Physician compensation is due for transformation as the traditional models based on fee-for-service payments and work relative value units misalign incentives and add unnecessary complexity.
“[Fee for service] remains the dominant system in the U.S. paying physicians and hospitals a set fee for each healthcare service provided. This approach rewards volume of services rather than quality and clinical outcomes,” Stephen Parodi, MD, executive vice president of external affairs, communications and brand of The Permanente Federation and The Permanente Medical Group based in Oakland, Calif., told Becker’s. “Unfortunately, the current approach is leading to higher costs and worse outcomes.”
Physician leaders across the country are running into similar challenges and are ready for a change. But any change is hard.
“The most profound lesson I’ve learned is that our traditional RVU-centric physician compensation models are fundamentally misaligned with academic medicine’s multi-faceted mission. They are financially unsustainable and directly contribute to the high proportion of low-value care in our health systems,” Salim Hayek, MD, vice president and chief transformation officer of The University of Texas Medical Branch at Galveston.
Over the last year, physicians have become more productive with fewer support staff, according to Kaufman Hall’s Physician Flash Report. However, the revenue per wRVU continues to fall, which reflects the larger reimbursement trends and is an “indication that traditional fee-for-service structures aren’t sustainable.”
As a result of the declining revenue, specialists may feel pressure to bring in more cases and work longer hours to bridge the gap in reimbursement. The increased pressure coupled with less support could accelerate burnout.
“Despite compelling evidence that these models increase burnout rates and fail to improve revenue, any proposed compensation change triggers anxiety among physicians who have built their professional lives around familiar productivity metrics,” said Dr. Hayek. “Transforming compensation systems requires both acknowledging this anxiety and demonstrating through clear data how the current approach undermines our core academic mission of patient care, education and research.”
Kaufman Hall suggests value-based care and other risk-sharking models as a way to re-engage physicians and align incentives for a positive impact on revenue and patient care. While value-based care has been available for years, most health systems haven’t meaningfully incorporated it and still rely heavily on fee-for-service. Is the rubber finally meeting the road?
Dr. Parodi thinks so.
“The past year has shown us that there is an undeniable hunger and even demand for a healthcare system that works better for all in the United States,” he said. “Discussions around value-based care are intensifying as healthcare systems and physicians grapple with rising costs, the need for better patient outcomes, and the shift away from fee-for-service models.”
The value-based model rewards physicians for keeping patients healthy, achieving great outcomes and avoiding unnecessary costs. Kaiser Permanente has worked for years to integrate this model, leveraging its unique provider network and health plan integration.
“Kaiser Permanente’s integrated model, which combines health coverage with medical care, has demonstrated the potential to improve efficiency, effectiveness, and affordability by putting the patient’s health and well-being at the center of every care decision,” Dr. Parodi said. “We need to talk about how we can make the transition to a better place where value matters more than volume.”
Many health systems are making moves in this direction, either through accountable care organizations, their own health plans or partnerships with payers. For physicians, the transition is a delicate balance to ensure they’re able to influence new payment structures.
“The key to success lies in truly faculty-driven initiatives that position physicians as architects rather than recipients of change, creating unprecedented transparency around financial realities while honoring the diverse career pathways essential to academic medicine’s future,” said Dr. Hayek.
Source Attribution:
This article was written by Laura Dyrda and initially published by Becker’s Hospital Review on Tuesday, March 18th, 2025. It has been republished/adapted with permission. You can read the original article [here].
