Incentive Plans Redesign-Finance Collaborative June 22, 2005

Introduction Early work on Incentive Theory - Barnard, 1938 Expanded by Clark & Wilson, 1961 & 1989 –Material: tangible rewards (salary, fringe benefits) –Solidary: intangible rewards (socializing, camaraderie) –Status: intangible rewards (prestige, recognition) –Purposive: intangible rewards (sense of mission)

Why Incentives? Financial, Organizational bottom-line Recruitment & Retention Tool –Changed individual & team behavior –Changed corporate culture Mission

Incentive Plans & “The Mission” Poor productivity denies access to care Poor productivity increases healthcare costs Our mission is to the entire community, not just to those who make it through the door Greater organizational revenues translates into improved access, facilities and personnel

Compromised Settings Insufficient patient demand Inadequate working infrastructure Payor-mix issues (high uncompensated/sliding fee population) Unionization (may present barriers or challenges)

Disadvantages of Incentive Plans Increased administrative work/accountability Increased demands on support staff Increased variable costs Change in focus (providers, recipients) Unwanted competition Good numbers, poor quality; overburdened systems

Incentivised Groups Reimbursable Visits (Medical clinicians, Dentists, Dental Hygienists, CPSP, Mental Health) Nurses Executive Leadership Departmental Site Specific Corporate (all employees)

Provider Metrics Encounters (daily, monthly, quarterly, annual, per hr.) RVUs (Relative Value Units) Charges, coding accuracy Panel size (more appropriate for capitated/MC) Quality (clinical outcome measures, chronic disease management standards, etc.) Overall Evaluation (productivity, quality, patient satisfaction, staff interactions, organizational and community involvement)

Team Examples/Discussion Aaron E. Henry Holyoke Middletown Rural White River

Implementation of an Incentive Plan Plan Design Simplicity Implementation and Communication Integration into Organization Return On Investment Corporate Culture

Plan Design Aligns strategic operating priorities with desired employee behavior Performance metrics balance competing priorities, including productivity & quality Stakeholders concur that targeted performance levels are realistic & fair, creating a “win-win” work environment

Simplicity Program issues increase as the square of program components. Keep it simple. Plan design (including measures, relevance to employee behaviors & payout potential) must be easy to understand by all employees Easily engages employees to work toward objectives (simplicity must relate to complexity of jobs participating)

Implementation & Communication Design & related implementation communications are pre-tested for clarity and understanding Communication of performance results & progress toward goal attainment is comprehensive and clear Measurement, tracking and reporting process is regarded as credible and reliable by all

Integration into Organization Incentive plan performance measures integrated into evaluation process Performance management process translates, encourages and reinforces desired behaviors Process to give feedback must exist - to eliminate barriers & improve performance

Return On Investment To be successful, the plan must generate more return than is paid to employees Results must encourage proper work behavior and not create undesirable competition (good results, wrong behavior)

Corporate Culture A level of open communication and trust must exist among employees and management Units, sites, and departments must embrace teamwork, especially where work processes cross such boundaries Consistent messages given at all levels about desired results and behaviors