Dr. Padma Singh, Director of Emergency Medicine at Westlake Hospital, collapsed into her desk chair with a sigh, being careful to avoid spreading the blood stain on her shirt to the chair fabric. Finally, another 10-hour emergency room (ER) shift in the books. Only a few notes left to write, and she would be out of hospital and on her way home to bed and six solid hours of sleep before she had to be back to lead tomorrow's staff meeting. Then she remembered the agendareview the compensation and bonus system for the ER physicians and get their approval on a new plan. That wasn't going to be easy. The ER doctors were sharply divided in their preferences for a compen- sation system. Some wanted a system that kept a communal atmosphere in the group, where everyone worked equally hard and was paid accordingly. Others felt like they were carrying more of the load and should be compensated for that. It was clear from looking at monthly records that some doctors routinely treated more patients than others. Dr. Singh wanted the system to motivate the group rather than add dissatisfaction. 

Padma groaned and buried her head in her hands. She now doubted that she'd be get- ting a good night's sleep after all. She had three alternative plans to present to the physi- cians in the morning, and she wondered if they would accept any of them.

Background on Westlake Hospital and the Emergency Physicians of Sacramento Group

Westlake Hospital is a privately owned, 162 bed, full-service hospital located in Sacramento, California. Westlake serves a mostly working-class patient population who rely on government insurance such as MediCal or Medicare. The hospital staffs its 29-room ER with doctors from a privately owned, physicians group called Emergency Physicians of Sacramento, or EPS. EPS has 20 physician members who staff their sister hospital, Eastlake, in addition to Westlake. Thus, EPS is a service provider for Westlake Hospital, and Padma Singh and the other 19 EPS physicians are not employees of Westlake Hospital, but employees of EPS.

Working in the ER at Westlake

When ER doctors work at Westlake Hospital, they work in teams of two. One doctor is the "triage doctor," who sees all patients in a "triage room" shortly after they arrive, and the second doctor is the "follow-up doctor" who sees patients, who are deemed in need of a higher level of care, in actual ER treatment rooms.

The triage doctor interviews and briefly interacts (approximately three minutes) with all new patients after they have checked into the ER. If the triage doctor determines that the patient needs to be seen by the follow-up doctor, he or she will pre-order tests or treatments (e.g., blood tests, urine tests, X-rays, or scans) that are likely to be needed by the follow-up doctor. This pre-ordering of tests saves time for the patient because the follow-up doctor will have the test results sooner and will be able to diagnose the pa- tient sooner. Because the triage doctor has limited information about the patient when he or she orders the tests, however, this doctor may "over order" to cover all likely tests that might be needed. In about half the cases, the triage doctor may determine that the patient doesn't need to be seen by the follow-up doctor, and may send him or her to the "Fast Track" clinic that is attached to the ER and staffed by physician's assistants (PAs) and nurse practitioners (NPs). The triage doctor will see an average of 80 patients dur- ing a 10-hour shift. But the triage doctor gets "credit" (explained later as "charge points") only for those patients that he or she sends to the Fast Track (about 40 patients per shift). These patients also tend to have milder issues, and typically have lower charge levels (also explained below). Patients that go to the follow-up doctor are credited to that doctor.

The triage shift is a high-intensity job that is emotionally and mentally draining, and least preferred by most doctors. As a result, more of these less desirable shifts are dispro- portionally filled by more "junior" physicians. The triage shift was added about a year ago in response to an ER audit that showed that patients were waiting too long (sometimes several hours) before being seen by a physician. It was clear from feedback forms that the issue of long waiting times was most responsible for patient dissatisfaction.

By contrast, the follow-up doctor performs a more traditional role in the ER. The follow-up doctor examines patients in examination rooms, based on the order of arrival, unless immediate attention is needed. The follow-up doctor performs a more thorough physical exam of the patient and may order more tests if necessary. Patients seeing the follow-up doctor have, typically, two final outcomes: ER treatment and release, or ER treatment and admission to the hospital. In a typical 10-hour shift, the follow-up doctor will see 25-30 patients, and will get credit for all of these patients.

Physician Compensation at EPS

Levels of Charge and "Charge Points"

EPS collects fees for its doctors' services directly from insurance companies based on a five-level formulathe higher the level, the greater the fee. The five levels of charges for an ER visit are defined as follows: Level 1 = minor first aid, Level 2 = minor illness requiring some evaluation, such as a sore throat, Level 3 = moderately serious illness or injury requiring more tests or procedures, like stitches, Level 4 = serious illness or injury that often leads to hospital admission, and Level 5 = very serious illness or injury that requires immediate surgery or transfer to intensive care.

Greater detail on a patient chart allows for a higher charge level. For example, if a chart simply says, "patient has abdominal pain," a Level 2 charge may be given. If, by contrast, a chart says, "patient has abdominal pain, worse when lying down (moderating factor), started after eating spicy food (precipitating factor), and lasting 3 days (duration)" then a Level 4 charge may be given. In addition, there are certain triggering factors that lead a charge to au- tomatically receive a Level 4 or 5. For example, if a physician spends more than 30 minutes at the patient's bedside (i.e., what's called "critical care time"), the visit is automatically charged a Level 5. As another example, if more than five tests are performed on a given patient, a Level 4 charge is automatically triggered. The necessity for any test or treatment is a relatively subjective decision, and doctors sometimes differ greatly in how they treat and charge any in- dividual patient case. In theory, a physician could always aggressively order tests for every patient, and thus, increase the overall fees that may be charged to the insurance companies.

For each level of charge, physicians receive a corresponding number of "charge points" (i.e., a Level 5 charge leads to five charge points). These charge points are totaled each month for each physician. Then, a physician's "average charge points per hour" (ACPH) is calculated each month (i.e., ACPH = total charge points for the month divided by the number of scheduled hours worked for the month). For example, if a Dr. Singh had a charge points total of 1,640 for the month of July, and she worked sixteen, 10-hour shifts that month (i.e., 160 hours), she would have an ACPH = 1,640/160, or 10.25. For each charge point, EPS is paid about $50. So, Dr. Singh would have generated 1640 $50 = $82,000 for EPS in the month of July.

Compensation Formula

Currently, doctors at EPS are paid on the basis of an hourly wage + monthly individual bonus + year-end bonus. The hourly wage is a flat rate of $100 per hour, and is paid based on the num- ber of 10-hour shifts each doctor works. So, if Dr. Singh worked sixteen 10-hour shifts in July, her hourly pay would be 160 hours x $100/hr = $16,000 for that month. Doctors often work an hour or two past the end of their scheduled shifts in an attempt to complete treatment for all of the patients that they saw during their shift, but they are not paid for this extra time worked. The monthly individual bonus is based on the ACPH earned by each doctor. Any doctor with an ACPH > 10 for the month receives a bonus based on the formula: [(ACPH above 10) (hours worked per month) x ($100 revenue per charge point)]. So, if Dr. Singh had an ACPH of 10.25 and worked 160 hours for the month, she would receive a bonus of [(.25) (160) ($100)] = $4,000. This would bring her monthly compensation to $20,000. The individual monthly bonus was instituted about a year ago to motivate doctors to work more efficiently and to more carefully document their proce- dures and tests, to protect them from malpractice lawsuits. It should be noted, however, that it is difficult for doctors to achieve an ACPH > 10, and currently, less than half of the ER doctors at Westlake make this bonus standard each month.

Finally, there is a year-end bonus for all physicians. The money that EPS earns that is not paid out in hourly wages and bonuses is used to pay administrative and insurance costs. If any revenue remains at the end of the year, after these costs are paid, it is divided among all physicians proportional to the number of hours they worked over the year. This payment is typically around $10,000 per physician.

Problems with the Current Compensation System

Dr. Singh was aware of at least three problems that resulted from the current compensa- tion system. First, doctors who worked in triage often had lower ACPH's than follow-up doctors. This is because even though triage doctors averaged more credited patients per shift than follow-up doctors (40 versus 25-30), the triage patients were typically charged at a lower level than the follow-up patients (Level 1 or 2 versus Level 3 or higher), making the total ACPH lower for the triage doctors. As result, scheduling was becoming conten- tious as no one wanted to take on the triage shifts. Some doctors had threatened to quit if the equity in assigning triage shifts was not improved. In addition, Dr. Singh was worried that triage doctors might send patients to the Fast Track when they actually needed more extensive care (because those patients would be credited to the triage doctor and not the follow-up doctor).

Second, the monthly bonus system was seen as unfair, because doctors who achieved an ACPH just below 10 completely missed out on any bonus. In addition, pressure to meet the hurdle of an ACPH above 10 might encourage unnecessary tests or falsely embellished documentation by follow-up doctors who wanted to gain charge points. While Dr. Singh had no documented proof that this was happening, she was aware that some doctors consistently had more Level 4 and Level 5 charges than others, making her wonder if they were "working the system" (and committing insurance fraud) to get their individual bonuses. Ordering unnecessary tests and procedures (such as CT scans) were not with- out risk to patients, as well. CT scans exposed patients to unhealthy radiation, and even a simple blood draw posed a risk to the patient health due to the possibility of infection.

Finally, the system led to wide variance in the time spent with patients. Dr. Singh had heard from patient feedback forms that some doctors were spending very little time with patients. Dr. Singh wondered if the monthly bonus system might also be encouraging physicians to see more patients per hour (and thus, spend less time with each patient) as a means of achieving a higher bonus. Dr. Singh worried that this could endanger patient safety. Further, some doctors had complained that they weren't getting to do the fulfill- ing job they trained for (i.e., treating and interacting with patients) because they were so rushed that they did little more than order tests and prescribe medication.

Dr. Singh was less worried about the year-end bonus system leading to the above be- haviors, because that bonus was so far removed from daily work activities, and individual benefit from over-charging would be diluted when the revenues from all doctors were pooled. She was not 100 percent sure, however, that the year-end bonus was not motivat- ing any unwanted behavior.

Possible Alternatives to the Current Compensation System

In thinking about these problems, Dr. Singh had consulted her friend, Dr. Fred Taylor, who worked in Los Angeles for a similar ER physicians group. Dr. Taylor suggested three pos- sible alternatives based on his experience, in all cases the year-end bonus would continue to be paid. These options included: (1) pay doctors a straight hourly wage (possibly at a higher rate than the current $100/hr) with no monthly bonus, (2) pay doctors completely based on a percentage of the revenue generated by their personal charge points (i.e., 25% of the revenue generated by their charge points per month) with no hourly pay, or (3) pay doctors an hourly wage plus a monthly group-level bonus based on the entire group's charge points (i.e., if the entire group's average charge points per hour was above 10, the entire bonus would be divided up among all the doctors, in proportion to the number of hours they worked per month).

Dr. Singh realized that there were pros and cons to each of these alternatives. She also knew that she would have to help the physicians to balance these pros and cons, if she had any chance of getting them to agree on a plan.

Question A

CULTURE

1-What values and assumptions are underlying the current compensation system at EPS?

2-What do these values say about the organizational culture at EPS?

3-How would each of the proposed alternatives affect the culture at Westlake?