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

Practice Financial Management – Insights & Tips From MedCV That You Need to Quickly Maximize Your Income

Financial Improvement

Hospitals and medical groups are finally shaking off the economic fallout of the Covid-19 Pandemic, but now historic inflation and looming economic uncertainties continue to place significant pressure on them to improve their financial performance. That’s why John Rezen (FACHE, MHA) in collaboration with MedCV has brought back this series of 2-3 minute reads on how You can assess and improve your practice financial performance in 12 essential areas. Each installment will help you and your team quickly add cash to your bottom line by allowing your practice to work smarter and harder. The following checklist of performance measures will 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 in Blue and upcoming segments are in 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

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 and your team have earned. So let’s get started!

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.

To calculate the value of this opportunity, multiply the difference between the actual average pay per hour and 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 the 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 workflow tool to gain a deep understanding of the skills required throughout the process of care and then applying that understanding to 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 range for each position. Maintaining an appropriate pay range will require recurring assessments of market-based pay for each position to ensure that the organization is competitive. Consistent adherence to the pay range will require a staff pay policy that 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 their contribution to the organization’s success.

This system requires 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 rate regardless of employee performance. Meanwhile, the increased employee alignment caused by the bonus system will accelerate organizational improvements.

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 next week. If you can’t wait that long, no problem, just contact John for the full 12-part series. Again, it’s in your best financial interest to make sure all 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 newfound business insight with your group or hospital administration.

John Rezen

President & CEO
Value Health, LLC

MedCV Advisory Board Member

Your Career is More Than Your Practice

MedCV is a Private Credentials Vault App built specifically for Physicians and Advanced Practice Providers where you can manage & control your most valuable career and practice documents, remind you of license and certification expirations, track your CME, and of course… even find your next great job! Additionally, MedCV includes important tips, tools, and resources to help you navigate the ever-changing “Business of Healthcare.” Join the MedCV community if you haven’t already!

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: