Performance-based Therapy Compensation – Is It Time for Change?

patient collections in physical therapy

Most therapists are periodically reviewed for job performance and receive wage or salary increases accordingly. Rarely do these performance reviews include the therapist’s clinical outcomes from valid and reliable outcomes instruments. One of our barriers to becoming an autonomous doctoring profession is the disconnection of remuneration for our services from the clinical outcomes we produce.

Is it time to carefully consider migrating to performance-based therapist compensation? Check out these key stats:
• Between 2004 and 2010 (the most recent data reported by APTA), actual median income of physical therapists increased by 17.6%.
• Payment for outpatient services have remained flat at best and many major payers have decreased rates over the same time period. For example, Medicare MPPR and Sequestration fee cuts amounted to 10-12% in 2013 following a 6-8% decrease in 2011.
• Many commercial payers followed on in 2011. We will have to wait and see what the effect in the commercial sector is in 2013.
• Many states have also trimmed worker compensation fee schedules.

This disconnection of payment from the quality of our clinical outcomes erodes the very nature of the therapist/patient relationship. A salary-based approach, without significant payment risk or reward based on clinical outcomes, subverts an important means of accountability such that “ordinary, even defective care, receives the same payment as optimal care”.

Compensation methodologies that separate our clinical effectiveness and efficiency from therapist payment can easily lead to muddled thinking about what therapists believe is appropriate compensation. Patient care is what we do and patient care by a physical therapist is the practice of physical therapy.

One consideration for becoming a physical therapist is to earn a living. This is a reasonable goal of professional practice. Our patients and clients seek our services to improve their ability to function and the quality of their lives. How we are paid for our practice should align with our patients’ goals. Research has shown that paying health care providers for their successes in treating patient problems better aligns provider clinical performance and patient goals than traditional salary or pay-for-production methods.

Better alignment of our goals with those of our patients produces better clinical outcomes. Using compensation mechanisms that focus us on our practice helps us think more correctly that our practice is our business. If you do your business well, you earn more. If your do you business poorly, you earn less.

The realities of financing heath care and paying health care providers are likely to accelerate our need to change how we think about our compensation. The market forces of decreasing availability of physical therapists coupled with decreasing payment for services will make it impossible for employers to meet the traditional salary expectations of therapists in the near future. Clearly, changes are coming.

Coupling clinical performance with compensation has proven effective in the physician world. “Pay for performance” and “quality-based value purchasing” have become a mantra of health policy makers for good reason—it more appropriately matches compensation and clinical outcomes than salary or pay for services alone. To earn the incomes that are commensurate with our training and educational loans we need to change our expectation about how we will be paid. Individual therapist practice, whether therapist are paid hourly or salary, are becoming their “businesses”. It’s up to practice owners to stop enabling bad thinking on the part of their employees: compensation that is devoid of consequences for inefficient and ineffective patient care is wrong and injurious to the health of practices.

What are you going to do about it?

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