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3 Ways Provider Compensation Technology Improves the Financial Planning Process

The financial challenges facing the healthcare sector have never been so acute. For many healthcare organizations, revenue has been falling despite the steep increase in costs. As a result, bridging that divide is a top priority for medical groups. One way to move the needle is more effective budgeting and planning, especially when it comes to the organization’s highest expense area: compensation.

“Provider compensation typically accounts for 50 to 70 percent of a medical group’s expenses,” says Charlie Gray, Vice President of Heisenberg II at Hallmark Health Care Solutions. “It’s also typically one of the most difficult parts of the financial planning process.”

Technology solutions that are purpose-built for provider compensation can transform the process by empowering healthcare organizations with the tools and data needed to effectively navigate financial obstacles. Here are three ways provider compensation technology can help organizations focus on the strategic portion of the financial planning process:

1: Collapsing data collection and reporting from weeks to days or hours

One foundational benefit of dedicated compensation technology is the ability to perform budgeting analysis using real-time data. When using spreadsheets and manual data aggregation, administrators may take months to complete the analysis. At that point, the data is already out of date.

By contrast, technology can integrate data sources to automatically pull in all the requisite financial data, compensation elements, and benchmarks from all relevant systems into a single source. As a result, organizations can start getting the Fair Market Value (FMV) data they need just by running a report, which is far more efficient than laboriously going through every provider one by one, putting them all in a spreadsheet, grabbing the data, looking at their production, verifying what they were actually paid, comparing against the contract, and comparing it to benchmarks.

“A provider compensation platform brings usable data to your fingertips at the exact moment you need it for making strategic decisions,” says Nick Hobbie, Heisenberg II Senior Solutions Consultant. “It can reduce weeks of work down to days or hours.”

2: Testing dollar impact in a sandbox environment with no risk to live operations

“Dedicated compensation technology can allow medical groups to easily gauge the financial impact when they’re considering new compensation plans for the upcoming fiscal year,” says Gray.

That’s thanks to something spreadsheets can’t manage sandboxing. “Solutions like Heisenberg II Provider Compensation can offer a test database (or ‘sandbox’ environment) that takes current data and puts it in a space where users can manipulate the data without affecting payroll or any other downstream systems,” says Hobbie. Users can take existing compensation plans – built at the individual provider or the medical specialty level – and perform an ad hoc analysis on any potential new plans to understand the financial impact. They can do this without making any actual changes and without all the manual effort.

Then, if they want to incorporate their analysis into their financial plans, they can take the information from the sandbox environment and pull it right into their budget software.

This streamlined, sandbox approach can facilitate a range of compensation-related improvements for healthcare organizations. For instance, in moving from fee-for-service to value-based pay, many organizations are redoing compensation models, and it can be very challenging to hit just the right targets. “In my experience as a director of physician compensation, we always wanted to keep up with the market without exceeding the market,” says Hobbie. “Being able to do modeling on the fly, using real-time data, is very helpful to thread that needle.”

3: Handling fee schedule changes

CMS fee schedule changes are a major pain point for every medical group. For instance, the 2021 Medicare Physician Fee Schedule dramatically recalibrated reimbursement weightings. To offset those changes, healthcare organizations had to make rapid decisions about adjusting compensation rates and thresholds.

Compensation technology can considerably ease the process of assessing, integrating, and reacting to fee schedule changes. “Essentially, analysts and compensation managers just need to load the fee schedules into the platform and compare wRVUs from year to year,” says Gray. “They can even look at the individual providers to see if a change in compensation was warranted because of CMS’ changes.”

The power behind a single source of truth

For organizations that lack compensation automation and forecasting capabilities, the budgeting process is ripe for improvement – and smart technology is the way forward. With a single-source-of-truth platform like Heisenberg II Physician Compensation, all compensation plans and data are housed in one place, and the platform offers a test environment to analyze the impact of future compensation model changes.

“Provider compensation doesn’t have to be as hard as we’re making it,” says Gray. “Yes, it’s complex. It’s probably the most complex portion of any medical group, but armed with the right technology, the budget processes can be simplified, and you can ensure that your providers are being paid appropriately.”