An Incentive Plan That Enhances Productivity

If your practice is like most practices, you are likely to provide a bonus to your staff when the Christmas holiday arrives. Most practices provide a bonus regardless of the productivity of the practice, the gross or net income, or the number of new patients who enter the practice. Even if the practice is less productive, such as in 2020 with COVID-19 affecting the bottom line, practices will still offer a bonus to the staff. You check with your accountant or office manager to see what bonus you provided last year, and you increase the amount from 5% to 15%, depending on the profitability of the practice. Employees learn to expect the bonus and, employers cringe when they give out a bonus even though there has been no increase in productivity or profitability of the practice. This scenario is all too familiar to most of us. What is the solution? We can keep the status quo and begrudgingly continue with the December bonus as we have in the past. Another ineffective option is to stop the bonus program—in which case you know there will be blowback from the staff, and staff morale will certainly deteriorate. A third option is to use nonmonetary motivators, a choice that seldom placates the staff. The best approach is to implement a bonus plan based on incentives and productivity. The incentive bonus plan is truly a win for the employees and a win for the employer. As a further benefit, this plan ultimately improves patient satisfaction and leads to positive word-of-mouth marketing for your practice.

To summarize, there are three possible approaches to the bonus problem: 

• Continue the status quo;

• Eliminate bonuses altogether; or

• Change the current method to combine both monetary as well as nonmonetary rewards such as increased time off, gift cards, or discounted parking.

Continuing the status quo is, for most practices, not a reasonable solution. The problems continue, and, in fact, will continue to escalate each year. The practice’s doctors feel resentful for offering a bonus if there has been no improvement in the bottom line, whereas the staff feel unappreciated when the practice is growing and improving and they don’t enjoy the benefits of this enhanced productivity.

Eliminating bonuses would be easy, but this would create more controversy than continuing the current system. Ultimately, most physicians are committed to rewarding their employees in some fashion.

If the objective of an employee bonus is recognition, motivation, and employee retention, then nonmonetary plus monetary rewards can be very effective.

The best approach is to turn a bonus plan into an incentive plan. Employees will work harder to achieve a bonus when they know that the bonus is tied into reaching goals and objectives than when the bonus is merely given to them for showing up day in and day out and doing only what is required in their job description or the employee manual. A better solution is to set quarterly goals for the practice and give quarterly monetary rewards for reaching those goals. This is best accomplished by notifying employees about changes in the bonus structure and asking for their involvement and participation in setting goals. 

Implementing an Incentive Plan

Start by sending an email or memo to the staff explaining the change in the bonus structure, describing the monetary parts of the plan and inviting input. This letter should not be sent right after Thanksgiving; wait until after the first of the year. Most of your staff can be expected to react to the communication positively and began talking about goals and suggestions. The next step is to hold a staff meeting on the rewards topic to resolve any misunderstandings.

An example would be to establish a monetary incentive such as one week’s pay distributed as a yearly amount—for example, one-fourth of the total bonus distributed each quarter. With input from employees, you can develop your own quarterly performance goals, such as the following:

• Quarter 1: A dollar amount for collections.

• Quarter 2: Collecting copays at the time of each visit, thus reducing your billing expenses. The second quarter could also review denials and reward the staff for decreasing denials, because this is income owed to the practice that is being held by payers.

• Quarter 3: Number of surgeries performed or reimbursement for profitable office procedures; and

• Quarter 4: Successful attainment of the first three goals.

Other considerations for goals might include total patients seen each quarter; the number of new patients seen in each quarter; new referrals each quarter (especially in specialist practices); or reduction in accounts receivables. At least in the beginning, select one or two metrics to monitor for the bonus plan. If you take on too many goals, the program can become cumbersome and unwieldy.

At the end of each quarter, managers or team leaders report the results to the staff. If the goals have been achieved, the practice issues bonus checks at the beginning of the next quarter for the previous quarter. I suggest that you give the last quarter bonus right after Thanksgiving so that your staff can use the money for their holiday spending. I do not recommend creating goals that are not quantifiable, such as positive comments from the doctor’s online reputation review site or results of patient surveys. These metrics are difficult to measure and can be manipulated by the staff.

Results of the Incentive Bonus Plan

This kind of incentive plan changes the long-standing habit of automatically giving annual holiday bonuses. The employees are involved from the very beginning and have a “buy-in,” because it is their program and they have agreed to the goals and the objectives. You can expect your staff to make acceptable suggestions and discuss new goals among themselves in preparation for future quarters.

It is imperative to warn the employees of the inappropriateness of discussing bonus amounts with fellow employees. You will find that you can eliminate much disgruntlement by standardizing the bonus amount and tying it to each person’s compensation level.

Setting goals focuses employees’ attention on critical areas of the practice or individual performance of job duties.

You will find that most physicians will be satisfied with the results of reaching new practice goals. Just setting goals focuses employees’ attention on critical areas of the practice or individual performance of job duties. Although goals change each quarter, employees continue to respond to previous quarters’ goals.

Getting Started

A practice that decides to implement a bonus or incentive plan needs to:

• Plan carefully;

• Communicate the plan clearly to every employee;

• Ensure measurable objectives; and

• Involve staff in the planning process.

Although these requirements may seem easy and obvious, they can be a challenge to accomplish and will take some time and effort to implement. The new system requires positive attitudes from the employees, and commitment on the part of the physicians to reward staff plays a key role.

Careful crafting of the bonus program at the beginning may avoid the need to change it in the future. It is better to implement a plan in slow, carefully developed steps, considering the future growth of the practice.

Clear communication with employees is essential. They need to understand how the plan works, when it becomes effective, and what period of time it covers. Use of email is adequate for brief, back-and-forth messages, but if a significant concern arises, a group meeting is the most effective way to communicate and reach a plan that is acceptable to everyone.

It is important to develop goals that involve every employee.

Setting objectives may be difficult. It is important to develop goals that involve every employee. You may consider separate goals for each department. Don’t forget the need to measure progress toward goals objectively—in hard numbers. Choose objective goals that can be quantitated; subjective goals present measurement problems and can spark disagreements over whether or not they were accomplished.

You can anticipate great value in involving employees in the planning process for the bonus/incentive plan. This can be accomplished either informally or formally through committees and staff meetings. Any plan is more likely to succeed when employees have input into the process.

A sample bonus plan might work like this: In 2018, the practice collected $1 million. In 2019, the practice collected $1.1 million, for a $100,000 increase in productivity. Your incentive plan agrees to share 10% of any increase in productivity ($10,000) with staff. So in a practice with five employees, each would receive $2000.

Bottom Line: For most practices, the greatest overhead expense is nonphysician staff salaries. You certainly don’t want to improve your own bottom line at the expense of your staff. However, if production increases and profitability is also increased, you will want to pass part of this windfall to your staff. An incentive or bonus plan is one of the best ways to accomplish both objectives. And satisfied staff members are much more likely to satisfy patients and speak well of your practice to outsiders.