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Family Care Specialists Medical Group, Inc.

Summary

The president of Family Care Specialists Medical Group, Inc. (FCS), Dr. Luis Samaniego, has
been contemplating his proposal to the Board of FCS regarding the improvements to the
compensation system. Most importantly, the concerns were regarding the impact of the
compensation system on their patients.

FCS has a low operating margin and can fall into a deficit due to the patient reimbursement
schedules and increases in operating costs. Therefore, every dollar of revenue counts, and very
little can be contributed to the compensation system. On top of that, nearly 40% of FCS patients
were covered by Medicare, and MediCal covered 30%. These public insurance programs’
reimbursement rates were generally lower than those from private payers and added to the
operating margin issue. In addition, FCS physicians have limits on the number of hours each
physician can devote to the clinical care that generated revenue for FCS due to the hours
needed to maintain privileges at area hospitals, participating in medical staff meetings,
community volunteering, and continuing education.

The biggest issue lies within the retention rate of physicians. FCS is experiencing difficulty in
retaining family medicine physicians and losing its own WMMC Family Medicine Residency
Program graduates to larger competitors such as Kaiser Permanente. Unfortunately, FCS does
not have a large pool of funds for a lucrative compensation program and ultimately needs
significant improvements to help solve their retention issue.

Recommendations & Case Questions

How can FCS improve the Quality Improvement Incentive Program (QIIP)?
FCS implemented the QIIP “To reward behavior that reflects the highest standards in Family
Medicine, medical education and health care service to our patients and community” by scoring
clinicians on seven activities.

These activities were both subjective and objective depending on the activity and required the
clinician to sometimes go out of their way to achieve the points. Some of the activities were
based on performance evaluation, where some were based on the ability to have free time to
spare to earn the points. The system was all over the place in terms of what they were
evaluating and awarding and was one of the major downfalls of the system. Another major
downfall of the system is awarding a clinician based on performance when they should be giving
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the best care and service they can be at every moment. First and foremost, the employees are
clinicians. It is immoral and unethical to give less quality care or more quality care due to an
award or incentive. If a clinician is providing suboptimal care, then they should be questioned
and reviewed accordingly. Financial incentives are a powerful way to motivate employees, but in
the medical field, FCS must make sure that the incentives are not distorted in favor of harming
patients’ well-being and provide a balance.

Another aspect that FCS implemented was the number of patients each physician would serve
in a typical half-day clinical session. This is unrealistic for any medical group to set a quota for
the number of patients a physician should see due to the nature of the business they are
running. Each patient will take a different amount of time, and each day will be different on the
number of customers coming in. This is completely out of the physician's control if you want
them to give the best service possible to each patient.

Therefore, we propose that FCS focus on being clear about the incentives and the rating system
and condense the seven activities into three to four different categories instead. For example,
combining the provider meetings and medical staff meetings into one category would make
things simpler for clinicians to achieve while putting the patient satisfaction survey and clinic site
quality improvement program into another category under patient and clinic satisfaction.

Additionally, FCS should remove the quota required and focus on whether company objectives
of providing quality care to patients are met. If FCS wants to increase efficiency, then FCS can
set goals of seeing a certain number of patients a day or week but not penalize them if they are
not meeting it since each patient has different needs while rewarding physicians that exceed or
meet the number with a bonus under the bonus program. Moving forward for FCS, it would be
wise for them to focus on compensating their physicians better upfront within their base salary
and reward them for working more as their bonus program rather than on performance
indicators.

How can FCS retain clinicians when competing with larger and better-funded competitors
such as Kaiser Permanente?
FCS will need to focus on providing a more competitive base salary and putting less weight on
the QIIP bonuses. By offering more compensation upfront FCS will be better able to attract
more qualified candidates. In addition, adding less weight to the QIIP bonuses will better
promote FCS’s mission of providing high-quality care to communities that need it most.
Retention should also increase if the base salary is comparable to larger organizations such as
Kaiser.

FCS should lean more into its mission of serving the underserved communities of East Los
Angeles. FCS is here to help give high-quality care to patients in communities that need it most.
By stating this in the beginning and making it imperative that prospective clinicians understand
the mission of FCS, it can help filter out any clinicians that are purely there to practice for the
money. FCS’s mission set can be a rewarding intrinsic value for clinicians who would want to
serve the community. FCS could consider developing an intensive interview process with their
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vision and value in order to seek those who have similar philanthropic mindsets. Including
questions that help identify what category their motivations lie in, such as instrumental (tangible
rewards, raises, bonuses) or intrinsic (enjoys the work of helping people) can help FCS identify
clinicians that are a good fit for its mission and objectives.

FCS should promote more of the flexibility that they offer to clinicians. Flexibility is what many
people are now looking for when it comes to prospective employers. Perhaps what FCS can’t
offer as much in compensation, they can offer in flexibility. Clinicians with family responsibilities
or other time commitments might be enticed by the flexibility that FCS can offer in comparison to
other larger competitors such as Kaiser. FCS’s new plan doesn’t seem to be working since only
a few physicians are able to meet the target that would set FCS’ compensation on the same
field as competitors. The new plan’s emphasis on offering financial incentives should be kept to
address the ambitious physicians that will aim for them. There should also be non-financial
incentives based on flexibility to attract and retain physicians as well. Offering non-financial
incentives such as flex schedules, mentorship opportunities, training opportunities, conferences,
or trips that help physicians advance or gain or experience can further strengthen the
relationship between the QIIP program and help motivate physicians’ FCS goals.