THE COMING CHANGES IN NEUROSURGICAL PRACTICE
Defining the Value of Neurosurgery in the
New Healthcare Era
Deborah L. Benzil, MD∗
Edie E. Zusman, MD, MBA‡
∗
Department of Neurosurgery, Columbia
University, New York, New York; ‡ Department of Neurosurgery, NorthBay Center
for Neuroscience, Fairfield, California
Correspondence:
Deborah L. Benzil, MD,
Department of Neurosurgery,
CareMount Medical,
110 South Bedford Road,
Mt. Kisco, NY 10549.
E-mail: [email protected]
Received, August 22, 2016.
Accepted, January 4, 2017.
C 2017 by the
Copyright Congress of Neurological Surgeons
NEUROSURGERY
Healthcare delivery is evolving rapidly with an increasing emphasis on the concept of
“value.” At the same time, neurosurgeons are disproportionately working in employed
positions where external definition of value becomes directly linked with compensation,
work environment, and career satisfaction. Few neurosurgeons have an understanding of
the various ways in which value is and can be defined and there are limited resources to
assist in this realm. This paper covers the essential value concepts of National Standards,
Pitfalls of National Standards, Call Coverage Compensation, Valuation Through Demand,
Value Beyond Productivity, and Neurosurgical Value in the Accountable Care Organization Era. This framework should help neurosurgeons better understand critical trends
impacting practice across the country.
KEYWORDS: ACO, Healthcare, Hospital–physician relations, Negotiations, Neurosurgery, Relative value unit,
Value
Neurosurgery 80:S23–S27, 2017
DOI:10.1093/neuros/nyx002
T
www.neurosurgery-online.com
raditionally, the majority of neurosurgeons provided inpatient and outpatient
care through private practices, and thus
defined their own value. A smaller contingent
of neurosurgeons worked in academic positions
where medical school or university policies and
parameters would dictate compensation. Within
both of these prevailing models, neurosurgeons
provided significant services to their hospitals,
notably emergency call coverage. Neurosurgical services and resultant revenues are highly
profitable to hospitals, meaning a desirable
contribution margin. Conservative calculations
suggested that neurosurgeons accounted for at
least $3 million (in 2010) in annual hospital
profit and were nearly always the highest
specialty in most.1,2
Over the last 2 decades, the entire landscape
of healthcare delivery has shifted, accelerated
after the passage of the Patient Protection
and Affordable Care Act in 2010.3,4 Increasingly, neurosurgeons derive some or all of their
compensation through hospital contracts. These
contracts can take various forms spanning a wide
spectrum from practice lease to professional
service agreements, through direct employment
and medical directorships (administrative
positions). Such contracts, by law, must adhere
to standards of fair market value (FMV).5
However, no real standard exists for FMV determination creating challenges for both hospitals
and neurosurgeons. In addition, the concept of
“value” in provision of healthcare has become
the prevailing and overarching theme of patient
care delivery.
Given the evolution of healthcare, the
increasing emphasis on value, and the importance of establishing true FMV for neurosurgeons, the purpose of this project is to provide
a framework for understanding various mechanisms for defining a neurosurgeon’s value and
the resultant potential for serious pitfalls.
ABBREVIATIONS: FMV, fair market value; AMGA,
American Medical Group Association; MGMA,
Medical Group Management Association; NERVES,
Neurosurgical Executives’ Resource Value and
Education Society; RVU, relative value unit; wRVU,
work relative value unit; UHC, University Healthcare
Consortium; FTE, full-time equivalent
Standard compensation data and analysis
was compiled through the leading organizations including American Medical Group Association (AMGA),6 Medical Group Management
Association (MGMA),7 Sullivan Cotter,8 and
Neurosurgical Executives’ Resource Value and
Education Society (NERVES).9 Centers for
DATA USED FOR ANALYSIS
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BENZIL AND ZUSMAN
Medicare and Medicaid Services resources10 were utilized for
relative value unit (RVU) and Medicare payments. In addition,
practice patterns across the country were sampled for trends in
compensation models, challenges to compensation, and for any
impact from the increasing focus on value as the predominant
focus of healthcare delivery.11,12
ANALYSIS AND DISCUSSION
TABLE 1. Variation in National Data of Neurosurgical Valuation
MGMAa
NERVESa
Variation (%)
a
General
There exists no single standard for defining value or FMV
for neurosurgeons or any other specialists across the country.
In fact, at least 36 distinct models for employment have been
described by MGMA.7 Graduating residents have increasingly
sought employed positions, often to limit the need for expertise in
and time devoted to administrative and business matters related
to practice.13,14 Two important concepts should be noted.
1. Employed physicians’ compensation and ability to negotiate
FMV still require high degree of understanding of practice and
business principles, and
2. external mechanisms of determining value and FMV for
neurosurgeons have gained importance and impacted all
neurosurgeons, even those practicing in other models.
There are few resources available to neurosurgeons and other
specialists to deal with these evolving issues and the changing
environment. Compounding this situation is the significant
undereducation of neurosurgical residents in socioeconomic
issues.15,16 The entire landscape of how neurosurgeons interact
with hospital administrators has radically changed from the past
when most established neurosurgeons worked closely with and
were respected by their hospital’s Chief Executive, Financial, and
Operating Officer. Then, neurosurgeons could directly pitch their
need for new or enhanced resources to local administrators who
were usually very responsive given the contributions of neurosurgery to the financial success of the hospital. The merging of
hospitals and the rapid growth of health systems have frequently
created a bureaucracy in which the local administrators, with
whom the neurosurgeons directly interact, have less control and
must function under standard conditions established for the
entire health system.17 In addition, as hospital employment has
expanded, administrators have seized the opportunity to limit the
impact of individual physician groups. Health systems thus have
begun to control the number of neurosurgeons and access, rather
than allowing traditional market forces including quality of care
to prevail. Analysis suggests that this, along with other factors, has
resulted in a small but real decline in neurosurgical compensation
and perceived value.
National Standards
Several organizations have established and published data on
physician productivity (as measured by RVUs) and compensation
value including Sullivan Cotter, MGMA, AMGA, NERVES, and
the University Healthcare Consortium (UHC). UHC bench-
S24 | VOLUME 80 | NUMBER 4 | APRIL 2017 Supplement
Median
75th percentile
90th percentile
84.37
74
14
102.20
99
3
124.53
154
24
Compensation per wRVU.
TABLE 2. Variation in National Neurosurgical Data Across Multiple
Organizationsa
a
Organization
25th
percentile
Median
75th
percentile
90th
percentile
MGMA
Sullivan Cotter
AMGA
555 726
456 290
512 259
704 170
629 550
656 250
930 473
784 670
755 813
1 229 881
973 935
1 006 533
Total compensation in $ 2014 reports.
TABLE 3. Variation in National Neurosurgical Compensation
Across Organizationsa
a
Organization
2015
2014
NERVES
AMGA
MGMA
670 000
728 006
747 066
734 000
701 399
710 000
Total compensation in $.
marking is distributed through the Faculty Practice Solutions
Center, a joint effort of UHC and the Association of American
Medical Colleges.18 The methodology for data collection for most
of these benchmarking efforts is variable and vague. As a result,
data verification and data accuracy are difficult to assess. The
following highlights this:
1. data from the different organizations can vary by more than
10% (Tables 1, 2, and 3),
2. RVU reporting depends on accurate coding by either the
physician or organization, something not likely uniformly
achieved,
3. mechanisms of RVU tabulation vary widely. For example,
some organizations report work relative value units (wRVUs),
while others report RVUs. In addition, some physicians have
residents or physician extender RVUs reported as physician
work,
4. AMGA and Sullivan Cotter standardize all data to 1.0 FTE
(full-time equivalent), MGMA only reports full-time data,
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VALUE OF NEUROSURGERY IN THE NEW HEALTHCARE ERA
and NERVES reports all above 0.5 and then normalizes to
1.0 FTE,19
5. organizations may exclude data from certain sources at their
choosing,
6. data sampling error is probable (smaller practices may not have
the resources to participate, for example),
7. reporting data may include or exclude critical data, such as call
compensation.
Despite these limitations, for a neurosurgeon, it is key to be
able to benchmark all of these data when trying to establish value
but obtaining the data can be challenging and expensive (range
to purchase $2500-$3500). Only NERVES is a specialty-specific
survey that provides the most comprehensive data on compensation, productivity, call compensation, practice management,
and more. As a rule, NERVES data are typically the most favorable
to neurosurgery negotiation because they provide the most
specific and relevant data, particularly at the high end of productivity (note Table 1 shows some of the MGMA data stronger than
NERVES data). Sullivan Cotter, typically the weakest for neurosurgeons is the one most frequently used by hospitals. Knowing
which data a given institution is using and how they are using it
is also critical. They will often choose the data that best suit their
immediate purpose in negotiations, ie, the lowest assessment of
value. They most often present the mean or 50% data even while
they actively promote their programs as being in the top echelons.
Institutions have also been found to completely misrepresent the
data; another critical reason neurosurgeons must have a firm grasp
on this specific mechanism of valuation.
Pitfalls of Using National Data for Valuation
Increasingly, neurosurgeons are having their compensation,
and thus their value, established through use of the noted national
data sources.20,21 This creates a serious concern for all neurosurgeons, as there is a very real potential for a downward spiral using
such a system. In survey of currently employed neurosurgeons,
the following is becoming a common practice. When the first
employment contract is signed, the neurosurgeon(s) are offered
RVU or combined compensation at a desirable level. The physicians have given up their private practices, relocated their families,
and begun to establish themselves believing there is mutual respect
for long-term career potential. When those initial contracts are
then due for renewal (or the system mergers cause new contracts
to be necessary), the new offer is announced as lower, the rationale
given to become in better concordance with national data. As
hospital systems across the country do similarly, most of those
valued above the 50% have now been reduced, further dropping
the mean national figures. Thus, when the eventual next negotiations ensue, valuation has declined even further. With ever
fewer neurosurgeons in private practice, national data will increasingly be driven by the value arbitrarily driven down by large
health systems. In the advertising world, this first contract-second
contract ploy would be considered a classic “bait and switch.”
Another interpretation of this phenomenon is that it derives from
NEUROSURGERY
the commoditization of labor, where physicians (neurosurgeons)
are viewed as completely interchangeable and thus the job is
given to the lowest cost provider. Of course, this ignores the costs
associated with turnover and the importance of stability, quality,
and employee loyalty. For an individual neurosurgeon, it means
that leaving an area may become the only viable option for fair
compensation and career satisfaction.
Model Contracts and Notable Benchmarks
Most neurosurgeons are reasonably familiar with private
practice models of compensation, whether in a single- or multispecialty group. In this setting, initial contracts are typically as
an employee (different terms may be used for this position)
with a straight salary or a salary with some potential for bonus
compensation. Following some period, the employee may then
be offered “partnership” (again, numerous terms may be applied).
This partnership may involve a one-time “buy-in” and a stepwise
contribution until full partnership is reached. At the final step,
practices span the spectrum including:
• equal pay to every partner regardless of years and productivity,
• productivity bonus beyond a uniform standard compensation
for each partner,
• cost center compensation calculation (a profit model),
• pure productivity-based compensation,
• any combination of the above.
The success of any of these models depends highly on the
environment and size of the group. In pure productivity models,
each partner is highly motivated to produce, even if this heightens
competition between the partners. Alternatively, equal pay has the
potential of leading to some bearing a greater work burden than
others. The distinct potential advantage of cost center compensation is the flexibility given to each individual in areas such as
equipment purchase and support staff; however, the majority of
costs are likely to derive from shared services such the billing office
and malpractice.
There is even greater variability in hospital employment models
and thus formulas for compensation. Regional variation is notable
as well. A first contract would typically be a 1- to 2-year
guaranteed salary, typically based at or below the median compensation for the practice, taking geography and demand as the key
drivers. Following this, compensation is invariably production
based, typically beyond a base salary. A few real-life examples
include the following.
• Seven tiered salary levels based on productivity (using regional
data) with very limited add-on for production beyond the prior
year. In addition, there was possible a 10% Quality/Safety
penalty, 5% improvement incentive, 15% group performance
incentive, and a capped overhead incentive/penalty. There was
no call compensation.
• Base salary at the median with a $70/RVU potential productivity bonus above $5000 but capped at $75 000. Additional
Quality and Safety Incentives up to $50 000 were possible.
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BENZIL AND ZUSMAN
• Base salary at the 25th percentile with a $78/RVU productivity bonus above the 40th percentile RVU productivity. Small
incentives were also possible.
In general, contracts that offer a higher base salary will often
contain lower $/RVU at relatively higher thresholds. The converse
is also true, ie, lower base typically is coupled with a better $/RVU
at a lower threshold.
Appropriate benchmarks depend on the practice setting along
with a number of personal priorities. For a job with exceedingly
high call demands, the most important benchmark should be
call compensation along with securing support for emergency
and trauma services. In a purely elective spine practice where
high RVUs are likely generated, the most important benchmark
is the $/RVU. Finally, for many cranial, functional, and stereotactic practices (lower RVU but high technical fees that benefit
the hospital), the critical benchmark is achieving a competitive
salary.
Call Coverage Compensation
Valuation of call compensation is another challenge.21 As
with the RVU and overall compensation data, the available data
for payment for call are highly flawed. Local customs often
override national norms with regions such as California providing
much higher and more consistent pay for call than other states.
Confounding this is determining what call pay includes and how
each component may contribute to the total value of the service.
Several distinct specialties have been identified including trauma,
pediatrics, stroke (with or without endovascular support), spine,
and inpatient consultations. With system mergers, it is likely
the burden for neurosurgeons working at hub hospitals (most of
which do not have residency support) will increase significantly
even though the compensation often remains flat. This again
represents a mechanism where health systems control workforce
and access issues, trumping traditional competitive forces.
Two other factors may influence the apparent value of call
coverage. The first is that some institutions include the value of
some or all of call coverage (especially if mandatory or proscribed)
within the global compensation package, usually as part of the
base or guaranteed salary. This has both advantages and disadvantages. Such a system artificially inflates the compensation data but
equally deflates call pay data. If personnel changes occur, this can
then dramatically alter the financial benefits or harms of such an
arrangement. If suddenly, the call burden increases with the loss
of other neurosurgeons, there would be no additional compensation provided for a striking increase in work and decline in
quality of life. The second is the re-emerging trend to require
uncompensated provision of emergency neurosurgical services,
often disguised by the term “citizenship call” designed to prey
on the physicians’ sense of ethics, professional obligation, and
responsibility to patients (Dr. S. Timmons, personal communication, 2016). In an attempt to trim budgets, many hospitals have
tried to enforce such a model.22 The most recent data suggest
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TABLE 4. Value by Demand: Current Locum Tenens Costsa
Cost in dollars
Physician daily payb
Overtime weekdays (>8 hours)
Overtime weekends (>4 hours)
Hospital paymentc
2000-2500
200-250/hour
200-250/hour
4500/day
a
Information provided by CompHealth.
In addition to coverage of malpractice, housing, transportation.
c
To Locum agency.
b
that currently less than 30% impose such a system with variable
requirements as to the total number uncompensated.
Valuation Through Demand
An entirely different approach to determining the value of a
neurosurgeon would be to invoke the data provided through the
locum tenens companies. The last decade has seen tremendous
growth in the number of agencies that provide this service, the
number of opportunities to practice neurosurgery full- or parttime without any permanent employment, and the practice and
hospital utilization of such services, often on a regular basis.
Table 4 identifies current compensation offers for locum tenens
in the United States in 2016. It is important to note that such
compensation does not include benefits but otherwise there is no
overhead associated with this pay. This amounts to annualized
payment of over $1 600 000. It is unlikely that neurosurgeons
as a specialty would ever move to working exclusively on a per
diem basis but it does suggest that hospitals indicate they can
comfortably pay in excess of $1.5 million to have neurosurgical services available. For a neurosurgeon wishing to achieve an
annualized salary of $500 000 with no overhead would require
about 160 days of work, achievable is under 23 weeks.
Value Beyond Productivity
Surveys increasingly confirm that the incentive portion of
most physicians’ value is being determined through measures
beyond productivity. Beyond RVU production, incentives most
commonly valued include quality measures (57%), patient satisfaction (47%), and chart completion (23%). Administrative pay
is also common (47%) in the final compensation practice. It is
important to note that even more complex rules (Stark, antikickback, Internal Revenue Service state laws, 501C3 special
requirements and FMV) apply to this with resultant greater
documentation requirements.
Neurosurgical Value in the Accountable Care
Organization Era and Beyond
There is also widespread concern that the high cost of many
neurosurgical services will result in dramatic reduction of neurosurgical interventions if the trend toward Accountable Care
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VALUE OF NEUROSURGERY IN THE NEW HEALTHCARE ERA
Organizations and other value-based or population-based systems
continue to drive the healthcare market.23 There is some potential
for this, especially if there is a higher than average incidence of
surgical intervention. However, the real critical factor will be how
a given neurosurgeon’s costs compare to others providing the same
care. In addition, neurosurgeons can help sustain their value by
participating in development of best practices, which reduce costs
across the whole timeline of disease intervention.24 Involvement
in systems approaches to value by neurosurgeons has been limited
to date. Too often, those trying to drive these programs fail to
provide suitable financial or practice incentive for neurosurgeons
to alter their practices. In addition, the patient demands to their
primary care providers for specialized testing and consultation
often preclude consistent participation.
The challenge of value determination in Alternative Payment
Models is also very hard to predict. One model that seems to be
gaining momentum is bundled payments, already being applied
to Medicare hip and knee replacement. For the immediate future,
neurosurgeons should demand component payment equal to
their fee-for-service schedule. These programs are also specifically
designed to allow surgeons to gain share profits realized by institutions through cost reduction in bundled services. In the future,
it is also possible that some neurosurgical intervention will fall
largely outside an insurance system that is purely value driven.
In such a scenario, secondary insurance or self-pay may predominate as the mechanism for timely neurosurgical evaluation and
treatment for select conditions.
SUMMARY
There is increasing emphasis on the concept of value within
the world of healthcare. Currently, there is no single means of
accurately determining a neurosurgeon’s value. It remains critical
for all neurosurgeons to understand the essential regulatory and
administrative principles regardless of the practice environment.
Disclosures
Both Dr. Benzil and Dr. Zusman are founding partners in Benzil Zusman,
LLC, a consulting company that specializes in neuroscience and healthcare negotiations and strategic development. Many of the concepts presented relate to the
work they do and have done for clients.
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