Answer the following questions. Make sure your answers are complete. If you use

Question

Answer the following questions. Make sure your answers are complete. If you use the template to complete one of your answers, make sure you label which question you are answering. 1. As a starting point, use last years allocation of $600,000 for base salary and $120,000 for bonuses. What would be the total compensation of each physician if performance pay is based solely on a productivity measure, that is, 100 percent of performance pay based on patient visits (0 percent for all other productivity, financial, and quality measures), 100 percent based on work relative value units, or 100 percent based on professional procedures? Are the results consistent among measures? 2. Now focus exclusively on a financial performance measure: 100 percent of performance pay based on gross charges (0 percent for all other productivity, financial, and quality measures), 100 percent based on net collections, and 100 percent based on net income before physician compensation. Are the results consistent among the measures? 3. What if only a quality measure is usedthat is, 100 percent of performance pay based on an average patient satisfaction score (0 percent for all other productivity, financial, and quality measures), 100 percent based on meeting a blood pressure control target, or 100 percent based on meeting a breast cancer screening target? Would the results be consistent among these measures? 4. One physician wants to base all compensation on performance. Assume that all of last years total compensation of $720,000 is allocated based on a single performance measure. What would be the total compensation of each physician based on each financial, productivity, and quality measure? Interpret the results.

Explanation / Answer

1) Total compensation of each physician, performance pay is based solely on a productivity measure,

100 percent of performance pay based on patient visits

Patient visits     4,023      3,567         3,966           4,244          15,800

A = 4,023 / 15,800 =0.25 * $120,000 =$30,000

B=3,567    / 15,800 = 0.23 * $120,000 =$27,600

C=3,966   /15,800 = 0.25 * $120,000=$30,000

D = 4,244 / 15,800 = 0.27* $120,000=$32,400

Basic pay

A =$600,000 * 0.25 =$150,000

B= $600,000 * 0.23 =$138,000

C= $600,000 * 0.25=$150,000

D= $600,000 * 0.27=$162,000

Allocation of $600,000 for Base salary and $120,000 for bonuses

Allocation is basic salary for all is same

A = $150,000 +$30,000 = $180,000

B =$138,000 + $27,600 = $165,600

C= $150,000 + $30,000 = $180,000

D=$162,000+ $32,400 = $194,400

Total Compensation = $720,000

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2) 100 percent based on net income before physician compensation

$196,515 + $158,814 + $171,193 + $263,541 = $790,063

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3)Quality measure is used is Average patient satisfaction score

Such as $600,000 for base salary and $120,000 for bonuses =$720,000

A = 89   * $720,000 =$640,800

B = 80 *$720,000 =$576,000

C= 87 *$720,000=$626,400

D= 94 *$720,000=$676,800

Total =$2,520,000

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