Operations: How Much Should I Pay...?

The specialist was wondering: Am I overpaying my staff?

She told us in an e-mail that her employees are “great,” but her practice is seeing revenues decline, in part because her staff, who are already “at the top of the pay scale,” all received “a significant raise [last year], more based on emotion on our part than on significant change in their performance. With that amount of raises we could have hired another full-time employee.”

It’s a dilemma practices of every specialty face: How do you keep payroll at a sustainable level without breaking the bank? It’s a bit like walking the proverbial tightrope.

Paying too little often results in high turnover and low morale. In a customer service business like yours in which your staff is the face your customers see, surly, pouting employees can be calamitous. Paying too much, on the other hand, can wreak havoc on your bottom line.

Jeffrey Denning, a consultant with the Practice Performance Group in La Jolla, Calif., notes that most medical groups are notorious for keeping staff salaries sub-par.

“Physicians are forever trying to save money on wages and benefits, and as a result, they don’t get enthusiastic team players. They just get workers,” he says. Nonphysician clinical and clerical employees are very expensive to maintain, Denning acknowledges, accounting for roughly half the cost of doing business at private practices.

Still, he says, “If you expect your staff to be in the 90th percentile in terms of quality, you have to pay at that level.”

To know how much to pay your staff, Denning advises keeping track of national compensation data, regional trends, and - to the extent possible - cross-town competitors.

A good place to start is the Medical Office Staff Salary Report from the Professional Association of Health Care Office Management (PAHCOM). According to the survey, support staff salaries at small group practices rose 4 percent last year nationwide, slightly higher than the 3.4 percent inflation rate. By comparison, the Bureau of Labor Statistics reports wage and salary growth for all private-sector industries was up 2.5 percent over 2004.

As with years past, the PAHCOM survey, which is based on feedback from more than 3,000 association members representing practices of one to 35 physicians, found geography plays an important role in how quickly compensation rates climb. The West, for example, posted an average staff salary increase of 7 percent last year over 2004, while the Northeast and Southeast reported gains of 4 percent, and the Midwest averaged a 2.5 percent rise.

To a large degree, those figures reflect regional cost-of-living adjustments. But Michael Parshall, a consultant for The Health Care Group in Plymouth Meeting, Pa., a management consulting firm, says it also speaks to the growing demand for skilled nurses, laboratory technicians, and other support workers in rapidly developing parts of the country. “There are certainly hot-spot markets like Florida, the West, and some of the Sun Belt regions where population growth is so fast that the supply of talent can’t keep up,” he says. “Salaries are tied to supply and demand.”

Among managerial positions, financial supervisors last year enjoyed the largest pay hikes nationwide with average salaries of $44,355 - up a significant 13.5 percent over 2004, according to PAHCOM. Radiology technicians claimed the second-highest increase, up 9 percent to $43,000.

At the same time, office managers posted a record-breaking 7.5 percent jump in average total compensation in 2005, which includes salaries and benefits. The position now commands more than $64,000 in all four regions of the country, up from $60,882 the year before. Individual salaries, however, vary greatly depending on practice size, job responsibilities, and office specialty. In its own annual salary survey, The Health Care Group, which tracks only base salaries, reports office managers with more than five years of experience earn roughly $49,000. And the Medical Group Management Association (MGMA) puts that number lower still, reporting a median total compensation package of $44,500 for office managers in 2005.

“The environment for medical practices is continuing to become more complex and regulated, so it’s paramount that practices employ a professional manager who can help the office buffet some of those issues,” says MGMA spokeswoman Liz Johnson. “Physicians are also placing more value on patient satisfaction and realize that having
a well-run office plays into that.”

MGMA’s 2005 Management Compensation Survey also found that medical records managers earned a median compensation of $45,000 last year, while administrators in an office of seven to 25 physicians brought in $96,746, and information systems directors, common at larger practices, earned $68,719.

Front-office staff salaries still meager

As for clerical posts, PAHCOM reports that filing clerks saw their salaries climb 10 percent nationally last year to $20,803, while collections personnel and billing clerks received a 6 percent bump in pay to roughly $30,000. Bookkeepers, meanwhile, took an average 5.5 percent reduction in pay, to $29,000. Surgery schedulers earned $30,300; data-entry clerks, about $26,000.

At the same time, The Health Care Group’s 2006 Staff Salary Survey reported that billing coordinators with more than five years’ experience earned an average hourly rate of about $17.50 in 2005 ($35,000 annually for a 40-hour workweek), while certified coders made an average $16.34 per hour (about $33,000 annually). Receptionists earned the lowest hourly rate at $13.27 ($26,540 per year) - which is one big reason turnover in that position is so high, says Denning.

“Making appointments, answering phones, and moving patients in and out of the rooms is a thankless, high-stress job, and because that position is chronically underpaid, people burn out fast,” he says.

Meanwhile, medical records and health information technicians, who work beneath office managers, earn a mean annual wage of less than $25,000, according to the Bureau of Labor Statistics.

Front-office support staffers are an increasingly critical component in physician practice performance, notes PAHCOM spokeswoman Karen Williams. She says that hiring the best and paying them well go hand-in-hand with a practice’s profitability. “You’re only able to pay based on your revenues coming in, so in order to be in a position to offer raises you have to have the right people in there who know how to manage accounts receivable, push through the insurance claims, and get customers to pay up,” she says. “[Profitability] all comes down to staff efficiency.”

Take care of your nurses ... or risk losing them

Rising clinical staff salaries reflect the growing need for trained professionals who can help physicians provide faster, quality patient care. Nurses, for one, remain in high demand as the aging population ups demand for skilled workers, fewer new recruits enter the field, and physicians delegate increasingly complex medical procedures to their clinical staff.

The Bureau of Labor Statistics reports the mean annual wage for the nation’s 2.4 million registered nurses is $56,880. Those who work in physician offices earn an average of $56,230. PAHCOM data, however, suggest that RNs who work in private practices earn less, averaging $43,000 per year.

“Hospitals often pay [RNs] at a much higher rate and give bigger year-over-year raises,” says Parshall. “But doctors’ offices are much less intense, without the bad work hours or weekend call, so they’re able to get away with paying less.”

But Steve Rice, managing senior vice president of physician services for MSA/Clark Consulting in Minneapolis, says practices these days must pay beyond the national average to keep their most experienced nurses on board.

“What we’re seeing is that nurses, in particular - after they get to the 10-year mark where they’re really highly skilled and most useful to a practice - take their expertise and go to work for insurance companies or medical malpractice firms where they’re paid a lot more,” he says. “When physicians don’t take care of their nursing staff, they’re more susceptible to losing them.”

The most highly paid nonphysicians in the office

Midlevel providers such as nurse practitioners (NPs) and physician assistants (PAs) are, not surprisingly, the most highly paid nonphysicians in the office. NPs earn a median total compensation of $70,300, according to MGMA, while PAs specializing in primary care earn $72,719. (Those figures reflect both salary and benefits.) PAs in surgical settings earn nearly $80,000.

Certified registered nurse anesthetists, meanwhile, earn more than some physicians: a median of $127,000, by MGMA’s reckoning.

As for other clinical posts, The Health Care Group reports that ultrasound technicians earn an average of $28.28 per hour, radiology technicians bring in $22.48 hourly, and laboratory techs make $17.90. Medical transcriptionists with at least five years in the field earn an average $15.14 hourly wage.

Finally, the Bureau of Labor Statistics reports technologists last year earned a mean annual wage of $48,600, while surgical technologists, who help set up operating rooms and prepare and transport patients for surgery, earned $35,920.

Beyond paychecks: other staff motivators

Keeping salaries competitive, however, is only half the battle when it comes to getting the most out of your staff, notes Thomas Kintanar, a family-medicine physician who founded both a large medical group in Ft. Wayne, Ind., and a smaller 11-person practice in Churubusco, Ind.

“We’re starting to use profit sharing to make sure the employees know we appreciate their contribution, but also to be sure they’re paying attention to collections on our accounts receivable - our biggest challenge,” he says. “We are looking at giving our office and billing staff a certain percentage of productivity, based on their ability to bill and collect effectively.”

Parshall notes that all physician practices - particularly those that pay below the national average - should highlight the value of the other benefits they provide employees. “If you’re paying health insurance and offering profit sharing or 401(k) contributions, and you pay $10 while others pay $11 without those additional benefits, be sure your staff know the value of their total benefits package,” he advises. “Send out not just a W-2 to your staff each year, but a complete statement of the total value of their compensation and benefits package. It’s a good way for practices and employees to determine how they measure up in the marketplace.”

Shelly K. Schwartz is a freelance writer in Maplewood, N.J., who has covered personal finance, technology, and healthcare for 12 years. Her work has appeared on CNN/Money.com, Bankrate.com, and Healthy Family magazine. She can be reached via editor@physicianspractice.com.

This article originally appeared in the October 2006 issue of Physicians Practice.