Part 8 of 12 – Pay for Performance Tools to Optimize Staff Compensation – Here is How

12 Part Series: MedCV Practice Financial Management – Insights & Tips You Need to Know About to Quickly Maximize Your Income

Tip 8 of 12 – Apply effective position management and pay for performance tools to optimize staff compensation.

Non-Provider Staffing Payment Levels:
a. Assessment: The last blog identified tools for effectively managing staffing levels.  A second opportunity for reducing staffing expenses is to effectively manage the rate of staff pay per hour.  

The value of this opportunity is calculated by multiplying the difference between the actual average pay per hour & the benchmark pay per hour by the total number of labor hours.

b. Improvement Action: One reason for excessive staff pay rates may be a staffing mix that is heavily weighted toward higher paying positions.  For example, you may have a higher ratio of RN to Medical Assistance staff than your industry peers.  A first step to address this problem is to adopt a principle of having each employee work in activities that represent the top of their certification or skill set.  You can implement this principle by utilizing the lean work-flow tool to gain a deep understanding of the skills required throughout the process of care and then apply that understanding in your assignment of positions to each activity. The activity-based management tool can then be used to quantify the actual FTE needs by position level.

A second cause for excessive staff rates per hour is above market pay rates.  To avoid this problem the organization must establish and adhere to a market-based pay ranges for each position.  Maintaining an appropriate pay range will require recurring assessments of market-based pay for each position to make sure the organization is competitive.  Consistent adherence to the pay range will require a staff pay policy which outlines the method of determining pay and establishes strict criteria, as well as high-level leadership approval for making exceptions.  Engaging physician leadership in the establishment and application of this policy will significantly enhance your success in managing staff pay.

A highly effective approach toward achieving optimal pay levels and aligning the organization is to institute a robust bonus system that rewards employees for the organization’s success and their contribution to that success. 

This system requires both an actionable Key Performance Indicator (KPI) System that effectively measures organizational success as well as Individual Performance Factors (IPFs) for each position that causally link to the KPIs.  (Note: For more details on this system please click on the Employee Engagement image (Left) or link below.) 

When the bonus system becomes the mechanism for rewarding performance all hourly pay rates can be set at the market regardless of employee performance.  Meanwhile, the increased employee alignment caused by the bonus system will accelerate organizational improvements.

Like we like to remind our physician members at the end of each of these 12 part series, as a physician, if this sounds like a lot of work and maybe even has your “business anxiety level” up a few notches, you are not alone. The great news is that your role in this should just be to make sure it gets done and that those who are going to be responsible and accountable for this can explain and report details about what the plan looks like and its status to you.

Share this article with your practice manager, group administration, or hospital administration to make sure they are working on this or see what resources they have to get at this work. If they need help in getting started, they should consider connecting with John Rezen at Value Health. The key is to be able to have your baseline, you would expect your team to report to you the improvement(s) made and the results.

Stay tuned for Part 9 of 12, Providers’ pay per wRVU of the last 6 part series focused on Expense Management. If you can’t wait that long, no problem, just contact John for the full 12 part series.

John Rezen

President & CEO
Value Health, LLC

MedCV Advisory Board Member

Again, it’s in your best financial interest to make sure each of these 12 Key Performance Indicators are optimized, you understand them, and take action, even if the action you take is to share the series and your new found business insight with your group or hospital administration.

Financial Improvement

Each of the 12 part “2-3 minute reads” in this Financial Improvement series provided by John Rezen, FACHE, MHA and your MedCV team can quickly add CASH to your bottom line just by having your practice “work smarter” for you. Even if you are not directly responsible for the management of your practice, knowing this information will help you make sure you are making the income you deserve.

As hospitals and medical groups emerge from the COVID- 19 economic shutdown, they will be faced with significant pressure to improve their financial performance. The following checklist of performance measures should help physician enterprises identify financial opportunities and accelerate their improvements. Below are the 12 topics, to read a previous segment, click on the name/link. The current segment is Blue and upcoming segments are Black.


  1. Staffing minutes per encounter
  2. Average staff pay rate per hour
  3. Providers’ pay per wRVU
  4. Service costs-to-revenue
  5. Supply and drug costs-to-revenue
  6. Overhead costs-to-revenue

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Published by Niels Andersen

Founder and CEO of KontactIntelligence, MedCV, VetCV, and VeritasHealthCare. 40 Years in healthcare, 20 years in healthcare tech supporting Government and commercial health systems, physicians, as well as Veterans and their families throughout the US.

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