially under compensation models that are primarily productivity-based, organizations often struggle to encourage physician performance in non-production areas, such as citizenship, without offering separate payments for those activities. It is not uncommon for organizations to “over-develop” their non-productivity components into overly complex compensation plans and APC supervision is no different. It is worth considering whether payment for APC supervision is aligned with your organization’s objectives for your physicians/practices, an answer which may vary by specialty, by state (the oversight requirements for that state), as well as by how the physician’s job duties and corresponding compensation were determined.

Does the physician’s existing compensation model indirectly account for APC supervision?

In many cases a physician’s personal productivity increases as a result of utilizing an APC in their practice, leading to increased compensation to the physician. This relationship is often observed in surgical specialties, where an APC can perform much of the pre and post surgical care, making it possible for the physician to spend more of their time in the operating room performing procedures, thus generating higher collections and WRVUs. In office settings, an APC can increase a primary care physician’s productivity by seeing lower acuity cases, leaving more complex visits for the physician, thereby increasing the physician’s production.

As billing models vary for APCs, the effect of an APC’s billing on physician production should also be considered. Services billed as “incident-to” may inflate the production associated with the physician’s provider identification number, potentially overstating the physician’s production for the purpose of distributing compensation. To the extent an APC practices more independently, such as when physicians are traveling to rural clinics to provide supervision, or when chart review is the primary method of supervision, supervisory services are not reflected in the physician’s productivity, and a separate payment may be more appropriate.

How great is the need for physician supervision, and the associated workload?

As physician supervision requirements vary across states (e.g.currently, 21 states and the District of Columbia allow full practice status for NPs1, paying for supervision may make more sense in a state with more stringent requirements (e.g., extensive chart review, physical presence), versus those that do not (e.g., availability only by telephone, or no supervision at all for most services).

Does your organization view APCs as an individual or shared resource, and who is most accountable for APC performance?

In organizations where APCs are viewed as the physician’s resource/responsibility, it may make more sense to compensate the physician for supervision in a way that promotes physician ownership of the APC’s performance. In organizations where APCs are viewed more as an infrastructure investment, and a resource to be utilized more broadly by all physicians, it may make more sense to include supervision activities as a citizenship expectation, similar to other practice management activities generally expected of physicians.

Through our own internal database, we have observed in recent years that more of our clients compensate at least one physician in their organization separately for APC supervision. Many organizations with which we have recently worked on a compensation plan redesign have included APC supervision as a pay component for select specialtiesor have targeted doing so. Interestingly, based on the Gallagher Integrated 2015 Physician Compensation and Production Survey, 62% of participating organizations indicated that they provide additional payments to physicians for their supervision of APCs.

What are the common APC supervision compensation models and what are the pros and cons of each?

Revenue Less Expense Model: a physician is reimbursed a portion of remaining APC revenue after deduction of appropriate expenses (e.g., APC salary and benefits; an allocation for practice overhead; and an allocation for corporate overhead).

Pros: Fits in well with a compensation philosophy where physicians are financially accountable for managing their practices, by putting physicians at-risk for APC performance. It is also often administratively simpler to include APC revenue in the practice

Cons: It’s very important to include the full allocation of APC expenses in the model, including overhead, otherwise the physicians don’t bear the true expense to the practice for the APC. Under this model, physicians may be motivated to utilize an APC only when it’s profitable to them, and not because it is in the best interest for the organization or patient to expand access to care. This model can also lead to high payments to physicians and compliance concerns regarding paying physicians for personally performed services. Also, encouraging physician ownership of APC performance may be contrary to organizations that wish to have a more centralized APC management structure

Visit/Panel Model: a physician is paid an amount per “visit” or based on the patient panel for APC supervision. “Visits” may be defined in a variety of ways, to include all practice visits, encounters, or patients—whether those visits are conducted by the physician or APC.

Pros: Fairly straightforward to administer. This model encourages physicians to “share” with APCs, as they’re paid for keeping the APC busy through a robust patient panel

Cons: Important to ensure consistent APC billing practices—that physicians don’t leverage APCs to increase personal production, and receive payment under their own compensation plan, as well as payment for APC visits. This can lead to high payments to physicians if not capped, and burden of supervision doesn’t necessarily increase with increased visits or panel size

Stipend Model: a physician is paid a fixed fee per APC full-time equivalent (FTE) supervised (occasionally, may take the form of hourly payments to physicians for supervision time). This represents the most common model utilized in the market today.

Pros: Administratively simple. Works well in an environment where the APC practices more independently and physicians are not viewed as being responsible for APC performance. Fixed payments make it easier for organizations to estimate financial impact and address compliance concerns

Cons: If physician management of APC performance or collaborative practice is important, the organization must address through managementas model has no performance requirement

WRVU Model: a physician is paid some dollar amount per WRVU for APC supervision. WRVUs counted may be defined in a variety of ways, to include all practice WRVUs, APC WRVUs only or some portion thereof.

Pros: Similar to visits/panel size as there is an incentive to “share” with APCs and keep them busy thus expanding access

Cons: Important to ensure consistent APC billing practices—that the physician doesn’t leverage the APC to increase personal production, and receive payment under own compensation model, as well as payment for APC WRVUs. Can lead to high payments to physicians if not capped, and burden of supervision doesn’t necessarily increase with the APC’s productivity.

Generally, in all APC supervision payment models, it is important for the organization to ensure that the utilization of an APC makes business sense, before addressing the physician supervision aspect. Additionally, as with any “new” physician compensation component, the supervision payment should be viewed in the context of the physician’s total compensation plan, rather than a supplement to increase overall compensation. In our experience, we have seen organizations implement APC supervision compensation without considering the impact of additional compensation to physicians, and financial affordability. We have also seen organizations add APCs to practices where the effect on total productivity and financial performance was minimal, raising concerns regarding the commercial reasonableness of the arrangement.

Models with variable compensation have the potential to generate cash compensation for physicians sufficient to raise compliance concerns regarding personally performed services and fair market value, as well as to negatively impact organizational financial performance. Organizations with a favorable payor mix under a revenue-less expense model may have APCs generating additional physician supervision compensation in the six-figure range, potentially placing the physician’s total compensation well above typical market norms. It may, therefore, be prudent for organizations to consider capping the total amount payable to each physician for APC supervision. It is Gallagher Integrated’s general experience that to remain within fair market value, the total payments received by a physician for APC supervision should not exceed a reasonable and typical market range per FTE supervised, and that the total number of APC FTEs supervised by any single physician should not exceed four, though the actual number is often lower.

Finally, when considering APC supervision compensation, it is essential to consider the changing landscape of health care reimbursement. As the move towards paying for value, rather than production continues, paying physicians based on APC production may be shortsighted as it has the potential to create competition for patients between the physician and APC. In a future that will demand a more collaborative, team-based care model between physicians and APCs, it is vital, regardless of supervision payments, to manage the APC-physician relationship and performance expectations.

In addition to the Advanced Practice Clinician Survey, we are preparing our 2016 Physician Compensation Survey as well as releasing the 2015 survey. These surveys provide comprehensive data on physician total cash compensation, including pay practices (e.g., advanced practice supervision pay, call pay, production and quality incentives, medical director and administrative pay) and compensation philosophy and governance practices – all important tools when looking at the growth of nurse practitioner and physician assistant staffing and what that means for physician compensation in the new era of healthcare.