“It’s ten minutes past eleven at night…Where is Peter?”Alicia asked this question as she awoke after snoring in front of Jessica, their daughter. When she heard Peter enter and the doors unlocking, it was an exciting sound. He seemed tired but was pleased to get Jessica to sleep. It was Saturday, so he shouldn’t have worked on Saturday.
Alicia loved her husband. He was a tireless worker, sacrificing his weekends and working long hours to achieve his dream of opening his own business. This gave him the opportunity to give Alicia more time to raise their children, as well as continue his MBA.
Peter started his own practice in 2002 and has since built it from scratch. His referrals were rapidly growing and he now sees 100 patients per day. In order to handle his increasing caseload, he hired an assistant psychologist (PTA) and his administrative staff. Although his primary passion was patient care, his priority now was growing his practice. Peter said to Alicia that he could make $6,000,000 in ten years, possibly more than $600,000.
“Pete, Jessica was really upset that you missed her soccer game again. All of the other Dads were there.”Alicia expressed disapproval. Peter had worked weekends and nights for 3 months. “I don’t understand why you spend every night and weekend in the office,”Sie said. “Isn’t your staff supposed to be doing most of this work while you are treating? Do they stay late to help you?”She was curious.
“I really don’t need this extra stress right now,”He replied. “I can’t pay them overtime to help, and I really can’t sit there and watch what they’re doing all day.”
“You know, Peter,”Alicia was pressed. “It’s clear to me that you’re not managing your staff properly.”
Peter felt as if he had been punched in the stomach. He didn’t want to challenge Alicia. She took care of Jessica for the last two years while she pursued her MBA. Peter began to get headaches.
“You are heads down all day treating patients and not paying attention to what is going on with your staff.”She added. “Last month, you had to replace both your front office person and two months ago, you replaced your biller.”
“You’re paying your administrative staff $12 and hour and you just hired a PTA for $45,000 a year but you’re doing most of the work anyway.”Alicia continued to get more agitated. “You have to be losing money because of the turnover and salaries and on top of that, you’re never home anymore. If you are going to see 100 patients a week and then spend every night and weekend doing business administration, why have staff at all?” Alicia asked.
“Good question, I don’t know”Peter reluctantly answered.
“Katherine called the other day.” Alicia said.
Katherine went to college along with Peter. The two of them graduated together from college and became good friends. Katherine established her own practice in 2004 and is currently opening her fourth. Her average weekly visits were 800
“We didn’t speak for long because she was about to take her golfing lesson but in the few minutes we spoke, I thought of an idea,”Alicia.
“I couldn’t even consider taking a day off to golf,”Peter thought so too. “OK Alicia, what did you come up with?”Peter accepted.
“You know, she pays her staff based on performance. Let’s start with some facts. Employee salaries vary in three ways: type of service, years of experience, and location.
There are four kinds of basic compensation: hourly, monthly, base salary plus performance bonus, and profit sharing or pure commission,”Alicia handed Peter the table. “Employee compensation is a cost of doing business. If you had no employees, you would eliminate that cost but if you spend time greeting patients and chasing insurance claims, you have no time to treat patient and manage referral relationships. So to grow, you need help. “
“So, you hire staff to treat patients, to greet them and schedule their visits, and to chase insurance payments. The problem is motivation. Can you tell me what are the costs of unmotivated front office staff?”
“Well, Alicia,”Peter. “A careless front office person might get patients upset, forget to collect co-pays, not follow up on a missed appointment. They could also get other office staff upset because they would not work together as a team. The cost of unmotivated front office person could be increased patient attrition, impact cash-flow, and the bottom line ultimately. The cost of an unmotivated hire is much more expensive than a few more dollars per hour…”
“So, Alicia,”Peter got up at the crack of dawn, despite it being late. “Should we look for more qualified front office staff and pay $15, or maybe, $18 per hour?”
“Not so fast.”Alicia. “If you pay more per hour, you will reduce turnover because fewer practices around will compete with your compensation, but you will still have the same motivation problems, regardless if you pay $12 or $20 per hour. Tell me, what’s the problem with paying hourly wages to staff that needs people interaction skills? What is the ultimate goal that your font office staff must meet?”
“I get it now!”Peter did not notice that his voice was rising. “The front office staff is responsible for patient loyalty and referrals. Working with people requires attention to detail and interest in their problems. Especially when you work with injured or sick people. It’s hard work, people feel burnt out. So, compensation and incentives must acknowledge their results, such as new referrals, fewer missed appointments, fewer missed co-pays. I could structure the front office salary so that they get minimal pay for standard work and a percentage of collections to give them incentive to grow referrals and keep patients compliant with their plan of care. Since more referrals, fewer missed appointments, efficient collection of cop-pays and balances increases collections, they could work more and make more than the best paid staff around!
“Right,” said Alicia, “Not everyone will accept this level of compensation. This is okay. Why waste your time on hiring the wrong person to the job only to find out later that they are not motivated or skilled enough?”
“But what do you think about the PTA. So, should I pay him a bonus as well? What bonus?” asked Peter.
“While you don’t wish to make him work extra hours or for no-shows during the week, it is important to compensate him according to his care and how many patients you see. Profit sharing is what you call it.” said Alicia.
“…or commission,” continued Peter her thought. “Ok, it’s obvious – a bonus and commission helps employees focus on the results of their work rather than on how difficult it was. I find that the structure of my compensation helps motivate my employees and encourage teamwork. This allows me to avoid potential problems while contributing more towards my bottom line.”
“Let’s move all my employees on commission.” asked Peter.
“This is the best business strategy.” responded Alicia, “Except that most people don’t have the self-confidence or productivity to work for pure commission, Your biller might be willing to take 100% of the insurance collection collections. It is likely that she would not, as she has to pay her mortgage. She cannot also make her income dependent upon the flow of patients and insurance companies. Your revenue is irrelevant to her expectations. She will expect a steady paycheck regardless. Do you actually have any ways of measuring her performance? How would you respond if there was under-performance?”
“Today I don’t care about her performance or mine as a practitioner. It’s not a good relationship.” lamented Peter, “This is a problem for the company.”
“There are many companies who work under a commission-only agreement, just like Katherine’s.” said Alicia, “Outsourcing your billing is more practical because an experienced billing company has the processes and methods to monitor employee performance. When you speak to an outsourcing company ask how their employees are compensated. Is everyone on commission? If they are not on commission, you’ll have more control over the problem.”
“No matter the size of my practice, it is essential that all its components work in harmony to achieve success. Patients will not be able to visit your practice if there are too many cancellations or a lack of referrals. Revenue will drop and patient visits will decrease.” said Peter.
“An employee who produces more than they produce is rewarded with a Pay-forPerformance scale. The staff are penalized for those who do not. Being a business owner means that I’m always paying Pay-for Performance. When the company’s revenues are down, you get less pay. Why should the income of staff follow the same pattern? Tomorrow, I am changing my compensation structure for my staff.” Peter sounded really excited.
“Peter slow down!” said Alicia. “For sound advice and guidance, it is a good idea to review your documents with a Human Resource and Compliance professional before you make any changes.” warned Alicia. “Because we didn’t meet a legal obligation to make the necessary changes, we don’t have to file a suit.”
Do you agree? What do you think?
Is there a PT-specific system of staffing that can help Alicia and Peter realize their dreams?