Surveys show that compensation for orthopedic practice administrators varies widely, depending on years of experience, size of the group and many subjective criteria of each practice. Base salaries rose slightly from 2007 to 2008. Here are observations on and trends affecting orthopedic practice administrators' salaries and best practices for hiring and keeping these extremely valuable members of your team.
1. Slight increases in reimbursements 2007-2008
Based on nationwide surveys of orthopedic practices, the Health Care Group in Plymouth Meeting, Pa., reported that salaries for orthopedic administrators ranged from $50,000 to $158,371 in 2008, compared with $46,388 to $156,208 in 2007.
These figures appear to be in line with what administrators in other specialties make. The Health Care Group’s reported 2008 average salary levels for orthopedic administrators, classified by years on the job, were generally comparable with the Medical Group Management Association’s 2008 median salary levels for administrators at all specialties, classified by practice size. (Unlike the Health Care Group, the MGMA does not report salaries by specialty.)
Here are the numbers: The Health Care Group reported average salaries in 2008 of $102,500 for orthopedic administrators on the job for two years or less; $124,667 for two to five years; and $94,122 in 2008 for more than five years. MGMA, by comparison, reported a median salary of $85,000 for practices with six or fewer physicians; $115,000 for practices with 7-25 physicians; and $132,000 for practices with 26 physicians or more. At the 75th percentile, a level that is consulted for paying administrators with more experience or responsibilities, MGMA reported salaries of $102,000 for six or fewer physicians; $139,000 for 7-25 physicians; and $169,000 for 26 physicians or more.
The MGMA also measures differences between men’s and women’s salaries and its latest survey still shows a wide gap between them. Median salaries for administrators at a practice with 7-25 doctors were $127,000 for a man and $104,000 for a woman in 2008. Jeff Milburn, an MGMA practice consultant based in Colorado Springs, says that while a slim majority of practice administrators in all specialties are now female, as recently as 1980 about 80 percent were male. Salaries have not yet caught up with that change, he says.
2. Effects of the recession
While both the Health Care Group and MGMA title their reports as “2009” surveys, they note that the data were actually gathered in 2008. There are no surveys yet showing actual 2009 data, but experts are predicting that, despite the recession, salaries will not decline this year.
“Salaries won’t go up as much as they have been, but I would be a little surprised if they show a decline,” says Mr. Milburn, who was a senior vice president at a 90-physician multispecialty group. He expects many physicians will absorb losses rather than pass them on. “Physicians who want to share the pain and insist on an employee pay cut should be willing to share the gain when times are good,” he says. If losses can’t be absorbed by the physicians, he recommends cutting pay across-the-board, at an equal percentage for all employees.
However, apart from hard-hit areas like Southeast Michigan, Mr. Milburn predicts there will be few across-the-board pay cuts this year. On the other hand, he thinks most groups won’t be handing out raises, either.
Paul Esselman, vice president and practice leader at Cejka Search, a healthcare executive search firm in St. Louis, says another effect of the recession is a reticence of administrators to take new jobs. “Some candidates are weighing the pros and cons of moving to a different geographical location,” he says. “The prospect of having to pay two mortgages can be a non-starter in a depressed housing market.”
Mr. Milburn estimates that in normal times, about a quarter of administrators would be willing to move to a new location for a higher-paying job, especially if they are young and do not have families to uproot.
3. Calculating salary
Mr. Milburn says many variables should go into in calculating the administrator’s salary for a particular group. He advises averaging the results of several different MGMA surveys to find the proper base salary. In addition to the size of the group, MGMA breaks out salary levels by practice revenue, education level of the administrator and community size. He also advises calculating the average of three years of salary surveys to level out “bumps” between surveys.
Titles matter, such as an administrator versus a practice manager. In the 2008 MGMA survey, the administrator of a practice with six or fewer physicians had a median salary of $85,000, but a practice manager for any size group earned a median salary of $48,000.
Mr. Milburn says the gap is partly explained by dramatic differences in education between the two groups. Most of the office managers in the 2008 MGMA survey had no more than a high school or community college education, while most of the administrators had a college or master’s degree. Specifically, 153 office managers had a high school degree, 55 had a community college education, 51 had a college degree and 12 had a master’s degree as their highest attainment. In comparison, 14 practice administrators had a high school degree, 19 had a community college education, 74 had a college degree and 94 had a master’s degree as their highest attainment.
In addition, Mr. Milburn says administrators tend to work in larger, more complex practices, with multiple department heads reporting to them; have more years of management experience; and have more authority in areas such as negotiating managed care contracts, hiring and firing employees and taking on special projects, such as a building expansion.
Mr. Esselman says pay reflects experience in areas such as maintaining patient and physician satisfaction and growing the organization’s market share. “The more strategic the role and the higher the level of expertise and training, the greater the compensation an administrator will earn,” he says. Mr. Esselman adds that some administrators can progress to the title of CEO, which tends to be used by a very large practice with a highly complex administrative structure.
4. Using raises to improve motivation
Once the recession is over — or even before, in practices with healthy bottom lines — practices may want to consider raises. Many consultants view raises as money well spent, honing highly motivated administrators, but they acknowledge that many practices let the opportunity slip away, risking the possibility that administrators will lose their edge.
Mr. Esselman reports that administrators who stay at the same job may be at comparatively low salary levels because they don’t have the opportunity to bargain for higher rates, which is usually part of the job-seeking process. “The administrator who stays put can be a great bargain for the group,” he says, “but it is important to make sure they are being kept at a competitive salary range or incentivized to stay with bonuses and other incentives.”
Mr. Milburn thinks practices should be considering offering a raise to their administrators every year, at whatever rate they can handle. Between each annual review, he recommends periodic performance feedback. When the raise is due, “there should be no surprise,” he says. “You shouldn’t say, for the first time, ‘I don’t like what you do.’ You should have talked about that already.”
5. Setting bonuses
Bonus payments, unlike raises, do not require a permanent change in salary levels. Bonuses for administrators tend to be 10-12 percent of the base salary, according to Cindy Dunn, RN, FACMPE, an MGMA practice management consultant in Cocoa Beach, Fla. She advises splitting the criteria for bonuses between financial indicators, such as accounts receivable, and quality indicators such as patient satisfaction, while focusing on biggest needs of the practice, such as increasing profits to a certain level.
Mr. Milburn advises picking measureable bonus criteria. “As the saying goes, ‘If you can’t measure it, you can’t manage it,’ “ he says. “The criteria have to be measurable, reasonable and something that the administrator can control.”
Some practices also award extra pay for “stretch goals,” for extraordinary administrators who go above and beyond the goals defined in the bonus criteria. But Ms. Dunn objects to stretch goals, arguing that they are too subjective and generally focus on pie-in-the-sky targets, such as the possibility of making a deal with another physician group. Furthermore, “there is no exact amount attached to these goals,” she says. “They are at the discretion of the practice.”
For retirement, Ms. Dunn recommends setting up a 401(k) plan for the administrator and perhaps including him or her in profit-sharing for retirement, which is normally open just to physicians in the group. Mr. Milburn recommends that 3-4 percent of the administrator’s salary go into the 401(k), with the practice matching all or a portion of that amount.
6. Providing other perks
Ms. Dunn recommends contributing an allowance to attend meetings for continuing education. She would set up a budget of $5,000 a year to cover two meetings, taking up five to seven workdays. Mr. Milburn also recommends setting aside $400-$500 to pay for subscriptions for the administrator, such as a practice management newsletter.
Ms. Dunn says the practice could also pay for a cell phone, but not for a car, because it can be difficult to calculate personal use for income taxes. In addition, she would give the administrator four weeks of vacation a year, twice what a normal employee would get.
Mr. Milburn says the cost of such allowances is well worth the payback in having a better informed, more competent administrator.
He says physicians need to make sure they treat their practice administrators well. “Be fair,” he says. “A physician once told me good doctors are easier to find than good managers. If you have a good one, you need to hold on to them.”
Hiring tips
When searching for a new administrator for a practice, Mr. Esselman says he looks very closely at the candidate’s track record. “Experience counts, but it’s not just number of years they served,” he says. “It’s also a question of what was accomplished. Did the administrator have a significant role in growing the practice? So if the candidate has 10 years of experience, we ask, ‘10 years of experience doing what?’
“It’s a very competitive market for good orthopedic administrators,” Mr. Esselman reports. “Orthopedics is a highly specialized field of medicine, so there is a relatively small pool of available candidates who are experienced in managing the needs of this type of medical practice.” But he adds: “I have encouraged clients to be open-minded when they are looking to recruit an administrator with a very specific skill set and to consider candidates with experience in other highly specialized medical specialties, such as cardiology or oncology.”
Mr. Milburn agrees that practices should not rule out hiring non-orthopedic administrators. While he concedes that these candidates would need three to six months to get up to speed on the specialty, he thinks their expertise with running a large practice is much more valuable. “The most important thing is experience in managing a practice with many moving parts,” he says.
Contact Leigh Page at leigh@beckersasc.com.