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Production Incentives: A growing trend for APP Compensation Plans

Production Incentives: A growing trend for APP Compensation Plans

In a survey of more than 64,000 advanced practice providers (APPs), Gallagher’s 2019 National Advanced Practice Provider Compensation Survey Report indicates that approximately 63% of organizations responding offer some type of formal incentive program to their APPs. In fact, 50% of organizations said they offer a productivity incentive program for some of their APPs, typically in the outpatient practice setting. This statistic follows a national trend over the past six years of increasing popularity of incentive programs, specifically productivity-based incentive programs. See Figure 1.

Work relative value units (RVUs) represent by far the most prevalent metric for productivity-based plans, with 91% of productivity-based plans based on work RVUs. Other metrics may include: visits/encounters, panel size, and professional collections. Work RVU productivity-based models are most commonly found in specialties and practice settings in which APPs are able to practice independently and therefore bill independently.  We have seen some organizations offer APP incentive program plans based on joint production goals with the APPs’ collaborating physicians.

At Gallagher we have started to see movement to productivity-based incentives particularly in those specialties in which APPs are more likely to manage their own patient panels and bill under their own provider identification numbers. Examples include primary care and urgent care settings, as well as such other outpatient specialties as psychiatry and dermatology.
 

Though organizations are implementing productivity incentives more often for APPs, these models are not similar to the pure productivity models we see with their physician counterparts. Typically organizations award APP incentives for work RVUs in excess of a pre-determined threshold to reward high performers.

To illustrate the breakout of base compensation vs. productivity-based compensation, we conducted a separate analysis using the underlying incumbent-level data from our 2019 National Advanced Practice Provider Compensation Survey Report. We looked at data only for APPs with a reported productivity component of pay. Only 1% of all APPs included in our 2019 survey reported compensation generated through a productivity-based incentive. When examining only those APPs who earned some amount through a productivity component, this figure becomes 18% on average.[1]  Organizations commonly cap the incentive opportunity for APPs. See Figure 2.

For those organizations offering APP productivity-based incentives, we find they are re-evaluating their plans to ensure the right balance between guaranteed pay and production. Organizations are positioning base salary to ensure that market competitiveness continues to support recruitment and retention. Meanwhile, organizations also are looking at the total cash compensation for APPs employed in practice settings and specialties that do not offer productivity-based pay opportunity to avoid creating competition among internal service lines for APP talent.

Given the mix of APPs with and without productivity-based incentives, Gallagher strongly recommends caution when referencing the reported APP compensation rates per work RVU. The reported compensation per work RVU rates are calculated as effective rates and do not represent what individuals would earn under a productivity model. A more detailed review of the applicable APP compensation model may help determine an appropriate compensation per work RVU rate under a productivity based model.

Similarly, our team relied on the underlying incumbent-level data, reviewing numbers only for APPs with a reported productivity component of pay and work RVUs. The tables below summarize our findings at the 25th, 50th, and 75th percentiles. See Figures 3, 4, and 5.

Please note that the data below are effective rates of pay and do not directly correlate with payout rates under a productivity model. Only a small number of plans are based solely on work RVU productivity, which most often is additive to the base salary structure.

We especially emphasize caution in using the surgical specialty data, because surgical APPs serve primarily in an inpatient setting for which sample sizes are relatively small.

If you have questions or are you interested in learning more about Advanced Practice Provider compensation trends or pay practices, please contact either of the following:

Aurora Young, National Managing Director & Service Line Leader

            Phone: 612.337.1137

            Email: Aurora_Young@AJG.com

Mary Heymans, Managing Director & Senior Advisor

            Phone: 612.337.1360

            Email: Mary_Heymans@AJG.com

To purchase Gallagher’s National Advanced Practice Provider Compensation Survey Report (2020 edition publishes on December 11), click here.

 

 

Note: [1] Gallagher relied on data available for all nurse practitioners and physician assistants for purposes of this analysis.

Mary Heymans

Mary Heymans is a Managing Director & Senior Advisor with the Physician Services service line of Gallagher’s Human Resources & Compensation Consulting practice. She has over 20 years of experience working in the healthcare industry, including professional consulting for healthcare organizations and physician practice management.

She previously oversaw a 10-state operation for a national physician practice management company. In this role she was responsible for contract negotiations and overseeing approximately 400 physicians and numerous support staff ...

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