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3 Key Takeaways from the 2023 Outlook for Provider Compensation

It is not easy being a medical group or health system right now. Organizations are faced with inflationary pressures, CMS fee schedule changes that decrease revenue for services, increased competition, and more.  

Optimal provider compensation administration can play a powerful role in helping organizations successfully steer through these challenges, but only if organizations can design – and then execute – their provider compensation plans effectively. The market has changed so much in just the past few years, and as a result, your tactics and tools need to evolve as well. So, what can healthcare organizations do in today’s world, not just to survive current challenges, but to find ways to thrive and seize competitive advantage?  

To help answer that question, Hallmark Health Care Solutions (HHCS) has published its 2023 Outlook on Provider Compensation Management report. It offers the guidance and analysis needed to help hospitals and health systems lay the foundation for improved compensation management. 

With input from an expert panel of healthcare thought leaders, the new report offers a comprehensive and detailed analysis of provider compensation-related challenges, trends, and opportunities that hospitals and medical groups will be facing throughout 2023. 

Here is a brief overview of three key findings from our Outlook Report: 

1: 2023 CMS fee schedule changes threaten to further shrink margins. 

Even after late intervention by Congress to limit cuts to reimbursements under the new 2023 CMS fee schedule, Medicare physician payments are still not keeping up with rising costs. This widening of the revenue-to-expense gap will make it harder for healthcare organizations to improve their margins in 2023. Smaller medical practices may especially struggle to absorb increasing costs under the new rules.  

Regardless, every health system and medical group must find ways to account for reduced reimbursements that will make margin recovery initiatives harder. “Fundamental changes to business and care models are required to create a sustainable health system and medical group model moving forward,” says Todd Godfrey, Founder and Principal of Reinvest Health Consulting, and a contributor to the 2023 Outlook report. “Assessing and understanding the trust cost of care will uncover changes that can truly transform the organization.” 

2: Organizations need to align compensation with revenue and performance targets in 2023. 

If CMS reimbursements are not keeping up with inflationary market forces, health systems and medical groups must find other ways to bridge the gap between revenue and expense. Effective compensation planning will play a critical role in this effort, particularly in designing plans that successfully incentivize improved provider performance through their compensation and pay elements. “Cost-cutting measures will not advance strategic imperatives or help organizations remain competitive and responsive to the market,” says Anthony D’Eredita, Founder and CEO of TrustWorks Collective, and another contributor. “It’s important to keep compensation tied to the underlying financials of the practices.” 

However, incentivizing better outcomes will require more than just tweaking existing plans, especially as much of the industry is actively shifting away from wRVU-based compensation models in favor of more quality- and value-based factors in compensation plans.  

3: Investing in smarter compensation technology will be key. 

Even the best provider compensation strategies and models will be useless if they cannot be executed and operationalized effectively. Outdated tools and Excel-driven processes are not designed to effectively manage the complexity and variability of today’s more sophisticated compensation models. Worse, they can hinder a medical group’s ability to accurately forecast and meet strategic targets. “With technology that automatically aggregates the data into one source of truth and validates data accuracy, analysts can perform more meaningful evaluations and engage in better strategic planning,” says Aarika Cofer, Vice President of Heisenberg II at Hallmark Health Care Solutions. 

In other words, by investing in smart compensation technology, administrators can refocus on higher priority, higher value tasks which are more likely to increase revenue and reduce costs for the organization. 

These takeaways are only the start. 

The full HHCS 2023 Outlook for Compensation Management report also examines issues like the following: 

  • How to navigate the number one issue faced by most healthcare organizations – inflation – and deal with the added strain it places on capital resources and growth opportunities. 
  • How smart compensation technology can even improve provider recruitment and help drive other strategic imperatives for the organization. 
  • How flexibility can and must be integrated into compensation plans and models to help organizations continue absorbing ongoing macro-level market changes.  
  • How technology can facilitate and ease organizational transition during and after mergers and acquisitions, which are expected to increase in 2023. 

Explore these topics and more. Download the full report.