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Practice Profitability and Staff Compensation Strategies for Physical Therapy Clinics
“It’s eleven ten in the evening… Where is Peter?” Alicia wondered as she woke up after dozing off in front of the TV with their daughter, Jessica. She was delighted to hear the sound of a door unlocking and Peter entering. He looked exhausted but was happy to carry Jessica to bed. After all, it was a Saturday and he should have had the day off.
Alicia was proud of her husband. He worked tirelessly long hours, evenings and weekends to achieve his goal of owning his own practice and giving Alicia the freedom to focus on raising their two children and pursuing his MBA.
Peter opened his practice two years ago and built his business from the ground up. Referrals were growing rapidly and he was now receiving 100 patient visits per week. He recently hired a PTA in addition to his administrative staff to help him with his growing workload. His passion was treating patients, but his current priority was building his practice. Peter was telling Alicia that in a year or two he could be making over $600,000 a year, maybe making $6,000,000 over ten years.
“Pete, Jessica was really upset that you missed her football game again. All the other dads were there.” Alicia said disapprovingly. Peter has worked nights and weekends for the past 3 months. “I don’t understand why you spend every night and every weekend in the office,” she said. “Isn’t your staff supposed to do most of this work while you’re processing? Is he staying late to help you? she asked.
“I really don’t need that extra stress right now,” he replied. “I can’t pay them overtime to help them, and I really can’t sit there and watch what they do all day.”
“You know, Peter,” Alicia pressed, “It’s clear to me that you’re not managing your staff properly.”
Peter felt like he had been punched in the stomach. He wasn’t going to challenge Alicia. For the past two years, she has managed to take care of Jessica while pursuing her MBA. Peter started having a headache.
“You’re head down all day treating patients and not paying attention to what’s going on with your staff.” she added. “Last month you had to replace both your front desk person and two months ago you replaced your biller.”
“You pay your administrative staff $12 an hour and you just hired a PTA for $45,000 a year, but you still do most of the work.” Alicia continued, becoming more agitated. “You have to lose money because of turnover and wages and on top of that you’re never home again. If you’re going to see 100 patients a week and then you come in every night and weekend doing business administration, why have staff at all?” Alicia asked.
“Good question, I don’t know,” Peter replied reluctantly.
“Katherine called the other day. Alicia said.
Peter went to college with Katherine. They graduated together and were good friends. Katherine opened her practice 4 years ago and was in the process of opening her fourth location. She made an average of 800 visits per week.
“We didn’t talk long because she was about to take her golf lesson but in the few minutes we talked I thought of an idea,” Alicia said.
“I couldn’t even consider taking a day off to go golf,” thought Peter. “OK Alicia, what did you find?” Pierre gave in.
“You know, they pay their staff based on their performance. Let’s start with some facts. Employee salaries vary in three ways: type of department, years of experience, and location.
There are four types of base compensation: hourly, monthly, base salary plus performance bonus, and profit sharing or pure commission,” Alicia said as she handed the chart to Peter. “Employee compensation is a cost of doing business. If you didn’t have employees, you’d eliminate that cost, but if you’re spending time checking in patients and researching insurance claims, you don’t have time to treat patients and manage relationships. reference. 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 the costs of a reception staff not motivated?”
“Well, Alicia,” said Peter, “A negligent person at the front desk might antagonize patients, forget to collect co-payments, not follow up on a missed appointment. She might also upset other members of the staff because they wouldn’t work together as a team The cost of an unmotivated front desk person could increase patient attrition, impact cash flow and ultimately the bottom line net. The cost of an unmotivated hire is much more expensive than a few extra dollars per hour…”
“So, Alicia,” Peter began despite the late hour, “should we look for more qualified front desk staff and pay $15, or maybe $18 an hour?”
“Not so fast.” Alicia said. “If you pay more per hour, you’ll reduce turnover because fewer practices around will compete with your pay, but you’ll still have the same motivational issues whether you’re paying $12 or $20 an hour. Tell me, “What’s wrong with paying hourly wages to staff who need people skills? What’s the ultimate goal for your police office staff to achieve?”
“I understand now !” Peter didn’t notice his voice rising. “Reception staff are responsible for patient loyalty and referrals. Working with people requires attention to detail and an interest in their issues. Especially when working with injured or sick people. It’s hard work , people feel burnt out So compensation and incentives I need to recognize their results, such as new referrals, less missed appointments, less missed co-payments I could structure the front office salary so that they earn a minimum wage for standard work and a percentage of collections to incentivize them to increase referrals and retain patients on their care plan.Since more referrals, fewer missed appointments, efficient collection of cop -payers and balances increase collections, they could work more and earn more than the highest paid staff!
“It’s true,” Alicia said, “and not everyone will be ready for that kind of compensation. But that’s okay, too: why waste time hiring the wrong person for the job and then find out they lack the skills and motivation to do the hard work? work?”
“So what about the PTA? Do I have to pay him a bounty too? But for what?” asked Peter.
“Of course, you don’t want to pay him for idle hours during absences, and you want to pay him proportionally to the number of patients he sees and for better care plans. That’s called profit sharing,” Alicia said.
“…or a commission,” Peter continued his thought. “OK, I got it – commissions and bonuses help people focus on the result of their work and not on how difficult it is. The compensation structure helps to motivate my staff and improve teamwork, to avoid problems and contribute more to my results.”
“So why don’t we move all my staff to the commission?” asked Peter.
“That’s the right business approach,” Alicia replied, “except most people don’t have the confidence and productivity to work on pure commission. For example, would your biller agree to working on 100% commission from your insurance recoveries?Most likely she wouldn’t because she has to pay her mortgage and other fixed costs and she can’t make her income dependent on your flow of patients and from insurance companies. She expects a steady check regardless of your income, which depends on her performance. Do you have any means of measuring her performance? If you found out about underperformance, what would you do?”
“Today I pay her regardless of her performance or my practice. It’s not a healthy relationship,” Peter lamented, “It hurts the business.”
“The good news is that, like Katherine’s office, there are companies that work on a commission-only arrangement,” Alicia said, “outsourcing your billing would make more sense because a specialist billing company would have process to manage the performance of their employees, including good In fact, if you talk to an outsourcing company, always ask them how they compensate their employees Are they all on commission? with the same problem with even less control.
“In fact, no matter the size of my practice, all of its parts need to work together to be successful. If administrative staff allow too many cancellations and don’t help with referrals, patient visits will suffer and revenue will decline. “, said Peter.
“A pay-for-performance scale rewards staff who produce and penalizes those who don’t. As a practice owner, I’m always on the pay-for-performance scale. You pay yourself less when revenue from company are down. Why shouldn’t staff income follow the same path? Tomorrow I will be changing the compensation setup for my employees,” Peter enthused.
“Slow down, Peter,” Alicia said. “Before making any changes, review them with an HR and compliance specialist for sound advice,” Alicia warned. “We don’t need a lawsuit because we breached a legal obligation to make the changes we want.”
What do you think? Is Alicia right in her reasoning?
Do you know of a PT-specific endowment system that could make Alicia and Peter’s dreams come true?
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