To expedite the evolution and widespread adoption of Value Based Arrangements (VBAs), I believe we need to alter how we think about physician compensation value. The healthcare compliance industry has mostly considered the FMV of physician compensation to be defined by what’s in the salary surveys. More specifically, appraisers have relied on the market approach to safely support or prove the FMV of a physician’s time and efforts. However, I believe it’s time for a paradigm shift to help promote VBAs and gain comfort on how physicians are compensated.
A few prominent healthcare attorneys have mentioned to me that their appraisers will only value a physician’s time/efforts on an hourly basis (rather than based on outcome), and I get that. It’s safe and supportable and reduces the appraiser’s liability. But, let’s not forget that the concept of value can be appropriately identified in ways other than the market approach (i.e. salary surveys). Without getting too cerebral about this, the concept of value is also measured in terms of “return” on investment, which is considered an income approach. A professional’s worth is not always embodied in the actual time he/she invests in a project but rather in the time it took to gain the knowledge and experience to effectuate such an outcome. In the case of employed physicians in VBAs, the physician’s contribution to the patient’s care is considered the investment. The return on the physician’s contribution is the outcome. The real challenge is quantifying the outcomes. More to follow on this topic….