The Value of Value for Physician Groups

Medical groups hope to find value by transitioning to a value-based reimbursement model. Here’s what physician leaders need to know — and what they can expect — from the compensation shift.

Many U.S. physician groups participate in some form of value-based reimbursement. The nature of this involvement, however, spans a fairly large range along a risk or value-based continuum. Current value-based reimbursement models include, but are not limited to: 

  • Standard fee-for-service arrangements with some quality incentives, such as pay for performance. In this model, there are opportunities for participating physicians to earn bonuses when they meet or exceed certain quality metrics, such as reaching desirable mammography or colonoscopy screening rates, or meeting or exceeding A1C levels in a physician’s diabetic patient population.
  • Standard FFS arrangements with opportunity for shared savings resulting from the cost of care not exceeding certain thresholds. In addition to possible bonuses associated with meeting or exceeding certain quality metrics, this model might also provide other bonuses based on the total cost of care for certain defined populations — for example, improving length-of-stay or cost-per-discharge targets.
  • Standard FFS arrangements with upside and downside risk on certain metrics. This model includes the opportunity for shared savings on certain aspects of quality and the cost of care as well as downside loss for certain cost metrics within a defined patient population. MACRA — the Medicare Access and CHIP Reauthorization Act of 2015 — is a great example of this option.

Is there a prudent approach for medical groups taking on some level of manageable and affordable risk in this new world? The short answer is yes. However, just as one wouldn’t run a marathon without proper training, medical groups must equip themselves with the appropriate infrastructure, tools and incentive structures to ensure the desired level of success in value-based contracting.


Although some experts expect specialists to continue to operate in a fee-for-service environment, there are some collaborative skills and benchmarks they should consider to successfully work with primary-care physicians in the world of value-based reimbursement.

  • Clear, complete and timely communication with referring primary care physicians.
  • Relentless commitment to clinical efficiency and effectiveness.
  • Prudence in prescribing ancillary/diagnostic testing and costly medications.
  • Commitment to effective use of inpatient resources and length-of-stay management.
  • Effective use of lower (less expensive) levels of care, such as virtual visits, skilled nursing facilities, home health and hospice care.
  • High satisfaction from referring physicians and patients alike.
  • Timely access for referrals.
  • Smooth and timely transition of the patient back to the referring primary care provider.

There are a number of key skill sets and tools that medical groups must secure to be able to manage risk effectively.

Infrastructure — A medical group must ensure it is sufficiently integrated with hospitals, hospitalists and post-acute facilities and services to ensure the group is receiving timely communication regarding the potential admission or discharge of the group’s patients.

Tools/data systems — A group must have access to the appropriate electronic health records — demographics, patient forms, history, surveys and physical information — to streamline the workflows associated with value-based care reimbursement. That includes fully integrated practice management systems that facilitate productivity and coding, financial processing, data reporting capability and enable documentation and management of populations.

Human resources — Patient-centered medical home designation requires appropriate staff to facilitate care management functions (utilization, quality and disease), along with access to social workers (community resources), dieticians, educators, pharmacists, mental health services and more.

Aligned incentives — These must be tracked at the clinician level, based upon a scorecard of quality, use and financial performance.

A physician group can purchase these services if it doesn’t have the internal resources to facilitate value-based reimbursement.

 Primary Care, Primary Impact

Given their critical role as the gatekeeper for their patients, primary care physicians have emerged as the “ground zero” specialty for the implementation of value-based reimbursement. Health systems all over the country are aggregating large groups of primary care physicians to secure their foothold on the primary care framework required to manage large numbers of covered lives.

The march toward increasing numbers of “covered lives” appears to have taken a major foothold in the conversation about value-based reimbursement. For example, the Health Care Transformation Task Force, an industry consortium whose members include some of the nation’s largest health systems and insurers, has publicly committed to having three-quarters of their respective businesses operating under value-based payment arrangements by 2020.

It seems unlikely — at least in the near future — that more than about half of a primary care practice’s total volume will transition to full-risk. That means there still will be the need to treat many patients under typical fee-for-service methodologies and the related incentives.

Since most physicians have spent the majority of their lives in this model of care, it is clear that successful practices in this emerging hybrid model will need to adapt by mastering the notion of living in two materially dissimilar care models.

When observing physician groups that seem to be successfully doing so, a number of success factors emerge, including:

Provider engagement — For change and adaptation to risk, physicians must lead the change and encourage other clinicians to embrace the skill sets and disciplines necessary to succeed in value-based reimbursement.

Patient empowerment — Teaching patients to be advocates and active participants in their care is a must for the early recognition of problems and improved outcomes.

Timely access — Expediting the appropriate level of care needed for a group’s patients and helping patients navigate care in their individual communities Is critical.

A team approach — Increased “touch points” for patient care allows clinicians not only to be more efficient but also more thorough and comprehensive in the care they provide.

Stratified populations — Clinicians must have an intimate working knowledge of their sickest patients. Such knowledge enables the provision of more targeted care around those individuals who are at the most risk. This leads to better patient management by the team and, therefore, improved clinical (and financial) outcomes.

Useful data — Systems must provide high-quality information that allows physicians to create pertinent action steps based upon timely and thorough clinical knowledge.

Best practices — Guidelines based on past performance can help achieve better quality and clinical outcomes for patients. They can help decrease use and financial expense.

Communication — Insist upon effective and timely information exchanges throughout the care continuum, among primary care physicians, hospitalists, specialists, post-acute clinicians and nursing for care transitions and home care. This might be the biggest challenge, but concerted communication is a must for understanding patient care needs.

Evaluations — Annual patient evaluations (or twice yearly, for seniors) is prudent for a good baseline understanding of a patient’s conditions, disease burden, social needs and health status.

Aligned incentives — Rewards must flow to those actively providing value as clinical outcomes improve and lead to decreased cost. Incentives can flow from a payer to a medical group or to a health system that either manages or owns a medical group as it works to improve patient health.

Redefining Productivity

In this emerging dual model of health care financing, there’s a need to redefine productivity for physicians.

It’s likely that fee-for-service incentives will continue to be “widget-based” in nature. Giving physicians incentives for net collections, patient visits or work relative value units still will work under a fixed-fee schedule arrangement.

Encouraging physicians to work more effectively within the construct of value-based reimbursement will require a fundamental shift in the definition of productivity. In a risk-based environment, the provision of additional clinical services does not automatically equate to more reimbursement. In fact, in most instances, the inverse is true. In addition, services of marginal clinical utility will hurt quality metrics. These dynamics will diminish the financial returns associated with treating patients on a risk basis.

For primary care physicians, much more attention will be given to panel sizes of patients for an individual provider and his/her care team. But medical groups must understand a size approach does not effectively address the significant differences in time and resources needed to see patients from different patient and payer populations. Groups should attempt to stratify their own panel ratios.

For specialists and subspecialists, even though they might participate in shared-savings incentive models over time, it is likely that most of them will continue to function in a predominantly fee-for-service model. However, the risk-based financial incentives for referring primary care physicians will, in a short period of time, dictate that specialists commit to managing the care of shared patients in a high-quality, cost-efficient manner. Most important, it will be critical for specialists to understand that their performance in these disciplines will determine their attractiveness to referring primary care physicians (as well as acute-care hospitals participating in bundled payment programs).

Definitions of productivity for specialists and sub-specialists most likely will remain oriented around fee-for-service terms (wRVUs, procedures, net collections, etc.). As a result, it’s possible that, as value-based reimbursement evolves, the

U.S. health care system might see a smaller number of busier specialists.

Other Potential Impacts

The use of advanced practice providers — such as nurse practitioners and physician assistants — probably will become more prevalent as populations become more stratified and physicians focus on providing clinical services to patients with more complicated clinical conditions.

Primary care health teams almost certainly will integrate APPs to manage growing patient panels, although they may be used more sparingly in specialty physician practices. Some expect they might be seen as “competition” for a reduced number of referrals coming from primary care physicians.

Other factors critical to success:

  • The role of comprehensive electronic medical records will continue to evolve. The financial constraints of value-based reimbursement will necessitate the elimination of care being provided simply because there is no record of a particular test or procedure in a patient’s record.
  • The role of telemedicine will increase substantially, given the convenience for patients coupled with its low overhead costs.
  • The role of data analytics will be paramount to the practice of the average physician, who will need timely access to up-to-date, accurate and comprehensive clinical data.

But what about medical groups that aren’t proactive about the emerging reality of value-based reimbursement? The fallout almost certainly will be substantial — increased physician burnout, decreased group reimbursement and the possibility that patient care will continue to wane compared to other industrialized countries.

Most industry observers agree that value-based reimbursement, once mature, will fundamentally rewrite the historic fee-for-service medicine credo that “more is better.” In a value-based paradigm, only services that truly bring clinical value (with proportional cost) will be prescribed and delivered. As a result, more inpatient services will be provided in lower-cost outpatient facilities, and likely those that are free-standing vs. hospital-based. Inpatient beds will be filled with only acute patients. Specialists will provide only those services needed to return their patients back to functional status within a desirable timeframe and at the lowest cost/greatest efficacy available. Lastly, primary physicians will manage their teams in a way that maximizes the opportunity for their patients to be healthy and happy.

Amir Bacchus, MD, MBA, is cofounder and chief medical officer of Nevada-based P3 HealthGroup, specializing in the clinical direction of health care organizations. 

Robin Meter, MHA, is principal of Posada Consulting, which works with health care organizations on enterprise challenges. He is based in Nebraska.

Topics: Management Journal

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