Today’s healthcare climate presents special challenges for physician networks. Financial success is elusive and keeping physician staff members happy can seem like a daunting task. Reimbursement is declining and practice costs are rising. Physicians and hospitals find themselves increasingly competing for ancillary revenue and outpatient procedures. By defining a new approach to physician compensation, hospitals, health systems, and physician groups can reinvent themselves and achieve long-term financial and cultural success that supports the goals of all stakeholders in an innovative manner.
The W2 Physician Partnership Model (WPPM)
The W2 Physician Partnership Model (WPPM) is a tailor-made model of tiered compensation based on productivity that effectively aligns hospital, health system, and physician interests, establishing a foundation for a cooperative culture to improve patient quality. The WPPM is truly unique in that it combines the best of private practice, which leverages individual motivation, with the necessity of a larger organizational support system.
How is the WPPM different from other physician compensation models?
First, forget what you know about traditionally employed salaried physicians or physician compensation based on relative value unit (RVU). The time-clock-punching mentality just doesn’t work with independently trained and driven physicians. The RVU approach quickly becomes outdated due to changes in reimbursement causing the health system to lose large financial dollars per physician. The WPPM focuses on tiered production, paying the physician a market-based higher percentage of net professional billings as the physician pays his or her overhead. This tiered model, which has proven successful in many diverse markets across the country, allows individual physician practices to exist inside a larger group practice of physicians, or within a hospital network of physicians. It emulates the best of private practice without sacrificing the group as a whole.
The WPPM model is the force behind Moody’s recognition of Mercy Health System as one of a few systems nationally that has “successfully implemented physician integration with minimal subsidization of physician practices.” Since 1998, many health care systems have seen declining bond ratings. Mercy’s rating has remained stable at an A2 bond rating since 1994, and improved from “stable” to “positive” in 2007. Since implementing the WPPM in 1989, Mercy’s revenues have increased from $33 million to $920 millio- an increase of 2,600%. Mercy Health System has grown from one hospital location to an integrated network of 64 facilities in 24 communities and two states. It employs over 300 W2 partner physicians.
An integrated physician model has been key to Mercy Health System’s success and it can be replicated nationwide. Mercy Health System President/CEO Javon Bea has coached numerous organizations through the development and implementation of tailored physician compensation structures, many of which have been in place and successful for 15 years or more. By focusing on effective physician recruitment, retention, and integration activities, a health system can successfully build physician morale and organizational commitment, generate needed revenue, and provide better patient care. It is an undertaking that is well worth the effort. In fact, the revolutionary WPPM model can transform an organization both culturally and financially. Not only is it appealing to physicians, which has been historically difficult to achieve with traditional employment or RVU models, but also it is straightforward and simple to implement.
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