Tie Staff Bonuses to Medical Practice Performance

Many medical practices provide year-end bonuses tied in to the spirit of the holidays. The problem is, once initiated, it is difficult to take away this type of bonus. It becomes an entitlement. It may be time to consider alternatives, and to tie bonuses to some type of performance criteria.

Tying Bonuses to Performance Goals – Production or Collections

Most physicians would like to see an increase in their business that will lead to greater profitability. You could use either billing or collections as your target, and tie this target into a bonus plan. Here are the details, using the Practice Planning Worksheet below as a guide.

Step One: For the coming year, determine a take-home dollar target for the practice physician(s). This is your bottom-line goal. Dr. Jones made $253,500 the year just ended. He would like to take home $270,000 in the coming year.

Step Two: Project your expenses for the coming year. The past 12-month expenditures were $192,800. Estimates for the next 12 months come to $213,000.

Step Three: Add your targeted physician take-home and your projected practice expenses: $270,000 plus $213,000 equals $483,000.

This shows the revenues needed to meet your forecast, based on collections. You could use this figure as your bonus goal. Or, if you prefer, you could go to step four, basing bonus on production.

Step Four: Forecast your contractual discounts and bad debt to arrive at the billings (i.e. production) needed to meet your target. Our projection: $690,000.

Step Five: Recalculate your billings or collections target into monthly or quarterly goals. Consider providing bonuses, to each staff member, for meeting monthly or quarterly goals.

Recommendation: $25 to $50 to each employee for meeting each monthly goal; or $75 to $150 per employee for reaching each quarterly goal.

Dollar payouts should be the same amount for all employees, regardless of the salary level. Consider giving your practice manager 50 percent to 100 percent more than the award to each employee. Part-timers could be given a pro-rated bonus, as a percentage of the 40-hour work week.

Strategy: Frequent bonuses work better than the annual bonus. This is the rationale behind the monthly or quarterly distribution.

Suggestion: Have a very visible reporting system. Provide a daily or weekly report so that all employees can see the progress towards the target. You could even calculate and present a daily or weekly target to help them.

Consider: Cash awards, rather than checks, for a greater impact. Five $5 bills are more impressive than a check for $25. Net out the awards so that employees don’t have to pay taxes. If you give a $25 award, after taxes that could result in a payout of $18, even less. Calculate the taxes and net the reward of $25 to the employee. In other words, it is costing you $30 or more, but taking out the taxes to arrive at the promised sum.

Results: What you are seeking are behavioral changes that will more actively involve your staff in helping you reach your increased production goals. Just seeing a few more patients a week will help the practice reach that goal.

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