Incorporating total medical expense (TME) into physician compensation models is becoming an increasingly popular approach in healthcare organizations.

This method seeks to incentivize physicians to focus on providing high-quality, efficient care that reduces overall medical expenses.

Traditionally, physician compensation has been based on fee-for-service models, which incentivize physicians to provide more services and generate more revenue. This approach has led to higher healthcare costs and has contributed to the rise in healthcare spending. In contrast, TME compensation models seek to align physician incentives with the overall goal of reducing healthcare costs.

TME incorporates all medical expenses related to a patient's care, including hospitalizations, medications, imaging, and laboratory tests. By including these expenses in physician compensation models, physicians are incentivized to provide efficient, high-quality care that reduces overall costs.

There are several ways to incorporate TME into physician compensation models:

Attribution Methodology

One approach to incorporating TME is to use an attribution methodology. This approach assigns patients to individual physicians based on the services they provide, and the TME associated with those services is attributed to the physician. This method provides physicians with a direct incentive to reduce TME by providing high-quality, efficient care.

Shared Savings Model

Another approach is to use a shared savings model, where physicians receive a portion of the savings achieved through their efforts to reduce TME. This method incentivizes physicians to work collaboratively with other healthcare providers to reduce healthcare costs and improve patient outcomes.

Value-Based Care Models

Value-based care models are another approach to incorporating TME into physician compensation models. These models focus on providing high-quality, efficient care that reduces overall costs and improves patient outcomes. Physicians are rewarded for providing value-based care, which is measured based on specific quality metrics.

Incorporating TME into physician compensation models has several benefits for healthcare organizations, including:

Cost Savings

Incentivizing physicians to reduce TME can lead to significant cost savings for healthcare organizations. By providing efficient, high-quality care, physicians can reduce unnecessary hospitalizations, procedures, and other medical expenses.

Improved Quality of Care

TME compensation models can also improve the quality of care provided to patients. By incentivizing physicians to focus on providing high-quality, efficient care, patients may experience better outcomes, fewer complications, and reduced healthcare costs.

Alignment with Healthcare Goals

TME compensation models align with the overall goal of reducing healthcare costs and improving patient outcomes. By incentivizing physicians to reduce TME, healthcare organizations can achieve their strategic goals while providing high-quality care to patients.

However, there are also challenges to incorporating TME into physician compensation models, including:

Data Availability and Accuracy

To accurately measure TME, healthcare organizations need access to comprehensive data on medical expenses related to patient care. This data can be difficult to obtain, and accuracy can be impacted by coding and documentation errors.

Physician Buy-In

Physician buy-in is essential for the success of TME compensation models. Physicians may be skeptical of new compensation models and may require additional education and support to understand how TME fits into their compensation plan.

Complexity

TME compensation models can be complex and may require significant resources to implement and maintain. Healthcare organizations must carefully evaluate the costs and benefits of incorporating TME into physician compensation models.