Linking Pay Raises to Medical Staff Performance

April 10, 2013

Across-the-board salary increases for staff send the message that stellar efforts will go unrewarded. Let employees know you value and expect excellence.

Practices are increasingly crunched between rising overhead expenses and lower fee-for service reimbursements. When looking for ways to balance their budgets, they often ask themselves: "Are employee pay raises warranted, and if so, on what basis, and how often should they be given?"

Before eliminating pay increases across the board, practices should remember that underpaying high-performing employees can be problematic. It results in either increased staff turnover, or worse, having people on the job who are unhappy and resentful. Either way, office morale, productivity, and patient satisfaction all suffer.

A major strategy for attracting and retaining high-performing employees is periodically reviewing the fairness and motivational value of current staff salaries and the opportunity for raises. While there are as numerous ways to decide the amount of staff salary increases, the basic approach is to either give everyone the same percentage or dollar amount or give employees different raises based on performance. Let's consider each:

A. The same raise across the board

Giving an across-the-board raise to all employees (e.g. 2 percent) may seem like the simplest way to handle salary increases. But it treats everyone the same whether they do outstanding work or only the minimum required for the position.

Using this approach sends the message to high-performing employees that it's futile to work harder or go the extra mile because their efforts will go unrewarded. It also sends a message to underperforming employees that "showing up" is all that's needed to receive a periodic increase in salary.

In both cases, it's the wrong message.

B. Base raises on merit

Another option is basing raises on merit and above-average work, such as that of a biller who keeps accounts receivable within an acceptable range. Or a receptionist, who has amazing communication skills, can multitask, remember patients' names, and handle problems with finesse. Merit-based raises, in these cases, not only encourage employees to excel in their own jobs - they also demonstrate how employees are missing out on potential financial gain by not performing well.

C. Base raises on new or improved skills

This approach gives pay raises when employees add or improve their skill sets. This gives employees a tangible incentive to grow in their jobs. Medical assistants, record clerks, medical billers, and receptionists can all grow in their jobs and learn new skills. Also, it is reasonable to expect a raise when new skills are mastered.

To begin, use periodic performance reviews to discuss your employees' job performance. Such one-on-one discussions should include recognition of good work, aspects of the person's work that need improvement, clarification of job responsibilities, setting priorities, and new performance goals for the next review period.

How well the employee measures up to those goals can help determine how much of a raise he or she deserves.

Action step: If you decide on using a skills-based approach to giving raises, make training opportunities available to employees interested in adding to or improving their skill sets. These might include on-site training for EHR and practice management software, off-site conferences and seminars, online learning programs (such as OSHA compliance training) or the opportunity to take specific college courses applicable to a person's job.

As an example, offer to pay the tuition for a staff member willing to take an adult education course in a language needed for the changing demographics of your practice: as a bonus, pay 125 percent of the tuition costs for an "A" in the course.

Self-study programs are another option. They can be as simple as a staff member borrowing a manual or video or as complicated as a distance learning program that leads to certification. Courses leading to billing and coding certification in particular not only benefit employees who want to add to their skill sets but also gives them the opportunity to earn a salary increase. Of course, this type of training also benefits the physician's bottom line because more accurate coding typically leads to higher reimbursements.

If you want to retain exceptional employees, expect to pay a bit more. The difference between "average" and "above average" performance might not sound like much, but this distinction can make an incredible difference in the value such star performers bring to your practice. Steve Jobs described the value ratio between a great programmer and an average programmer as being at least 25 to 1. Given such odds, paying 30 percent more for talent seems like a bargain.

Bob Levoy is the author of seven books and hundreds of articles on human resource and practice management topics. His newest book is "222 Secrets of Hiring, Managing and Retaining Great Employees in Healthcare Practices" published by Jones & Bartlett. He can be reached at