Case 11 CASE 11 Instructor Version by FACHE BANGOR FAMILY PHYSICIANS Pay for Performance This case requires the development of a physician compensation scheme for a four-physician family practice. The model uses historical data for inputs along with information regarding the amount and type of compensation to be based on performance and how performance is measured. The model consists of a complete "base case" analysis--no changes need to be made to the existing MODEL-GENERATED DATA section. However, some values in the student version INPUT DATA section have been replaced with zeros. Thus, students must determine the appropriate input value and enter them into the cells colored red.

When this is done, any error cells will be corrected and the base case solution will appear. Note that the model does not contain any risk analyses, so students will have to create their own if required by the case. Furthermore, students must create their own graphics (charts) as needed to present their results. INPUT DATA: KEY OUTPUT: Compensation System Parameters: Physician Compensation: Total amount in base pay 0,000 Based On A B C D Total Total amount in performance plan 300,000 Net revenue 7,509 4,010 7,443 1,039 0,000 Total amount in profit distribution 120,000 Work RVUs 4,,,,,,000 0,000 Net income 6,,,,,,000 Multiple Factor Distribution: Mult. factors* 180,,,,,000 Percentage based on financial performance 50% Percentage based on noneconomic factors 50% *Multiple factors plan includes non-economic factors plus work RVUs 100% Historical Physician Data: Physician Identifier A B C D Total # Patients 4,,,,,800 # RVUs 4,,,,,164 Professional procedures 6,,,,,256 Gross charges 7,820 5,841 2,675 6,312

Case 11case 11instructor Versioncopyright 20068305by Fachebangor Fam

Case 11 CASE 11 Instructor Version by FACHE BANGOR FAMILY PHYSICIANS Pay for Performance This case requires the development of a physician compensation scheme for a four-physician family practice. The model uses historical data for inputs along with information regarding the amount and type of compensation to be based on performance and how performance is measured. The model consists of a complete "base case" analysis--no changes need to be made to the existing MODEL-GENERATED DATA section. However, some values in the student version INPUT DATA section have been replaced with zeros. Thus, students must determine the appropriate input value and enter them into the cells colored red.

When this is done, any error cells will be corrected and the base case solution will appear. Note that the model does not contain any risk analyses, so students will have to create their own if required by the case. Furthermore, students must create their own graphics (charts) as needed to present their results. INPUT DATA: KEY OUTPUT: Compensation System Parameters: Physician Compensation: Total amount in base pay $300,000 Based On A B C D Total Total amount in performance plan 300,000 Net revenue $177,509 $174,010 $177,443 $191,039 $720,000 Total amount in profit distribution 120,000 Work RVUs 4,,,,,,000 $720,000 Net income 6,,,,,,000 Multiple Factor Distribution: Mult. factors* 180,,,,,000 Percentage based on financial performance 50% Percentage based on noneconomic factors 50% *Multiple factors plan includes non-economic factors plus work RVUs 100% Historical Physician Data: Physician Identifier A B C D Total # Patients 4,,,,,800 # RVUs 4,,,,,164 Professional procedures 6,,,,,256 Gross charges $527,820 $535,841 $602,675 $576,312 $2,242,648 Net collections $422,256 $401,881 $421,872 $501,050 $1,747,059 Total support staff cost $522,388 Total facilities costs $298,351 Total supplies cost $136,257 Revenue reinvested in practice $78,892 Physician base compensation $600,000 Historical Support Staff Data: Number of Employees Total Compensation Practice Manager 1 $75,168 Receptionist ,652 Nurses ,264 Medical assistants ,615 Billing clerk ,165 Laboratory technician ,788 Other costs 61,736 Total $522,388 Non-Economic Data: A B C D Total Average patient satisfaction score Number of committee meetings Continuing education credits Professional assn. leadership MODEL-GENERATED DATA: Compensation Based on Net Collections (Revenue) Physician Identifier A B C D Total Net collections $422,256 $401,881 $421,872 $501,050 $1,747,059 Proportion of revenues 24.2% 23.0% 24.1% 28.7% 100.0% Performance compensation $72,509 $69,010 $0 $72,443 $0 $86,039 $300,000 Total should equal $300,000 Base pay 75,,,,,,,000 Total should equal $300,000 Profit distribution 30,,,,,,,000 Total should equal $120,000 Total compensation $177,509 $174,010 $177,443 $191,039 $720,000 Total should equal $720,000 Compensation Based on Work RVUs Work RVUs 4,,,,,164 Proportion of revenues 23.1% 25.1% 27.2% 24.6% 100.0% Performance compensation $69,436 $75,208 $0 $81,457 $0 $73,899 $300,000 Total should equal $300,000 Base pay 75,,,,,,,000 Total should equal $300,000 Profit distribution 30,,,,,,,000 Total should equal $120,000 Total compensation $174,436 $180,208 $186,457 $178,899 $720,000 Total should equal $720,000 Compensation Based on Net Income Net collections $422,256 $401,881 $421,872 $501,050 $1,747,059 Support staff allocation 119,,,,,388 Facilities allocation 74,,,,,351 Supplies allocation 31,,,,,257 Net income $196,515 $158,814 $171,193 $263,541 $790,063 Proportion of net income 24.9% 20.1% 21.7% 33.4% 100.0% Performance compensation $74,620 $60,304 $0 $65,005 $0 $100,071 $300,000 Total should equal $300,000 Base pay 75,,,,,,,000 Total should equal $300,000 Profit distribution 30,,,,,,,000 Total should equal $120,000 Total compensation $179,620 $165,304 $170,005 $205,071 $720,000 Total should equal $720,000 Compensation Based on Multiple Factors Base pay $75,000 $75,000 $75,000 $75,000 $300,000 Profit distribution 30,,,,,000 Noneconomic compensation 41,,,,,000 Based on net collections 36,,,,,000 Total compensation $182,466 $189,766 $170,309 $177,458 $720,000 Base pay $75,000 $75,000 $75,000 $75,000 $300,000 Profit distribution 30,,,,,000 Noneconomic compensation 41,,,,,000 Based on work RVUs 34,,,,,000 Total compensation $180,929 $192,865 $174,817 $171,388 $720,000 Base pay $75,000 $75,000 $75,000 $75,000 $300,000 Profit distribution 30,,,,,000 Noneconomic compensation 41,,,,,000 Based on net income 37,,,,,000 Total compensation $183,522 $185,413 $166,591 $184,474 $720,000 END Notes: (1) The RVUs listed are work RVUs, which are only one of the three component RVUs used in Medicare physician reimbursement. (2) Over the past five years, the average annual amount reinvested in the preactice was $80,000. (3) In 2005, each physician received a bonus of approximately $28,000. Note: The model gives equal weight to each of the three non-economic factors.

,242,648 Net collections 2,256 1,881 1,872 1,050 ,747,059 Total support staff cost 2,388 Total facilities costs 8,351 Total supplies cost 6,257 Revenue reinvested in practice ,892 Physician base compensation 0,000 Historical Support Staff Data: Number of Employees Total Compensation Practice Manager 1 ,168 Receptionist ,652 Nurses ,264 Medical assistants ,615 Billing clerk ,165 Laboratory technician ,788 Other costs 61,736 Total 2,388 Non-Economic Data: A B C D Total Average patient satisfaction score Number of committee meetings Continuing education credits Professional assn. leadership MODEL-GENERATED DATA: Compensation Based on Net Collections (Revenue) Physician Identifier A B C D Total Net collections 2,256 1,881 1,872 1,050 ,747,059 Proportion of revenues 24.2% 23.0% 24.1% 28.7% 100.0% Performance compensation ,509 ,010

Case 11case 11instructor Versioncopyright 20068305by Fachebangor Fam

Case 11 CASE 11 Instructor Version by FACHE BANGOR FAMILY PHYSICIANS Pay for Performance This case requires the development of a physician compensation scheme for a four-physician family practice. The model uses historical data for inputs along with information regarding the amount and type of compensation to be based on performance and how performance is measured. The model consists of a complete "base case" analysis--no changes need to be made to the existing MODEL-GENERATED DATA section. However, some values in the student version INPUT DATA section have been replaced with zeros. Thus, students must determine the appropriate input value and enter them into the cells colored red.

When this is done, any error cells will be corrected and the base case solution will appear. Note that the model does not contain any risk analyses, so students will have to create their own if required by the case. Furthermore, students must create their own graphics (charts) as needed to present their results. INPUT DATA: KEY OUTPUT: Compensation System Parameters: Physician Compensation: Total amount in base pay $300,000 Based On A B C D Total Total amount in performance plan 300,000 Net revenue $177,509 $174,010 $177,443 $191,039 $720,000 Total amount in profit distribution 120,000 Work RVUs 4,,,,,,000 $720,000 Net income 6,,,,,,000 Multiple Factor Distribution: Mult. factors* 180,,,,,000 Percentage based on financial performance 50% Percentage based on noneconomic factors 50% *Multiple factors plan includes non-economic factors plus work RVUs 100% Historical Physician Data: Physician Identifier A B C D Total # Patients 4,,,,,800 # RVUs 4,,,,,164 Professional procedures 6,,,,,256 Gross charges $527,820 $535,841 $602,675 $576,312 $2,242,648 Net collections $422,256 $401,881 $421,872 $501,050 $1,747,059 Total support staff cost $522,388 Total facilities costs $298,351 Total supplies cost $136,257 Revenue reinvested in practice $78,892 Physician base compensation $600,000 Historical Support Staff Data: Number of Employees Total Compensation Practice Manager 1 $75,168 Receptionist ,652 Nurses ,264 Medical assistants ,615 Billing clerk ,165 Laboratory technician ,788 Other costs 61,736 Total $522,388 Non-Economic Data: A B C D Total Average patient satisfaction score Number of committee meetings Continuing education credits Professional assn. leadership MODEL-GENERATED DATA: Compensation Based on Net Collections (Revenue) Physician Identifier A B C D Total Net collections $422,256 $401,881 $421,872 $501,050 $1,747,059 Proportion of revenues 24.2% 23.0% 24.1% 28.7% 100.0% Performance compensation $72,509 $69,010 $0 $72,443 $0 $86,039 $300,000 Total should equal $300,000 Base pay 75,,,,,,,000 Total should equal $300,000 Profit distribution 30,,,,,,,000 Total should equal $120,000 Total compensation $177,509 $174,010 $177,443 $191,039 $720,000 Total should equal $720,000 Compensation Based on Work RVUs Work RVUs 4,,,,,164 Proportion of revenues 23.1% 25.1% 27.2% 24.6% 100.0% Performance compensation $69,436 $75,208 $0 $81,457 $0 $73,899 $300,000 Total should equal $300,000 Base pay 75,,,,,,,000 Total should equal $300,000 Profit distribution 30,,,,,,,000 Total should equal $120,000 Total compensation $174,436 $180,208 $186,457 $178,899 $720,000 Total should equal $720,000 Compensation Based on Net Income Net collections $422,256 $401,881 $421,872 $501,050 $1,747,059 Support staff allocation 119,,,,,388 Facilities allocation 74,,,,,351 Supplies allocation 31,,,,,257 Net income $196,515 $158,814 $171,193 $263,541 $790,063 Proportion of net income 24.9% 20.1% 21.7% 33.4% 100.0% Performance compensation $74,620 $60,304 $0 $65,005 $0 $100,071 $300,000 Total should equal $300,000 Base pay 75,,,,,,,000 Total should equal $300,000 Profit distribution 30,,,,,,,000 Total should equal $120,000 Total compensation $179,620 $165,304 $170,005 $205,071 $720,000 Total should equal $720,000 Compensation Based on Multiple Factors Base pay $75,000 $75,000 $75,000 $75,000 $300,000 Profit distribution 30,,,,,000 Noneconomic compensation 41,,,,,000 Based on net collections 36,,,,,000 Total compensation $182,466 $189,766 $170,309 $177,458 $720,000 Base pay $75,000 $75,000 $75,000 $75,000 $300,000 Profit distribution 30,,,,,000 Noneconomic compensation 41,,,,,000 Based on work RVUs 34,,,,,000 Total compensation $180,929 $192,865 $174,817 $171,388 $720,000 Base pay $75,000 $75,000 $75,000 $75,000 $300,000 Profit distribution 30,,,,,000 Noneconomic compensation 41,,,,,000 Based on net income 37,,,,,000 Total compensation $183,522 $185,413 $166,591 $184,474 $720,000 END Notes: (1) The RVUs listed are work RVUs, which are only one of the three component RVUs used in Medicare physician reimbursement. (2) Over the past five years, the average annual amount reinvested in the preactice was $80,000. (3) In 2005, each physician received a bonus of approximately $28,000. Note: The model gives equal weight to each of the three non-economic factors.