MCOs Use Financial Incentives, Partnerships To Boost MDs' E-Prescribing Utilization
05/09/05
Managed Care Week
Despite growing recognition of the potential of electronic prescribing to improve patient safety and control pharmacy costs, utilization of the technology has increased slowly.
Take-up rates may start to grow more quickly, however. A new generation of e-prescribing programs features refined incentives and more targeted interventions to encourage participation. Meanwhile, collaborative efforts among employers and insurers are deepening the reach of such initiatives in some markets. And the Medicare program should give e-prescribing a big boost, since plans that participate in the Medicare Part D drug benefit will be required to support the technology starting in 2006.
E-prescribing can reduce the risk of adverse drug events and improve formulary compliance and generic dispensing rates, experts say. That’s because physicians can use a personal digital assistant (PDA) or other electronic device at the point of care to check a patient’s medication history, review the insurer’s formulary or see therapeutic alternatives to the selected medication.
The requirement that firms expense stock options also has encouraged many publicly traded companies to “move away from broad-based stock option programs that give options to everybody,” says Paul Dorf, managing director of Compensation Resources, Inc.
For example, Aetna, Inc. said in January that it would restrict stock options to company managers and pay nonmanagement workers one-time bonuses of up to $500.
A few health care companies are considering incorporating explicit performance standards linked to member or provider satisfaction into executive compensation, rather than limiting top executives’ performance goals to financial standards like gains in earnings per share, Kirkpatrick adds.
He recommends that boards avoid formulas in setting executive compensation. “The compensation committee needs to know if they are setting the right performance measures and getting actual value. Using their judgment and making informed decisions is more important than having a plan that looks like everyone else’s,” he says.
Here’s a look at some CEOs’ pay packages: UnitedHealth’s McGuire received the same bonus - $5.6 million – in 2003 and 2004. The insurer’s compensation committee noted that at 2.5 times McGuire’s annual salary, the bonus is well in excess of the 150% minimum called for in his employment contract. The bonus reflects UnitedHealth’s record revenues, strong earnings, 51% increase in stock price last year and several successful acquisitions, the committee said. Still, it said, not all executives exceeded performance goals. “Although a number of annual incentive targets were met; and the company had a very strong performance in 2004, the committee determined that not all goals were exceeded by all business units,: the committee said. “Accordingly, bonus compensation for many executives did not increase, and in some instances decreased, over levels received in 2003.”
CIGNA Corp. CEO H. Edward Hanway’s 2004 salary remained flat at the 2003 level of $1 million. That reflects a decision by the insurer’s compensation committee to adjust pay practices in light of the insurer’s ongoing restructuring effort aimed at restoring profitability and ending membership losses in its health insurance division. Among other changes, the cimmitteee froze 2004 compensation targets for many executives at 2003 levels, changed stock-option award procedures and incorporated membership goals as a measure in determining 2005 bonus awards. Hanway still got a 24% increase in his annual bonus, which rose to $2.6 million.
WellPoint’s Glasscock was the second-highest paid publicly traded managed care company executive last year. He got a 50% raise in total compensation last year, receiving $1.1 million in annual salary, a $4.1 million bonus and $283,000 in other annual compensation. In 2003, he received a similar salary of $1.0 million, but a bonus of just $2.3 million and $273,000 in other compensation. Meanwhile, Leonard Schaeffer, former CEO of WellPoint Health Networks, was named chairman of the new entity. Under his employment agreement with the old company, Schaeffer received a cash payment of $50.6 million upon the end of his term as CEO.
View details of health insurance executives’ annual compensation at AIS’s Managed Care channel on www.AISHealth.com.
