Practice Profitability and Staff Compensation Strategies for Physical Therapy Clinics

“It’s ten past eleven at night… Where’s Peter?” Alicia wondered to herself as she woke up from dozing in front of the TV with her daughter, Jessica. She was pleased to hear the sounds of a door opening and Peter entering. He looked exhausted but was happy to get Jessica to bed. After all, it was Saturday and she should have had the day off.

Alicia was proud of her husband. She worked tirelessly without counting hours, evenings and weekends, to be able to achieve her goal of having her own office and giving Alicia the freedom to dedicate herself to raising her two children and continue with her MBA. .

Peter opened his practice two years ago and built his business from scratch. Referrals were growing rapidly and he was now receiving 100 patient visits a week. He recently hired a PTA in addition to his administrative staff to help with his growing caseload. His passion was treating patients, but his current priority was to develop his practice. Peter was telling Alicia that in a year or two, he could earn over $600,000 a year, perhaps earning $6,000,000 in ten years.

“Pete, Jessica was really upset that you missed her soccer game again. All the other dads were there.” Alicia said disapprovingly. Peter worked every night and weekend for the last 3 months. “I don’t understand why you spend every night and weekend at the office,” he said. “Aren’t your staff supposed to do most of this work while you’re in treatment? Do they stay late to help you?” she asked.

“I really don’t need this extra stress right now,” he replied. “I can’t pay them overtime to help out, and I can’t really sit there and watch what they’re doing all day.”

“You know, Peter,” she pressed Alicia, “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 wasn’t going to challenge Alicia. For the past two years, he has managed to take care of Jessica while she pursued her MBA. Pedro starting a headache.

“You spend all day with your head down treating patients and not paying attention to what’s going on with your staff.” she added. “Last month, she had to replace her front desk person and two months ago, she replaced her biller.”

“You’re paying your administrative staff $12 an hour and you just hired a PTA for $45,000 a year, but you’re doing most of the work anyway.” Alicia continued, increasingly agitated. “You’ve got to be losing money because of turnover and salaries, and on top of that, you’re never home anymore. If you’re going to see 100 patients a week and then spend every night and weekend doing business administration, why Why have staff? At all?” Alice asked.

“Good question, I don’t know” Peter replied reluctantly.

Katherine called the other day. Alice 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 averaged 800 hits a week.

“We didn’t talk much because she was about to take her golf lesson, but in the few minutes that we talked, an idea occurred to me,” Alicia said.

I couldn’t even consider taking a day off to play golf, Peter thought to himself. “Okay Alicia, what did you come up with?” Peter gave in.

“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 types of basic compensation: hourly, monthly, base salary plus performance bonus and profit sharing or pure commission,” Alicia said, handing 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 don’t have time treating patients and managing 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 the costs are for unmotivated front desk staff?”

“Well, Alicia,” said Peter, “a careless front desk person could upset patients, forget to collect copays, not follow up on a missed appointment. It could also upset other office staff because they wouldn’t work together as a team The cost of an unmotivated front desk person could increase patient attrition, affect cash flow and ultimately the bottom line The cost of an unmotivated hire is much more expensive than a few dollars more per hour…”

“So, Alicia,” Peter joked despite the late hour, “should we find more qualified front-desk staff and pay $15, or maybe $18 an hour?”

“Not so fast.” Alice said. “If you pay more per hour, you’ll reduce turnover because fewer interns will compete with your compensation, but you’ll still have the same motivation issues regardless of whether you pay $12 or $20 per hour. Tell me, what’s the problem with paying hourly wages?” hours to staff who need people interaction skills?

“Now I understand!” Peter didn’t realize his voice was rising. “Front desk staff are responsible for patient loyalty and referrals. Working with people requires attention to detail and an interest in their problems. Especially when working with injured or ill people. It’s hard work, people feel Therefore, compensation and incentives should recognize their results, such as new referrals, fewer missed appointments, fewer missed copays You could structure the front office salary so they receive a minimum pay for standard work and a percentage of collections for incentivize them to increase referrals and keep patients who adhere to their plan of care Since more referrals, fewer missed appointments, efficient collection of copays and balances increase bills, they could work harder and earn more than higher paid staff!

“Right,” Alicia said, “and not everyone is going to be ready for this kind of compensation. But that’s fine, too: why waste time hiring the wrong person for the job only to find out later that they lack the skills and the motivation to do the hard work?” works?”

“So what about the PTA? Should I pay them a bonus too? But what for?” Peter asked.

“Sure, they don’t want to pay you for downtime when you don’t show up, and they do want to pay you proportionally to the number of patients you see and for better care plans. That’s called profit sharing,” Alicia said.

“…or commission,” Peter continued his thought. “Okay, I get it: commission and bonus help people focus on the result of their work and not on their difficulty. The compensation structure helps motivate my staff and improve teamwork, avoiding problems and contributing more to my bottom line.

“Then why don’t we move all my staff to commission?” Peter asked.

“That’s the correct business approach,” Alicia replied, “except most people don’t have the confidence or productivity to work on a pure commission basis. For example, would your biller agree to work on a commission basis?” 100% of her insurance collections? Chances are she wouldn’t, because she needs to pay her mortgage and other fixed costs and can’t make her income depend on her flow of patients and insurance companies. to measure your performance?

“Today, I pay him regardless of his performance in practice. That’s not a healthy relationship,” Peter lamented, “it’s hurting business.”

“The good news is that, like Katherine’s office, there are companies that work on a commission-only basis,” Alicia said, “outsourcing their billing would make more sense because a specialized billing company would have processes to manage the performance of their employees, including the right incentive methods. Actually, if you talk to an outsourcing company, always ask them how they compensate their employees. Are they all on commission? Otherwise, you’ll end up with the same problem with even less control.”

“In reality, no matter how big or small my practice is, all of its parts have to work together to be successful. If the administrative staff allows too many cancellations and doesn’t help with referrals, patient visits will suffer and revenue will decrease.” “, said. To fart.

“A Pay-for-Performance pay scale rewards staff who produce and penalizes those who don’t. As a practice owner, I’m always on the Pay-for-Performance pay scale. You pay yourself less when company revenue is Why shouldn’t staff income be on the same track? Tomorrow, I’ll change my compensation settings for my employees,” Peter sounded very excited.

“Slow down, Peter,” Alicia said. “Before making any changes, review them with a Human Resources and Compliance specialist for good advice,” Alicia warned. “We don’t need a lawsuit because we didn’t comply with a legal requirement to make the changes we want.”

What do you think? Is Alicia right in her reasoning?

Do you know of a specific PT staffing system that could make Alicia and Peter’s dreams come true?