How to Address Benchmark Shifts

You evaluate your contracts against market data. Your organization is in compliance with fair market value. You have a comprehensive compliance plan. All is well in the world.

Until benchmarks change.

Several factors play a role in shifting benchmarks from year to year. By understanding why these benchmarks change from year to year, you can adapt your compliance plan to prepare for change. Having a process already in place can help your organization deal with potentially challenging conversations.

Benchmarks can change from year to year, but significant shifts are uncommon. The average change for any benchmark at the 50th or 75th percentile is 5%. This 5% change is often accounted for by: general salary inflation and cost of living increases; shift in responsibilities for a physician role; change in hospital characteristics; or new counterparties in a contract.

In some cases, adding only one contract can change benchmarks. When contract values are clustered, one outlier could cause a drastic shift. Data sets with larger, more diverse sample sizes are less prone to benchmark change than data sets with smaller, clustered samples.

A few things to remember for dealing with changing benchmarks

1. If a contract was documented within FMV when signed, payment rates can remain as is until the contract expires. This is where documentation is imperative. Even if a benchmark shift skyrockets your rates out of FMV, you don’t have to change them until the contract expires.
2. Be strategic in setting your payment rates. Perhaps your organization has given the green light to rates at or below the 75th percentile–this doesn’t mean that every contract should be signed there. Give yourself some wiggle room to account for fluctuation so that you have a little cushion to fall back on.
3. Demonstrate your efforts. Documenting the conversations and efforts made to set a payment rate at FMV is essential–especially if you are unable to set a low rate.

Interested in access to 2019 Benchmark Reports? MD Ranger benchmark reports include physician compensation data pulled from over 33,000 contracts across more than 30 states. Email info@mdranger.com for more information.

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