The concept of pay-for-performance (PFP)—that is, the idea that an individual receives payment based on what he or she produces—seems very American to me and is certainly part of our capitalistic society. To use a sports analogy, a professional athlete who is one of the top performers in his or her sport commands higher compensation than an average or poor performer. So, why would therapy practice owners, directors, and executives not consider offering salary/compensation rates based on financial or quality performance? After all, many CEOs who lead their companies to profitability often share in that profitability.

But, when it comes to health care, there are a number of laws we must take into account when considering structured pay-for-performance programs for our therapists. First, let me say that pay-for-performance programs are not, in and of themselves, illegal. However, when it comes to establishing “fair market value” pay rates and bonuses based on PFP programs, the rules are different for businesses operating in the healthcare industry. Compared to their non-healthcare counterparts, healthcare entities and providers don’t enjoy the same freedom to pay employees in accordance with performance. On that note, there are several key laws to consider when discussing PFP:

  • Anti-Kickback Statue
  • Civil Monetary Penalties Law
  • Stark law
  • Specific state laws (possibly)

There also is an OIG advisory on pay-for-performance programs. Now, the crucial point of this advisory is that it only applies to the entity that asked for the opinion. That said, it’s still important, because it gives us an idea of how the OIG feels about this particular situation.

So again, pay-for-performance programs in outpatient practices are not necessarily illegal, but at this point, I need to provide my disclaimer that I am not an attorney—and proper interpretation of the above-mentioned laws and of OIG advisories require the expertise of an experienced attorney. But, I can tell you that the OIG likely would be concerned about an incentive program that paid therapists based solely on the revenue they generated or the number of referrals they garnered. Additionally, the OIG likely would not support incentive programs that could cause a decrease in the quality of services provided. Now, I know that we all provide the highest quality care possible, but under the current fee-for-service (FFS) system, we get paid more when we provide more services—regardless of the quality of those services.  So, PFP programs based solely on the number of services provided create a challenge when it comes to determining medical necessity.

If you’re thinking about implementing a pay-for-performance program, here are some things to consider:

  • The PFP agreement should clearly outline the criteria for payment in writing.
  • You should consider including as part of the payment criteria:
    • patient satisfaction scores,
    • employee performance evaluation scores, and
    • changes in functional outcome scores.
  • It would be in your best interest to have independent auditors conduct regular documentation audits. (You don’t want to pay out an incentive only to pay it back to Medicare later as the result of an unfavorable documentation review.)

Pay-for-performance programs can be extremely complicated, and if you offer such a program to your employees, I definitely recommend that you have the program reviewed by an experienced health law attorney. That said, the pay-for-performance trend is quickly catching on across the entire healthcare industry, and implementing some type of PFP structure in your practice could put you ahead of the curve.


Have you considered adopting a PFP program in your practice? Why or why not? Share your thoughts in the comment section below.

The State of Rehab Therapy in 2018 - Regular BannerThe State of Rehab Therapy in 2018 - Small Banner
  • Common Questions from Our PT Billing Open Forum Image

    articleAug 18, 2018 | 34 min. read

    Common Questions from Our PT Billing Open Forum

    Last week, WebPT’s trio of billing experts—Dr. Heidi Jannenga, PT, DPT, ATC/L, WebPT President and Co-founder; John Wallace, PT, MS, WebPT Chief Business Development Officer of Revenue Cycle Management; and Dianne Jewell, PT, DPT, PhD, WebPT Director of Clinical Practice, Outcomes, and Education—hosted a live open forum on physical therapy billing . Before the webinar, we challenged registrants to serve up their trickiest PT billing head-scratchers—and boy, did they deliver! We received literally hundreds of questions on …

  • articleJan 16, 2013 | 5 min. read

    What are Compliance Programs and Why Does My PT Practice Need One?

    The concept of a compliance program is new to many in private practice physical therapy.  However, it’s a necessary aspect of any practice. Here are some common questions (and answers!) regarding a compliance program: What is a compliance program? A compliance program is a set of checks and balances to ensure that a physical therapy practice is meeting its established standards. Another way to look at it is that compliance is a quality program to ensure a …

  • Last Legs: The Compliance Vulnerabilities of Dead or Dying Software Image

    articleOct 24, 2016 | 5 min. read

    Last Legs: The Compliance Vulnerabilities of Dead or Dying Software

    Rusty mechanical equipment. Creaky carnival rides. Wobbly chairs. People are naturally skeptical of things that are dilapidated, rundown, or slipshod—and with good reason. After all, that which is ramshackle usually isn’t reliable. Now, imagine it’s the physical therapy software you use everyday to run your rehab therapy practice that’s gone derelict. Take PTOS EMR, for example , because if you didn’t know, this therapy office software is going out of business, and it has ceased all updates …

  • The PT’s Guide to Surviving a Medicare Audit Image

    articleMay 30, 2016 | 5 min. read

    The PT’s Guide to Surviving a Medicare Audit

    “How can I avoid being audited by Medicare?” This is one of the compliance questions I hear most frequently, and the honest answer is, quite simply, that you can’t. Just because CMS or one of its auditing entities hasn’t come knocking on your door doesn’t mean you’re not being audited. In fact, every claim you submit undergoes statistical analysis, and Medicare compares your claims data to the data for all other claims submitted. Furthermore, Medicare now analyzes …

  • A 10-Point Plan for Smart and Secure Electronic Communications with Patients Image

    articleMar 15, 2018 | 8 min. read

    A 10-Point Plan for Smart and Secure Electronic Communications with Patients

    As emails and text messages have become ubiquitous, patient expectations around provider responsiveness have increased. Gone are the days when providers set aside time each afternoon to return calls; now, they can simply respond to their patients’ texts—but should they? Many physical therapists, regardless of their practice model or patient population, are surprised to learn that they may not be allowed to interact with patients in the manner they—or their patients—prefer. These same providers are typically even …

  • Founder Letter: PQRS is Dead, But Your Data-Analysis Efforts Should Live On Image

    articleDec 6, 2016 | 6 min. read

    Founder Letter: PQRS is Dead, But Your Data-Analysis Efforts Should Live On

    If there’s one thing I know about rehab therapists, it’s that we are all very busy people. If your to-do list is anything like mine, it’s growing faster than you can prune it—and has probably expanded onto multiple sheets of paper (or maybe even into multiple notebooks). And regardless of the value associated with each item on the docket, we tend to refer to these tasks as things we “have” to do—not things we “get” to do. …

  • The Complete PT Billing FAQ Image

    articleMay 24, 2016 | 25 min. read

    The Complete PT Billing FAQ

    Over the years, WebPT has a hosted a slew of billing webinars and published dozens of billing-related blog posts. And in that time, we’ve received our fair share of tricky questions. Now, in an effort to satisfy your curiosity, we’ve compiled all of our most common brain-busters into one epic FAQ. Don’t see your question? Ask it in the comments below. (And be sure to check out this separate PT billing FAQ we recently put together.) Questions …

  • Who You Gonna Call? Which Compliance Resource to Contact and When Image

    articleOct 10, 2016 | 6 min. read

    Who You Gonna Call? Which Compliance Resource to Contact and When

    As is the case for healthcare professionals across the care spectrum, compliance resources for physical therapists are constantly evolving—forcing you, the rehab and remediation specialist, to wear many hats. Not only are you treating patient impairment and injury on a day-to-day basis, but you’re also responsible for ensuring that you and your practice meet a slew of ever-changing regulatory requirements . Man—and you thought finding treatment slots for your growing Rolodex of patients was a challenge. Don’t …

  • 5 Things You Need to Know About Medicare Audits Image

    articleJul 16, 2014 | 6 min. read

    5 Things You Need to Know About Medicare Audits

    If you treat Medicare patients, then you know all-too-well that the only thing worse than having to understand—and follow—Medicare’s thick book o’ rules is having to worry about the ever-present threat of a potential audit. After all, the national media love a good fraud story , and even if you’re fairly confident that you are doing everything right, each breaking audit headline probably plants a small seed of worry somewhere deep in your subconscious. With that in …

Achieve greatness in practice with the ultimate EMR for PTs, OTs, and SLPs.