Profits Went Up When We Switched How We Pay Our Doctors / APPs

People love consistency. Our theory was that if we offer a competitive pay for doctors or PAs with a big bonus option, that this would encourage people to work harder and make more money. Turns out, so far, this has been dead wrong.

Our Theory About Encouraging Higher Pay For Our Doctor or APP

Lets say that the average APP pay is 120,000 in our area. We thought that if we match that rate at $120,000 and offered an exponential bonus, that this would lead to a lot of providers wanting to bust their butt and make a lot of cash.

We made it so that if a PA/NP sees about 18-20 pts a day, that their quarterly bonus would be $3,000-$5,000 on top of their bonus. In our mind, making $140-150k a year to see 19 pts a day and be out by 5pm every day is a pretty sweet gig for most midlevel providers. Keep in mind that in our clinic many of these visits are lower level visits like UTI’s, colds, STI checks, etc.

I was wrong.

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So Far We Have Found The Exact Opposite

We pay our doctors and PAs their bonuses 6 weeks after end of a quarter. While our PAs were ramping up, we found that so far our PAs will not have any extra desire to see more patients for the extra money. They would much rather be out by 5pm every day and have that work life balance.

Even though we re-assured them, that they would almost always be out by 5pm, none of our PAs ever felt very motivated to see more patients with this model (except for one PA at the very end before she left our group).

We Switched To Flat Salary

If the going rate is $120k salary, we upped our rate to lets say $130k a year salary. We are now paying MORE than anyone around us for the same job.

However, we no longer have a bonus incentive.

We Don’t Give An Option With Number Of Patients Anymore

We stopped giving an option of number of patients they want to see during the day. Now, we just book at 19-20 pts per day with last patient at 3:40pm.

Every PA is out of the office by 4:30, every single day.

I ran the bonus metrics. With the old bonus metrics, our pay for our doctors or PAs would have made $6,500 bonus per quarter seeing 19 pts per day. This comes out to an extra $26,000 per year.

Now we pay them only $10,000 more without the bonus.

Security Matters

Everyone is happy. They are making more salary than their peers in our area. We are making more profit with the new contract.

I Hardly Could Believe It

I’ve had to rerun the numbers multiple times, but keep getting the same answers.

We as a company make more money with our higher flat salary contract compared to our bonus contract.

This makes sense as a business where I was compensating the APPs for taking some risk off my plate by paying them a lower salary. This meant that they kept more profits in their pocket when the passed the threshold of their salary.

Now that I’m taking 100% of the finanical risk with their salary and employment, it only makes sense that I am compensated better for that inherent risks.

Maybe We Just Haven’t Found The Right Employee Yet

Not everyone is motivated by sales or metrics. Everyone has different goals in life, and thats cool.

The way I always thought about it in my mind, if I’m going be at work 8 to 5, I’m going work my butt off since every contract I’ve ever had was essentially incentive-based. I am going to make as much money as possible while I’m working. Many people value leaving predictability, and are not financially motivated. Thats cool. There is a lot more to life than money.

However, I always thought that salary plus bonus was the way to go. It hasn’t worked out for us. If we told people they could get a $7,000 bonus per quarter, but only got $6,000 per quarter, they are not motivated. They are deflated because they feel like we underdelivered on our promise.

Here we are paying over market rate and not underdelivering on any promises.

We Want Happy Employees

I really want happy employees. Not everyone is motivated by money, and that’s fine. I’m happy that all of our employees seem to be happy with the new flat salary contracts and I can’t believe how this has worked out so well for us financially. We want to pay our doctors well, and I’m glad they feel well compensated.

4 thoughts on “Profits Went Up When We Switched How We Pay Our Doctors / APPs

  • July 7, 2024 at 8:30 AM
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    Very surprising. What is the age and experience level of everyone? Maybe different stages of life cause this?

    Reply
    • July 7, 2024 at 8:33 AM
      Permalink

      Most of our PAs are about 5 years out from graduation. One was a new grad. Our docs have been practicing 10+ years.

      Reply
  • September 17, 2024 at 11:17 PM
    Permalink

    Found your blog recently and have been going down the rabbit hole…keep up the amazing work!
    I’ve seen/structured a variety of bonus programs, including a quality-focused model (HCC/HEDIS), wRVU model, and an NPS (patient satisfaction) model. Outside of clinics, I’ve also seen different payout mechanisms, such as a model where the bonuses were 100%+ of base salary or simply an equity structure that vests over X period of time. I’ve also seen a model specifically for medical assistants and front desk staff based on how timely they clock in and the number of lab errors.
    A. “We don’t give an option for the number of patients anymore.”
    In my experience, one of the biggest potential killers for a volume-driven clinic is the culture around scheduling. I’ve seen so many clinics where clinicians are setting their own admin time blocks, 2 hour lunch breaks, and caps on when they stop seeing patients. Brick and mortar businesses are inherently low-margin; 1-2 extra patients per day really can be the difference-maker for a good/bad month. If you never give them the option in the first place, then this issue is avoided. After all, you can never crave the taste of fried chicken if you’ve never had it in the first place!
    B. Psychology around Incentives
    In one of my previous jobs, corporate (large clinic chain) had rolled out a wRVU incentive where clinicians would be paid quarterly based on the number of wRVUs generated — if you hit X wRVUs, you get Y% of your base salary as a bonus. The goal was to incentivise clinicians to pick up more shifts and be more productive during those shifts. A few problems that I learned from designing/tracking the program and interviewing a bunch of clinicians:
    1. Quarterly payouts are too far apart to be top-of-mind for most clinicians
    I believe a monthly payout would have kept it in their minds more often. 3 months is way too long for a $6k payout. In my experience, it was difficult to “sell” this program as it was rolled out since folks weren’t able to see that far ahead.
    2. Data visibility and ease of digestion should be a top priority
    In my case, wRVUs weren’t really an intuitive metric; we didn’t have a great to way break it down. It wasn’t until much later that I realized people had no real way of tracking wRVUs. Clinicians weren’t really able to track the number of wRVUs they were generating without asking someone else to pull the data; and so it wasn’t something they thought about often. Once we fixed that (by creating a nice real-time dashboard), then we started to see a little improvement.
    3. Payout thresholds matter and can be another lever
    Another mistake we made was standardizing the bonus thresholds. If you generated X wRVUs, you got a Y% payout. We would have different Y%s based on a set of 5 RVUs thresholds; each one you crossed would get you an additional payout. The problem was that these thresholds were evenly spaced out and there was no real incentive to go for the higher tiers.
    I toyed around the idea of having these thresholds be the lever.
    We had about 600 clinicians at the time and the idea was to have an insane payout for the absolute top-tier clinicians — like the top 1%. Everyone else would get some sort of standard payout, but the top 1% would make something crazy like a 50% bonus. You reward those who deserve it, but also create a “goal” for the non-top 1% of clinicians to aspire towards. This model works VERY well in certain finance industries — it’s not uncommon for folks to see ~100% of their base as a year-end bonus.
    What did I learn from all of this? Same thing you did. Just pay people a slightly higher base and bypass all this goddamn payroll bullshit. Save the headache for another part of the business!

    Reply
  • September 17, 2024 at 11:21 PM
    Permalink

    Found your blog recently and have been going down the rabbit hole…keep up the amazing work!
    I spent time working on the corporate side of clinics (finance, strategy, operations), but have also been a practice manager and a front desk receptionist. I’ve seen hundreds of clinics across the country — from small mom-and-pop shops to corporate mega-chains.
    I’ve seen/structured a variety of bonus programs, including a quality-focused model (HCC/HEDIS), wRVU model, and an NPS (patient satisfaction) model. Outside of clinics, I’ve also seen different payout mechanisms, such as a model where the bonuses were 100%+ of base salary or simply an equity structure that vests over X period of time. I’ve also seen a model specifically for medical assistants and front desk staff based on how timely they clock in and the number of lab errors.
    A. “We don’t give an option for the number of patients anymore.”
    In my experience, one of the biggest potential killers for a volume-driven clinic is the culture around scheduling. I’ve seen so many clinics where clinicians are setting their own admin time blocks, 2 hour lunch breaks, and caps on when they stop seeing patients. Brick and mortar businesses are inherently low-margin; 1-2 extra patients per day really can be the difference-maker for a good/bad month. If you never give them the option in the first place, then this issue is avoided. After all, you can never crave the taste of fried chicken if you’ve never had it in the first place!
    B. Psychology around Incentives
    In one of my previous jobs, corporate (large clinic chain) had rolled out a wRVU incentive where clinicians would be paid quarterly based on the number of wRVUs generated — if you hit X wRVUs, you get Y% of your base salary as a bonus. The goal was to incentivise clinicians to pick up more shifts and be more productive during those shifts. A few problems that I learned from designing/tracking the program and interviewing a bunch of clinicians:
    1. Quarterly payouts are too far apart to be top-of-mind for most clinicians
    I believe a monthly payout would have kept it in their minds more often. 3 months is way too long for a $6k payout. In my experience, it was difficult to “sell” this program as it was rolled out since folks weren’t able to see that far ahead.
    2. Data visibility and ease of digestion should be a top priority
    In my case, wRVUs weren’t really an intuitive metric; it’s difficult to track properly and we didn’t have a great to way break it down. It wasn’t until much later that I realized people had no real way of tracking wRVUs. Clinicians weren’t really able to track the number of wRVUs they were generating without asking someone else to pull the data; and so it wasn’t something they thought about often. Once we fixed that (by creating a nice real-time dashboard), then we started to see a little improvement.
    3. Payout thresholds matter and can be another lever
    Another mistake we made was standardizing the bonus thresholds. If you generated X wRVUs, you got a Y% payout. We would have different Y%s based on a set of 5 RVUs thresholds; each one you crossed would get you an additional payout. The problem was that these thresholds were evenly spaced out and there was no real incentive to go for the higher tiers.
    I toyed around the idea of having these thresholds be the lever.
    We had about 600 clinicians at the time and the idea was to have an insane payout for the absolute top-tier clinicians — like the top 1%. Everyone else would get some sort of standard payout, but the top 1% would make something crazy like a 50% bonus. You reward those who deserve it, but also create a “goal” for the non-top 1% of clinicians to aspire towards. This model works VERY well in certain finance industries — it’s not uncommon for folks to see ~100% of their base as a year-end bonus.
    What did I learn from all of this? Same thing you did. Just pay people a slightly higher base and bypass all this goddamn payroll bullshit. Save the headache for another part of the business!

    Reply

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