Latest / Becker’s Healthcare Podcast / Healthcare Upside / Down - Governance Without Gridlock: Designing Compensation Decision-Making That Scales

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Healthcare Upside / Down - Governance Without Gridlock: Designing Compensation Decision-Making That Scales · Becker’s Healthcare Podcast

• 0:00
  - Hello, everyone. This is Molly Gamble with Becker's
• 0:01
  - Healthcare. Welcome to Healthcare Upside Down, a podcast
• 0:04
  - by Becker's Healthcare and ECG Management Consultants
• 0:07
  - in which we'll explore the upsides and downsides
• 0:10
  - of health care and the industry's most current
• 0:11
  - trends. Thanks so much for tuning in. Joining
• 0:14
  - me for today's discussion is Ariel Baumann, director
• 0:16
  - of physician compensation with Piedmont, and Kate Taylor,
• 0:19
  - principal with ECG Management Consultants.
• 0:22
  - Ariel and Kate, thanks for joining me today.
• 0:24
  - Excited to be here. Thanks so much for
• 0:26
  - having us. We are gonna be talking about
• 0:29
  - compensation governance today. This is how a health
• 0:31
  - system decides, reviews, and approves provider pay. It's
• 0:35
  - compensation governance, in other words. This has become
• 0:37
  - one of the more consequential
• 0:39
  - questions in the field as of late.
• 0:41
  - Kate and Ariel, I'll first, let's turn to
• 0:43
  - you understand what's shifting here. How are you
• 0:45
  - seeing these governance models change, and what factors
• 0:48
  - are driving those changes?
• 0:50
  - Yeah. I think that's a great question to
• 0:52
  - to start this podcast off with. From my
• 0:54
  - perspective, I think the biggest shift is that
• 0:57
  - provider compensation governance has evolved from simply a
• 1:00
  - compliance
• 1:01
  - focused function into really a strategic
• 1:04
  - business function.
• 1:05
  - I think organizations are still focused on fair
• 1:07
  - market value and regulatory compliance, but, increasingly, I
• 1:10
  - think they're also trying to solve for things
• 1:12
  - like recruitment,
• 1:14
  - retention, provider engagement, and, of course, financial sustainability.
• 1:18
  - At the same time, though, I think compensation
• 1:20
  - arrangements themselves have become significantly more complex. We're
• 1:24
  - seeing productivity incentives, of course, but also quality
• 1:27
  - incentives,
• 1:29
  - value based compensation,
• 1:30
  - APP supervision. I mean, the list really goes
• 1:33
  - on and on, but that complexity is really
• 1:35
  - what's forcing organizations
• 1:37
  - to adopt more formal governance structures.
• 1:41
  - I I completely agree, Kate. And from where
• 1:43
  - I sit inside a health
• 1:45
  - system, the complexity of who's involved in these
• 1:48
  - decisions has really just exploded.
• 1:50
  - It's not just compensation
• 1:52
  - and HR sitting in the room anymore.
• 1:55
  - A single comp decision could involve
• 1:58
  - physician leadership,
• 1:59
  - operations,
• 2:00
  - finance,
• 2:01
  - legal, compliance, and sometimes depending on the decision,
• 2:04
  - even the c suite.
• 2:06
  - And while all of those opinions are always
• 2:08
  - super valuable,
• 2:09
  - when you have that many voices at the
• 2:11
  - table, you really need a framework that's just
• 2:14
  - exceedingly clear about who decides what. Otherwise,
• 2:18
  - you're gonna end up either with decision by
• 2:20
  - committee, which is slow,
• 2:22
  - or decisions mating in silos, and those decisions
• 2:25
  - usually aren't consistent with each other.
• 2:28
  - Yeah. And I think that's especially true when
• 2:31
  - organizations are in a in a growth phase.
• 2:33
  - Most systems built their compensation processes when they
• 2:36
  - had maybe a few 100 employee providers.
• 2:39
  - Those those relationship based processes work really well
• 2:42
  - at that size, but
• 2:44
  - that will work well for 200 physicians is
• 2:46
  - not necessarily gonna work for 2,000
• 2:49
  - physicians.
• 2:50
  - Exactly. And as these organizations
• 2:53
  - grow, those informal
• 2:54
  - processes
• 2:55
  - simply don't scale. And I think they're starting
• 2:58
  - to realize that
• 2:59
  - not only a well documented, but a repeatable
• 3:02
  - governance process isn't just a nice to have
• 3:05
  - thing. It's one of the best compliance defenses
• 3:08
  - that you can build.
• 3:09
  - Compensation
• 3:10
  - work is sometimes more art than science, and
• 3:13
  - that makes the framing no longer being just
• 3:16
  - about getting the answer right. It's about being
• 3:19
  - able to show your work.
• 3:20
  - Mhmm. Mhmm.
• 3:22
  - Thanks, both of you. I mean, there's several
• 3:24
  - shifts occurring at the same time. It sounds
• 3:26
  - like you have compliance
• 3:28
  - moving from a compliance function to, like you
• 3:30
  - said, Kate, solving for more and more things,
• 3:32
  - whether that's recruitment, engagement, retention, sustainability.
• 3:36
  - And then Ariel, really hear your comment about
• 3:38
  - the complexity of the stakeholders involved in these
• 3:40
  - decisions ranging from, I think you listed there,
• 3:42
  - like, more than six bodies including the c
• 3:45
  - suite at times.
• 3:46
  - When each of you from your lens are
• 3:48
  - looking at compensation governance frameworks, what are some
• 3:51
  - tells
• 3:52
  - or some warning signs that a process is
• 3:55
  - just no longer keeping pace with the organization?
• 3:57
  - Understanding that these were often built for organizations
• 4:00
  - when they had a few 100 physicians,
• 4:02
  - many times now that's not the case. Obviously,
• 4:04
  - that's one sign. But what other tells should
• 4:07
  - people be paying attention to?
• 4:10
  - I think this is an easy one, and
• 4:12
  - the number thing I look for is
• 4:15
  - inconsistency.
• 4:16
  - So when similar situations are being handled differently,
• 4:20
  - depending on who's asking, which leader is involved
• 4:24
  - in request, or even what region of the
• 4:26
  - system you're in, that's usually a signal that
• 4:29
  - your governance just isn't keeping up anymore.
• 4:32
  - I see the exact same thing from the
• 4:34
  - from the client side. One of the questions
• 4:37
  - we often ask during the assessments of governance
• 4:40
  - is whether similar arrangements are receiving similar treatment.
• 4:44
  - If the answer is no, that's usually less
• 4:46
  - of a compensation issue and more of a
• 4:48
  - governance issue.
• 4:49
  - Another warning sign is when every single arrangement
• 4:53
  - feels like an exception. I think I said
• 4:54
  - this on an earlier Becker's podcast, but there's
• 4:57
  - always gonna be exceptions. But if leadership is
• 5:00
  - constantly bringing forward unique structures that don't fit
• 5:04
  - within those existing processes, it's gonna mean that
• 5:07
  - the governance framework
• 5:08
  - isn't providing enough guidance to the team.
• 5:11
  - And, you know, I'd also add that overreliance
• 5:15
  - on institutional
• 5:16
  - knowledge.
• 5:17
  - If there's only one person in the organization
• 5:20
  - that knows why a rate was set or
• 5:22
  - how a decision was arrived at, that's a
• 5:25
  - real vulnerability.
• 5:26
  - And I think strong governance,
• 5:29
  - you know, being able to document that rationale,
• 5:32
  - not just the outcome is very important.
• 5:35
  - I think that's even more important, Errol, because
• 5:37
  - turnover happens constantly. And governance shouldn't should survive
• 5:41
  - those leadership transitions
• 5:43
  - or changes in members of the provider compensation
• 5:46
  - team, etcetera.
• 5:47
  - The process shouldn't walk out the door when
• 5:50
  - a specific compensation
• 5:52
  - leader retires or terminates their their relationship with
• 5:55
  - the organization.
• 5:56
  - Agreed. And, honestly, one of the most common
• 5:59
  - things I continue to see is governance that
• 6:01
  - just looks really good on paper, but doesn't
• 6:04
  - actually have the ability to function in real
• 6:06
  - world practice in the organization.
• 6:09
  - So this the tells are the warning signs.
• 6:12
  - Inconsistency
• 6:13
  - where similar situations are handled differently, over reliance
• 6:15
  - and institutional knowledge.
• 6:17
  - Also,
• 6:19
  - when every arrangement feels like an exception, that's
• 6:22
  - a really, really important one. And then governance
• 6:24
  - model is good on paper, but not actually
• 6:25
  - working as they should in real life. So
• 6:27
  - let's say a leader's listening to this. They're
• 6:29
  - checking the box, Kate and Ariel, of of
• 6:31
  - all three or four of these. Then you
• 6:33
  - can run into the concern that stronger governance
• 6:37
  - can compromise or be a trade off to
• 6:39
  - speed. These are often seen in by leadership
• 6:42
  - as competing forces at times. You have more
• 6:44
  - oversight and then slower decision making.
• 6:46
  - What does an effective governance model look like
• 6:48
  - in practice, and and how do you balance
• 6:50
  - those two without making a trade off and
• 6:52
  - sacrificing operational flexibility?
• 6:55
  - Yeah. I think if there's a speed issue,
• 6:57
  - it's a good sign you need a governance
• 6:59
  - assessment. And I because I always push back
• 7:01
  - a little on the idea that governance and
• 7:04
  - speed are competing
• 7:05
  - against one another. In my experience, organizations
• 7:08
  - that
• 7:09
  - move slowly usually don't have too much governance.
• 7:12
  - They have unclear governance that's hard to follow.
• 7:16
  - Mhmm. I agree. And like Kate, I like
• 7:18
  - to push back on that framework on governance
• 7:21
  - because
• 7:22
  - what I've found is that decisions will move
• 7:25
  - faster
• 7:26
  - when people understand
• 7:28
  - the process. And when that happens,
• 7:30
  - I think we find that clarity
• 7:33
  - is velocity.
• 7:34
  - So when the compensation philosophy is clear,
• 7:38
  - the review pathways are defined, and everybody knows
• 7:41
  - when something needs that extra pause for review,
• 7:44
  - there's a lot less back and forth that
• 7:46
  - goes on there.
• 7:47
  - Mhmm. And, you know, honestly, the fastest organizations
• 7:51
  - aren't the ones that are reviewing the smallest
• 7:53
  - amount of things. They're the ones that have
• 7:55
  - those pathways that Ariel mentioned.
• 7:57
  - So we see organizations often create these tier
• 8:00
  - review structures where
• 8:02
  - routine decisions can be handled very quickly,
• 8:05
  - and then those more complex arrangements or even
• 8:07
  - those exceptions receive that additional scrutiny so it
• 8:10
  - doesn't slow down the process.
• 8:12
  - Yeah. And I think those are the situations
• 8:14
  - where that tiered decision making you referenced becomes
• 8:17
  - really important because
• 8:18
  - not every comp decision carries that same level
• 8:22
  - of risk or complexity. So
• 8:25
  - effective governments, I think, allows that ability to
• 8:28
  - distinguish between those routine decisions and then those
• 8:31
  - truly nonstandard
• 8:33
  - arrangements that are going to warrant that deeper
• 8:36
  - review.
• 8:37
  - Yeah. And I'll give you, Maya, I'll give
• 8:39
  - you an example. Arrow was teasing me about
• 8:41
  - this, but I think it's a I think
• 8:42
  - it makes sense. It's kinda like airport security.
• 8:45
  - Most passengers are gonna move through the standard
• 8:48
  - screen pretty efficiently,
• 8:50
  - but in a small subset that we're gonna
• 8:52
  - require some additional review, and government should work
• 8:56
  - very similarly to that. Mhmm. And I tease
• 8:59
  - Kate about this, but I actually love that
• 9:00
  - analogy, and and I agree. The the goal
• 9:03
  - is to create
• 9:04
  - enough structure
• 9:06
  - that people know how to navigate the process
• 9:09
  - without having to stop and ask for direction
• 9:11
  - at every single step of the way.
• 9:14
  - Mhmm. I love that analogy. And and, Ariel,
• 9:17
  - I have to say, I'm I'm familiar with
• 9:18
  - the Brene Brown quote, clarity is kind, but
• 9:20
  - clarity is velocity, I think, is a is
• 9:23
  - is an a cousin to that. It makes
• 9:24
  - a lot of sense on this topic. So
• 9:26
  - thanks for
• 9:27
  - busting that common misconception about governance and speed
• 9:31
  - being at odds with one another.
• 9:33
  - Let's take a moment to look ahead. It
• 9:34
  - sounds like based on the shifts and the
• 9:37
  - environmental changes and internal changes that you outlined
• 9:40
  - at the beginning of the conversation,
• 9:42
  - We're gonna continue to see provider compensation governance
• 9:45
  - evolve over the next few years and likely
• 9:47
  - become more complex.
• 9:49
  - What are you expecting? What what do you
• 9:51
  - each anticipate?
• 9:52
  - What shape will that take?
• 9:54
  - Yeah. I think we're moving beyond a world
• 9:56
  - where governance is simply about answering the question,
• 9:59
  - is this fair market value? Although, that is
• 10:00
  - my favorite question to answer as evaluation consultant.
• 10:04
  - And it's I think it's a really important
• 10:06
  - question, obviously, and I think comp governance is
• 10:09
  - gonna become just much more
• 10:12
  - nuanced and integrated
• 10:13
  - into
• 10:14
  - broader organizational strategy.
• 10:17
  - Compensation decisions don't happen in a vacuum.
• 10:20
  - They're tied to access goals, growth strategies, workforce
• 10:24
  - planning, and, of course, financial performance.
• 10:28
  - I think we'll also start to see a
• 10:30
  - larger use of analytics. We've also seen that
• 10:33
  - with the government,
• 10:34
  - with their focus groups as well.
• 10:37
  - Organizations
• 10:37
  - are increasingly looking at that internal equity, those
• 10:42
  - retention trends, recruitment competitiveness, that's a big one,
• 10:46
  - and provider engagement
• 10:47
  - alongside these traditional market benchmarks that we're all
• 10:50
  - relying upon.
• 10:52
  - And to your earlier point, Kate, I think
• 10:54
  - the governance question is going to start to
• 10:56
  - shift from,
• 10:57
  - does this arrangement pass the FNB test to,
• 11:01
  - does this arrangement align with our strategic objectives
• 11:04
  - and
• 11:05
  - pass the FNB test? And I think, in
• 11:08
  - general, that's just a much richer conversation that
• 11:10
  - we get to have then.
• 11:12
  - Yeah. And one more thing I'll mention too
• 11:13
  - that,
• 11:14
  - has come up a few times on the
• 11:16
  - last few governance engagements I've worked on. I
• 11:19
  - think APP governance or advanced practice provider governance
• 11:22
  - will be one of the biggest areas of
• 11:23
  - focus over the next several years.
• 11:26
  - Obviously, many organizations have a fairly mature,
• 11:30
  - physician governance
• 11:31
  - structure, but I think there's a lot less
• 11:33
  - consistency around APP compensation.
• 11:37
  - Agreed. And I think APPs, in addition to
• 11:40
  - also needing it from regulators and from the
• 11:43
  - providers themselves, I think transparency
• 11:46
  - expectations from all of those groups is gonna
• 11:48
  - also continue to rise.
• 11:50
  - Yeah. So to just to tie this question
• 11:52
  - about, I think what this means is that
• 11:54
  - governance is becoming just as much about
• 11:57
  - communication and consistency across the organization as it
• 12:00
  - is about regulatory compliance.
• 12:02
  - Mhmm. Mhmm. I think what you both highlighted
• 12:04
  - there is, obviously, organizations will need to respond
• 12:07
  - and and be ready for these shifts, but
• 12:08
  - some of them also sound like great opportunities,
• 12:12
  - for those who are really leading this work
• 12:13
  - and for stakeholders to ensure their stronger alignment,
• 12:16
  - like you were saying, Kate, Nereal, about strategy
• 12:18
  - and strategic objectives.
• 12:21
  - Is there anything we did not touch on
• 12:22
  - today or any final thoughts that you'd like
• 12:24
  - to leave our listeners with?
• 12:26
  - So I think from my perspective, I just
• 12:29
  - really encourage listeners to think about governance not
• 12:32
  - as a constraint,
• 12:33
  - but as a true competitive advantage. I think
• 12:36
  - the organizations
• 12:37
  - that do this really well or are going
• 12:40
  - to be able to recruit with confidence,
• 12:42
  - retain with equity, and defend their decisions with
• 12:45
  - good documentation
• 12:46
  - going forward?
• 12:48
  - The last thing I would say is that
• 12:50
  - governance is really about trust at the end
• 12:53
  - of the day. I think
• 12:54
  - trust that decisions are being made consistently
• 12:57
  - across the organization,
• 12:59
  - that providers,
• 13:00
  - physicians, and APPs are being treated fairly,
• 13:04
  - that trust that leaders can explain and defend
• 13:07
  - any sort of compensation decisions when questions
• 13:10
  - arise either internally or externally.
• 13:13
  - And organizations that build that trust, tend to
• 13:15
  - be those
• 13:16
  - organizations that recruit better and retain those positions
• 13:19
  - better as well.
• 13:21
  - Agreed. I think the ones that do this
• 13:23
  - well aren't necessarily the ones that have the
• 13:25
  - most policies either. I think they're the ones
• 13:28
  - that just have that clear set of expectations,
• 13:31
  - really consistent processes set up, and they have
• 13:34
  - that ability to explain how and why
• 13:37
  - compensation decisions are being made.
• 13:41
  - Mhmm. Okay. And, Eric, I I wanna thank
• 13:42
  - each of you. I think you've helped helped
• 13:44
  - me and our listeners understand that this is
• 13:46
  - shifting from fair market value will still be
• 13:48
  - part of the conversation here, but this work
• 13:50
  - is really expanding,
• 13:51
  - and taking on renewed importance for organizations. So
• 13:54
  - thank you so much for your insights and
• 13:56
  - your observations that you shared with us today.
• 13:59
  - We also wanna thank our podcast sponsor, ECG
• 14:01
  - Management Consultants. You can tune in to more
• 14:03
  - podcasts from Becker's Healthcare by visiting our podcast
• 14:06
  - page at beckershospitalreview.com.
• 14:09
  - Ariel and Kate, thank you again.
• 14:12
  - Thank you. Happy to be here. Thanks so
• 14:13
  - much for this was a blast.