How to Structure a Bonus Plan in a Private Practice

It is very wise to have a bonus plan for staff in operation in your office. If you reward staff for increasing their production and the production of the practice, they will naturally want to continue to do that, and the whole staff will tend to operate much more as a team.

In structuring a bonus plan, the simpler you can make it for yourself and your staff, the better. Bear in mind that you want the staff working as a team and that there are several areas of concern. Consider the following:

The best bonus plans are ones that get the entire staff working together towards increased viability for the whole practice, while rewarding their own increased production. A plan that gives staff bonuses when the practice is not viable is a loser for the doctor/owner. At the same time, not providing bonuses to staff for their increased production when the practice is getting more and more viable provides no incentive or reward for the staff and will lead to a less cohesive and productive group. So, you have to put together a system that takes into account the major statistics of the practice, the viability of the practice, and the individual production of the staff members.

Certainly, you want higher production statistics, but if you pay bonuses only on increased production, you could be painting yourself into a corner if the collections do not keep up with the production. You could be paying bonuses out of your own pocket!

At the same time, generally, only one person is handling collections. But even so, a team effort can come into play in this area. Staff members who do not formally have anything to do with collections can still be of assistance by not overburdening the person in charge of collections with other matters. The staff can offer to help out with getting statements out. If appropriate, the staff can offer to perform other helpful functions (as time allows) so that the person in charge of collections can handle financial matters. All staff should be cognizant of relaying important financial related information to the accounts manager if they become aware of a situation that could affect the financial area. Additionally, the better service a patient/client receives, the easier it is to collect payment. All staff can contribute to collections by doing their own jobs well.

If the staff is focused only on production statistics, they may not focus an appropriate amount of attention on promoting new patients/clients in the practice. New patients/clients coming into the practice is one of the prime factors involved in your being able to generate more production and collections. The new patient/client area ties in closely with the growth and viability of the practice. All staff can be responsible for the inflow of new patients/clients into the practice by their own promotion from their job area, as well as outside of the practice.

The point becomes self-evident. The staff must be focused on all of the above and working as a team to keep all of those statistics going up. The practice will grow, and they will be rewarded for their contribution to that growth. At the same time, the practice’s viability must be looked at.

The following is a very simple and effective bonus plan suggestion:

  1. For starters you must confront the viability status of the practice. Determine what the break even point of the practice is – what it honestly costs to operate. Don’t forget reserves too! It is advisable to confer with a consultant on this as he/she will be able to help you determine whether or not you have considered all factors. As you are determining this figure, take into consideration the fact that the practice does have variable expenses, so you will want to average those figures in. Work them in on the high side to ensure that you’re not cutting yourself short.
  2. Once you have determined what the baseline viability figure of the practice is, you will know exactly how much you must bring into the practice to keep the doors open and operate in a solvent fashion. Remember, it is better to figure high than to cut yourself short. You now know that anything above that figure can be used for giving bonuses to the staff.
  3. You would now take a percentage of the amount that is above and beyond this figure to be used as a staff bonus fund. This could be anywhere from 15% – 20%. Of that percentage, you would figure what percentage each staff member would be paid as a bonus. This could be based upon seniority of position (the office manager would probably be bonused more than the receptionist), years of service, etc. Each individual staff member would be eligible for their share of the bonus amount based upon whether they have met their own individual production quotas. In this way, the staff are being rewarded for helping to make the practice solvent and viable and for their own production that contributed to the solvency level of the practice.

SAMPLE: Cost of operation is $20,000. Production target is set at $24,000. Collection target is $22,000. A New Patient/Client target would also be set to keep staff focused on all three areas. If all three targets are met, the staff bonus plan operates for the month.

Let us say that the Production target is met, the collections are at $22,000 and the New Patient/Client target is met. The staff would then qualify for their bonuses.

You would take the amount collected over the baseline viability figure which in this case is $2000. Let’s say that you are putting 20% into the bonus plan which, in this case, would be $400. Let’s also say that you have four full-time staff, and you work out that the office manager gets 30% and each other staff member gets 23.3% if they made their own production targets. So, the office manager would get a $120.00 bonus, and the rest of the staff would get a $93.20 bonus. That is a very nice incentive for the staff and allows the owner to get a nice bonus as well.

It is suggested that the percentage amount that goes to bonuses be based upon the present viability of the practice. If you are just starting this and don’t have much in reserves and are just covering your bills, you would put a smaller percentage toward the bonuses and use the rest to pay off bills and build reserves. As you build more reserves and get debts paid off, you become more and more viable and can thus afford to put a higher percentage toward the staff bonuses.

The effectiveness of this bonus plan lies in the fact that each staff member knows that they need to reach established targets to qualify for bonuses. They also know that the more they produce, the more bonuses they will get and that nobody wins unless they and the practice all win. Thus they will want to push the statistics up and the practice will expand due to the focus and teamwork of the staff. Everybody wins!

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