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The Evolution of APP Compensation: An Interview with Aurora Young

Aurora Young Web
Tell us about your career and background in the healthcare industry.

I started in the healthcare industry—particularly compensation consulting—almost 22 years ago at a small firm called MCG Health, which later became Integrated Healthcare Strategies. MCG was focused more on executive compensation and benefits design at that time. The first part of my career was dedicated to compensation consulting from the staff through the executive level within healthcare. I also had the opportunity to help develop their compensation database and surveys from the ground up, which really provided a great foundation for my career and a deeper understanding of the data and analytics supporting what we do. About 15 years ago, I transitioned my practice to focus exclusively on physician and advanced practice provider (APP) compensation, working with healthcare organizations of all sizes and types, from Hawaii to New York.

I joined ECG in April, and my focus will continue to be on physician and APP compensation planning, design, and valuation. I’m most excited to join a healthcare-dedicated consulting firm like ECG that has a depth of expertise and partners at all levels of healthcare strategy, finance, operations, and technology, and is truly immersed in value-based care and reimbursement with its clients.

Can you talk a little more about how you decided to specialize in APP compensation?

One of the surveys I worked on with another colleague was on APP compensation, at a time when the industry still commonly used the term “midlevel provider.” We partnered with Duke Medicine to look at APP compensation through the lens of a provider model, and we developed the survey to really look at specialty, practice setting, and production at a time when other surveys for APPs were still including them as part of the nursing pay structure and plans. Duke Medicine was evolving their care model, as well as their utilization and compensation models for APPs, and wanted market data to help them understand what other organizations were doing.

I became more and more involved with APP compensation and really enjoyed that work. I soon transitioned my consulting expertise and practice to provider compensation—both physicians and APPs. That transition was about 15 years ago, when I brought my expertise with APPs to the physician services practice at Integrated Healthcare Strategies and really expanded that practice.

It has been a fun and dynamic time to be involved with provider compensation—for physicians, with all of the regulatory scrutiny and value-based care initiatives, but also for APPs through the significant growth and change in care models and compensation models that are aligning more closely with those of their physician partners, with increased utilization of incentives and performance-based pay for APPs.

How has APP compensation changed over the past 15 years?

Fifteen years ago, it was fairly common to have a base salary grade for nurse practitioners (NPs) and a different base salary grade for physician assistants (PAs). There would be a range built around a midpoint, typically with a spread of 50% to 60% around the midpoint. APPs move through the salary structure based on years of experience. Over the years, we have seen base salary structures evolve and expand to recognize specialty, scope of practice, care model, practice setting, etc., as differentiators, partly in response to market supply and demand factors for certain specialties and expertise, but also in response to organizational changes in pay philosophy for APPs. We have also seen base salary ranges compress and be tied more to market percentile positioning, with less emphasis solely on years of experience.

At the same time, we’ve seen significant growth in the prevalence of performance-based pay components, including production and quality incentives for APPs. While approximately 90% of total cash, on average, is still in the base salary, there is a growing percentage of pay being tied to performance-based incentives, call coverage, recruitment incentives—similar to what you might see in their physician partners’ plans.

What compensation models are organizations using to optimize top-of-licensure utilization of APPs?

I would say that we continue to see increased utilization of incentives, especially productivity-based incentives in certain specialties or practice settings where APPs are practicing independently. There still are not a lot of APPs who are compensated based fully on production, but we are definitely starting to see that productivity component make up a larger and larger piece of pay in certain areas where it makes sense to do so. We are also having more conversations on the physician compensation side about how to align physicians in their supervision of APPs to ensure that they are being optimized and practicing at top of license.

What are some of the key variables for a successful APP compensation plan?

I would say that one of the most critical factors to a successful plan is provider engagement in the development of the plan, and specifically the metrics of performance. Engagement is particularly important because there are different care models, and the utilization of APPs can vary across practice settings and specialties, even within the same specialty and setting. So really making sure that you’re engaging the provider in the planning and design process, understanding how they are practicing and their scope of coverage, so that you are developing a plan and incentives that they can control and be successful under.

I would also add transparency and communication throughout the planning and design process, and maintaining those philosophies once the plan is implemented. You should have a clearly defined philosophy on pay and a compensation plan document and policies that support that philosophy so that APPs know what and how they’re going to be paid for their services, and make decisions about their practice and career. An established philosophy and plan document also helps to ensure integrity in that plan as APPs move between specialties and practice settings, and as individuals are recruited into the organization

How will the MPFS changes potentially impact APP compensation?

Because most APPs still have a significant portion of their total cash derived through base salary component, I don’t believe you will see as significant of an impact from the MPFS changes for many providers. Obviously there are some APPs whose compensation is based fully on production or who have a WRVU productivity component to their compensation plans, and they would likely be impacted by the changes as organizations evaluate how and when to implement the updated MPFS schedule.

What we are likely to see is the impact in APP productivity when we look at published market data. Organizations will need to be cognizant of the reporting in the data set so that if the published WRVU data increases, this can be factored into analyses and planning.

Is there anything you’d like to mention about your work and your experience that we haven’t talked about yet?

I would just say that, for me, APP compensation is such an exciting and dynamic field of consulting right now. This is an area within healthcare that organizations are really focusing on as an opportunity to expand access to care and having conversations around care models and utilization of APPs. It is great to be a part of a team that can help our clients find solutions and develop their APP compensation plan in light of these strategies. You have to dig in with organizations and assess how to best to align a compensation plan and philosophy with their care model and utilization within the APP cohorts. There is truly an opportunity to continue to be part of the solution with our clients in this area.

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