William R Pupkis, CEO of Capital Region Orthopaedics in Albany, N.Y., discusses five tips for benchmarking and controlling staffing and labor costs.
1. Consider staffing as a number per FTE physician. Most orthopedic practices benchmark staffing and labor as a number per full-time equivalent physician. Mr. Pupkis says another good benchmark is to measure the number of salary dollars per FTE physician. He notes that higher performing physicians will more than likely require a higher staff count to ensure patients are handled in an effective manner.
2. Cutting staff may not be the solution to high staffing and labor costs. Some practices may have more FTEs than are needed to cover their current patient load. However, cutting too many staff members can affect the practice's ability to properly care for its patients and may lead to higher costs in the end.
"If a practice gets too lean, then two things can happen, and both are bad," says Mr. Pupkis. "First, they most probably will increase their overtime spending to cover the hours the physicians are seeing patients — not good over the long run. Even worse, it could affect the overall productivity of the office not allowing the physician to see as many patients because of bottlenecks in patient flow."
3. Control overtime expenditures. Although overtime is sometimes needed, it can also be a major driver in staffing and labor costs for practices. If practices are experiencing routine spikes in the number of overtime hours, they may need to try a few approaches to reduce this expense.
Scheduling issues often are drivers of overtime costs, especially if a practice or a physician is not prepared for a flux of patients, Mr. Pupkis says. "It is the responsibility of management to provide support to the physicians. If he or she is unable to manage it, then we must do so in their stead," he says.
Using shared human resources employees, such as front desk staff, to relieve FTEs is one way Mr. Pupkis' practice has offset some of their overtime costs and has helped to support physicians in seeing their patients.
Another concern is that many staff members may come to depend on the extra income generated by overtime hours and may not react well when told this income will be cut. "This can be another aspect of overtime that can backfire," Mr. Pupkis says. You could end up losing a valuable employee. Remember, you lose the good employees first because they can get a job anywhere, and most probably for more money.
4. Hiring another employee can make your practice money. If overtime is occurring too frequently, a practice may need to bring on some additional FTEs. Rather than drive staffing costs up, the addition of one more employee can reduce variable expenses, such as overtime, and allow physicians to see more patients, according to Mr. Pupkis. Full-time staff can also be brought on at a lower hourly wage compared with the expenses associated with overtime costs and hiring temporary workers.
To determine if your practice should add another FTE, Mr. Pupkis suggests following guidelines suggested by the MGMA's "Better Performing Practices." He says, "Adding a medical assistant or cast technician could enable the physicians to see additional patients per day, adding to the bottom line. To quantify this, divide the total collections by the total patient visits to determine the average collections per patient visit. Then calculate what an additional staff person might make, including benefits, on a daily basis. The difference will be significant."
5. Compounded annual raises can save money and keep salaries competitive. While many practices may be tempted to freeze or reduce salaries due to a tough marketplace, Mr. Pupkis suggests there may be techniques practices can use to save money and still provide raises and fair pay.
Mr. Pupkis' practice uses the concept of compounding to accomplish this, a process which sets aside funds for raises and bonuses. For example, the total salary pool is set by the board, which includes bonuses and raises. If the total increases are set at 3 percent, then 2 percent are portioned for raises and the remaining 1 percent for bonuses. Supervisors perform annual evaluations of their employees and then bring the evaluations to management who then help to calibrate the averages for all the reviews to ensure fairness across the practice.
"Some supervisors may rate their employees all above average, but it is important to evaluate who the 'A' players are compared with those who are average or below average," Mr. Pupkis says. From the calibrated results, employees are given a raise and bonus that matches their evaluation ranking, which might be above or below the three percent, or even be zero if they don't reach a benchmark minimum.
This method can result in a culture change, like many other new initiatives. "It can be a difficult idea to sell," Mr. Pupkis says. "At first, we had physicians question why their direct employees weren't receiving maximum raises, but the data showed that the rankings were fair. This method will save money over the course of 3-5 years because of the 'magic' of compounding."
Mr. Pupkis says this technique can also help ensure your practice is paying fairly, as it can help correct valuable employees who may be underpaid. He says, "When looking at regional compensation data, make sure to set your range correctly. If you don't you could lose a good employee."
Contact Renée Tomcanin at renee@beckersasc.com.