Your Compensation Program is Your Best Chance to get Better

There is nothing your health center can do right now that is more important to achieving your mission than taking a hard look at your employee compensation program.  Given that there is not a single thing your health center can do without employees, and that what you pay is directly linked to the quality and engagement of your employees, there is a compelling argument that your compensation program should get a great deal of your attention.  Wages make up more than half (55%) of your expenses, and when you add in taxes and benefits, the “average” health center spends more than two-thirds of its total expenses on employee costs.  Employee costs as a percent of expenses have been increasing every year, and there is nothing to suggest that will be changing soon.

We estimate that as much as a third of the total payroll and benefits cost of the typical health center is wasted.  With turnover of about 20%, you’ll conservatively lose about 5% of total compensation to turnover costs.   Unengaged employees, who likely make up about 70% of your workforce, are estimated to only really “work” about 60% of the time, and about 25% of employee engagement problems are compensation-related, so subtract another 20% for compensation-related employee disengagement costs.  In virtually every assignment we’ve had, roughly 8% of current total compensation is mis-allocated, typically paid to long-service, poor performers.  Add those three costs together and you’re up to 33%, and we haven’t even asked the fundamental question — what percent of your “planned” performance are you getting from employees who are frequently not qualified to do the work.

An effective compensation plan tells you the current value of every employee to your health center.  With this information you can determine whether you have the right jobs and the right people, and whether they are performing at a level that justifies what they are paid.

Employees paid fairly do not turn over at the same rate, saving you money.  Research shows that when employees feel they are treated fairly  they are more engaged, and far more productive, not just saving you money, but increasing your revenue.   Imagine what you could do with a third less expenses, and a workforce who can actually afford to be mission-driven.

Eight out of ten health center clients we work with already have a payroll budget sufficient to pay a highly qualified workforce, but they “can’t afford” to pay correctly because of the money they have tied up in the wrong people performing the wrong jobs.  You have the resources, you just need the will to use them the best possible way.

 

 

 

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Your Front-Line Staff Have Pay Pressures — Understand Them

Pay isn’t always the answer to every problem, but understanding the pay pressures on the most vulnerable of our employees is essential for every health center.  Front-line employees in the FQHC environment, whether in the the “front office” or “back office,” make up the majority of health center employees, and are critical to the success of any health center in achieving its mission.  Any health center executive will tell you how crucial having skilled front line employees are, and how these employees represent the “face” of the organization.  Ask any provider, and they will tell you that their success, as well as a good part of their work satisfaction, is dependent on their support staff.

This morning the Wall Street Journal published an article “States Where Day Care Costs More than College” that provides readers with the average cost of day care for a four-year old child in each state and the cost expressed as a percentage of state median income.  Unsurprisingly, the amount is staggering.  For example, a single employee earning $15/hour working full time in Michigan would spend just under a quarter of her take home pay (24.5%, after factoring in the child care tax credit) on day care for one child.

You should know how these numbers work for employees in your health center, because the odds are high that more than 20% of your work force is in this position.  The overwhelming majority of front-line employees in the typical health center are young (under 35) and female.  There are currently just under 10 million single mothers in the  United States, of which about 5 million are under 35 and employed.  Given the total number of working women between 20 and 35 is just over 23 million, about 21.5% of the workforce that fits the typical front-line employee demographic is a single mother.  Add to this the fact that health centers are going to have most of the lower-educated and therefore lower-paid portion of that population, it is likely the percentage will increase to about one quarter of all front line employees.

Apply this to your employees — a single mother (assuming only one child) working full time at $15/hour at your health center (assuming you are in Michigan) will have disposable income of only about $1,700/month.  Let’s take off some living costs (all monthly):  about $650 for rent (average for a one bedroom apartment, Wayne County), $350 for food (USDA “Low Cost” food plan), $475 for transportation (an $8,000 car on a five year loan at 8%, plus insurance, and two fill-ups of the tank per month), and $220 for medical insurance premiums (based on Merces’ Michigan FQHC benefit survey).   That means she has $5/month left over for everything else.   These are all extremely conservative estimates, given that using the “living wage” calculators, those four costs would have already taken our employee into the red about $500.

Why should this matter to you?  Forget any guilt or moral obligations you may feel, because this is going to just be about pure business.  These jobs are not the burger-flipping, gain work experience type of jobs that the current minimum wage battles are about.  These are long-term jobs for people we want to keep, which means we want to do everything in our power to reduce turnover and disengagement. Someone who at best will have $5/month to spend on life is NOT thinking 100% about work.  She is thinking about how to get government assistance, whether she can find a roommate to save costs… and most of all… she is NOT thinking about the health center’s mission when she gets an opportunity to leave to earn another dollar an hour.

Turnover in healthcare is more than 20% annually; turnover in front line staff easily exceeds 30%, and in low paying organizations will be even higher than that.  These aren’t statistics you can wish away.  Pay will not solve all of these problems; some turnover will occur anyway, and some employees will leave to take higher paying types of jobs.  However, an effective compensation program can reduce turnover by ensuring you are at least competitive and not vulnerable to losing employees in the first two years … right after you have trained them up for someone else.

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Provider Retention Best Practice

Listen to them.

I contemplated just “dropping the mic” and walking away after saying that, but felt compelled to explain.

In the last few months we’ve had numerous calls and emails from both health centers and PCAs looking for help with “creative ways to retain providers,” typically involving either incentives or some other kind of monetary inducement to stay (and preferably to improve productivity, since nothing comes for free).  We’ve also read numerous articles and seen many webinars offered by experts on the subject telling health centers what they need to do (and usually what they need to pay).  Before you worry about being creative, try something basic.

The truth is, the first and most important step toward improved provider retention is listening to them.  Not talking TO them, but LISTENING to them.  Whether you have externally facilitated focus groups or individual conversations, have a monthly CEO lunch or hire a “provider relations specialist,” there is nothing more important toward retention than asking your providers how they feel about their jobs.   We recently held a series of focus groups with providers at a health center contemplating incentives to improve productivity. You may very well hear something about pay, because everyone has something to say about pay, but it’s more likely that you’ll hear the things that we did, like these:

  • My work-life balance is out of whack — I work all day in the clinic and then spend another four hours every night closing my charts.
  • The front desk can’t figure out how to set appointments — I get 15 minutes at the end of the day for a patient that I know needs an hour, or I get a parent who has to bring one kid in at 9 and the other at 3 even though they could both come in at the same time.
  • I’ve had four MAs in the last six months, and the minute I get them halfway trained up they leave.
  • Every time a patient has an issue they go to management who never has my back
  • Decisions on clinical procedures and practices are being made by administrators with no input from clinicians, and the Medical Director isn’t even a part of senior leadership.
  • My pay is a lot lower than the kids you just hired out of residency — I didn’t even care about what I made until I found out about that.
  • I waste a ton of my time on things that can… and should… be done by other people.

Now there will always be exceptions in every organization, but for the most part what we hear is frustration.  Frustration that they can’t get their jobs done.  Sometimes frustration that gets to be far more than the desire to achieve the mission they signed up for.  If you don’t want to believe them, that is, that it isn’t just a matter of throwing money at the problem, go to the Rand Corporation Study on physician work satisfaction.  While money is mentioned, you’ll find many more things to consider when it comes to retention — from your Electronic Medical Records system to your ability to retain front-line staff because you don’t pay enough.  But better yet, take some time out of the day to listen to YOUR providers, because they are the ones you need to retain.

 

 

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The Decline and Fall of “Pay for Performance”

Prepared for the NWRPCA Quick Notes, the full text of this important critique of current methods of “pay for performance” appears in Merces’ general industry compensation blog, “The Compensation Times”

The Compensation Times

[This article was originally published for the Northwest Regional Primary Care Association “Quick Notes” and can be found here.]

Congratulations on your new hire. “Ron” looks to be a promising new employee. He came to you with a strong resume and enough relevant experience to suggest that he is the kind of employee you see as a long-term, steady provider. For his part, Ron hopes to enjoy his work, feel acknowledged, and be compensated in line with the value he brings to the company and his growing value in the external marketplace. Compensation isn’t the most important thing for Ron, but his emotional response to his compensation can set the tone on how we sees the organization as a whole.  He needs to know his contribution will be rewarded and be consistent with his performance, that of his colleagues performing at the same or different levels, and fair market…

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FQHC Provider Productivity Lags Expectations

The actual productivity of FQHC family practice physicians averages about 14% less than what is planned for on a daily basis, and about 11% below expectations on an annual basis. While productivity against expectations is somewhat higher in an incentive environment, the average family practice physician participating in an incentive plan still falls 11% and 5% below daily and annual targets, respectively.  While “locum tenens” may fill in some of the gap when providers are not at work, health centers may be experiencing a shortfall of almost 440 patient visits per provider, per year, against their plans.

Merces 2015-2016 FQHC Provider Productivity & Compensation Survey collected data on more than 2,200 medical, dental and mental health providers from 57 health centers across the country.  Conducted in the last six months of 2015, the study gathered information on both expected performance organization-wide and actual performance of individuals. Information on compensation methods and actual pay was collected and analyzed along with daily and annual productivity expectations.

The “average” health center expects a full-time family practice physician to see 18.2 patients per day, and in 214 “full” work days, to see 3,917 patients per year.  As noted above, actual performance is significantly lower — the average family practice physician actually saw only 15.1 patients per day and just 3,192 annually.  The current average annual salary for full-time family practice physicians is just about $178,500; about 93% of W-2 compensation comes from base salary — the remainder is combination of productivity earnings, other bonuses and other forms of “reportable” compensation.

Similar findings appear among most of the fourteen different types of providers (including mid-levels) studied.  A number of factors are considered in the various analyses, including providers’ personal characteristics and the characteristics of the health centers.  As previously reported, health centers appear to be compensating female providers at lower levels than similarly situated (and performing) males.

More information will be provided in the coming days; for information on how to purchase a copy of the report, contact Merces at research@mercesconsulting.com.

 

 

 

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