Staff Salaries Climbing

October 1, 2004

Staff salaries at physician offices rose again last year, several studies show, and unless something radical changes, they will keep climbing faster than the inflation rate for the near future.


Staff salaries at physician offices rose again last year, several studies show, and unless something radical changes, they will keep climbing faster than the inflation rate for the near future.

Physicians are paying employees more in part because they are more dependent on them than ever before, says Gary Alexander, president of OfficeWorksRx, which places nonclinical staffers in physician offices in a number of cities across the country.

“A lot of practices are small businesses, where, technically, the doctor is the CEO,” he explains. “But he’s not always a CEO who’s focusing on the business. He’s seeing 30 or 40 patients a day. So you become more and more dependent on your personnel. If you don’t have stellar personnel, you’re dead.” (For more, see the article on hiring an office manager, page 41.)

Even slight changes in pay tend to have a big impact on a practice’s bottom line, notes Jeff Denning of Practice Performance Group, a management consulting group based in La Jolla, Calif. “For most, staff wages are about half their expenses,” he says. “Rent is number two, and it is a distant second. So an increase of 2 percent to 4 percent [in compensation] is a big deal.”

In all, medical office clerical staffers’ wages increased an average of 9 percent last year, the Professional Association of Health Care Office Management (PAHCOM) reports. (Wages for all U.S. workers, by comparison, rose a little more than 2 percent, according to the U.S. Dept. of Labor). Managerial-level medical office staffers’ salaries also rose.

Group practice administrators - often the highest-level nonphysicians in the office - enjoyed substantial raises, averaging 15 percent at small offices and almost 4 percent at large offices, according to the Medical Group Management Association’s (MGMA) “Management Compensation Survey: 2003 Report Based on 2002 Data.”

And with revenues increasing far more slowly than salaries, most of the increased cost of doing business comes directly out of the practice partners’ pockets. The trend leaves physicians needing to find creative ways to recruit and keep their best workers. The best physician-CEOs, various observers say, often find nonmonetary ways to keep their staffers, even as other businesses can offer more money.

Not just about money

Salaries have been rising faster than revenues for years now. “The trends in healthcare have been reduced reimbursements and increased costs,” says David Gans, MGMA’s director of practice management resources. “The incentive [for the practice] therefore is to constrain costs and increase productivity [and thus their net margins].”

Paradoxically, that often means spending more money on, say, technology or human resources. That’s easier said than done when money and time are tight. For one thing, the competition for good workers can be fierce. People qualified to work in a physician’s office can often make more money working in other settings.

“The person in the doctor’s billing office could just as easily work in a hospital or health plan billing office,” Gans points out. “A hospital, because of its size, has a different pay scale than a practice.” And when it comes to benefits and salaries, of course, hospitals and larger employers simply have more to offer. And many of your employees’ skills are transferable to other industries that may be in better shape financially than healthcare, adds Alexander. To hire or retain them, you’ll need to offer fair market wages. (See charts of average wages, page 70).

All of this leaves practices at a disadvantage in getting and paying for good employees. But there is some good news: nonmonetary issues may be even more important than monetary ones in rewarding staff. “In every labor survey ever done, salary is never the number-one reason for retention,” Alexander says. “You really have to go beyond salary.”

Indeed, some practices “can get away with paying a little bit lower wage [than hospitals] because they can offer a little better working environment,” Gans reports. “There’s less anonymity. The hours are better. It is more intimate.”

You still have to pay a “competitive” wage, he adds, or else lose staff to businesses that do. But good recruiting means more than just money - it also means paying attention to human resources management principles like continuously improving working conditions at the office, supporting staffers’ ambitions, and maintaining sound business practices that, at first blush, would not look like they are related to salary issues at all.

The best-staffed practices - and, typically, most profitable - do that. In general, Gans adds, the physician practices that perform well financially, regardless of size, “have a better culture. They’re better places to work.”

What makes a practice a good place to work? Mostly, it’s a matter of respect, and the experts say physicians have a long way to go when it comes to respecting employees on a professional level. “I’m going to get in trouble for saying this, but physicians do not respect the work of the people who work for them,” Denning asserts. “To them, everything looks easy compared to what they do. But competent, intelligent workers won’t put up with that.”

Alexander agrees. “Physicians sometimes do not value the kind of specialized knowledge” it takes to run a practice well. Staffers need to understand HIPAA, reimbursement, compliance, coding, and customer relations. They also often need at least a cursory understanding of clinical language and issues.

The best practices “treat a person as having a career.” They provide advancement and learning opportunities, and aggressively recognize clerical and administrative staffers as central to the practice’s success.

“You’d be surprised about how much a ‘good job’ and a certificate will do” to earn a worker’s loyalty and improve performance,” Alexander says. “Movie tickets, flowers; they’re meaningful. I’ve seen cases where people would compete harder to get a bouquet of flowers at the end of the month than to get a $500 bonus.”

Perks reduce turnover

Robyn Levy, an Atlanta allergist, believes quarterly performance reviews - as opposed to annual reviews - also are very effective ways to reinforce the individual staffer’s importance in the group, set expectations, keep employees involved in reaching the group’s goals, and recognize good performance.

The most stable practices are “constantly looking for ways to reward their staffs in small ways, to let them know they’re appreciated,” says Roger Landers, executive director of Florida-based PAHCOM, which boasts 3,400 members.

Receptionists, for example, often are among practices’ lowest-paid and most junior staff members, earning an average of $23,412 a year, according to PAHCOM’s annual staff salary survey. Yet when PAHCOM asked practices to name the position they find hardest to fill, Landers reports that, “invariably, that’s the receptionist. In some people’s opinion, that’s the most important [administrative] position in the practice. It’s the face of the practice.” But it is also a high-turnover position. Physicians have named it their “next position we plan to fill” for the past three years. (See chart, page 68.)

To make it more stable and attract better people, some physicians “are in subtle ways trying to upgrade the prestige of that position,” Landers reports. New receptionist titles like “patient coordinator” and “patient specialist” are cropping up in the PAHCOM survey. (Their average wages, however, fell by almost 2 percent from 2002 to 2003. Landers does not know if the improved titles and decreased salary levels were related.)

Still other perks recommended in seminars about employee relations: frequent thank-you notes, facials and massages, birthdays off, and awarding staffers the frequent-flyer miles that accumulate in using the company credit card to order office supplies.

Alexander has found that “another big factor in employee satisfaction is the commute. I’ve seen people take pay cuts to cut down their commutes, especially if you’re dealing with single parents and people who have educational commitments. With gas prices climbing, that’s another reason to want to shorten commuting.

There is always higher turnover when a candidate has to commute more than 30 minutes, so in their recruiting [physicians] should pay attention to how far a candidate has to travel.”

Moreover, consultants say that a practice’s general management directly influences employee costs. Haphazard management causes all the things that drive good employees away, regardless of what they are paid. For example, an inefficient scheduling system or an inadequately trained scheduler typically causes long wait times that drive patients away. An understaffed front desk often leaves callers on hold for long periods, and leads to patient and employee dissatisfaction. No one likes apologizing all day long.

Turnover - with all its attendant costs for advertising, interviewing, training, and the loss of institutional memory - is expensive.

You get what you pay for

Needless to say, “the [practice] workload has risen over the last 10 years,” Denning says. Yet practices are “not hiring enough people, so it becomes a high-stress job and it’s hard to get people to stay.”

The costs of hiring and keeping talented people, Alexander says, are usually lower than the costs of having unskilled or uninterested people on staff. He notes that a receptionist who fails to collect a $10 copay ultimately forces the practice to spend $7 to $8 in posting, billing, and collecting the money. A physician seeing eight patients an hour would thus be losing about $500 a day in revenue. “Why not pay someone $15 an hour to avoid losing $500 a day?” Alexander asks.

Similarly, he contends that poor or understaffed physician business offices are responsible for many practices’ troubled revenue collections. Some practices collect only 55 percent of the revenues they earn. Even the best performers collect only 85 percent. “What other industry would put up with getting only 85 percent of what they’ve earned?” he wonders. Yet the billers and collectors who drive the practice’s revenue side are among medical offices’ lowest-paid staffers. Close to 9 percent of the industry’s crucial billing jobs remain vacant at any one time.

Denning concludes that physicians “cannot hire Burger King-level workers, except at their own peril.”

That message about raising staff expenditures, he concedes, is not an easy one to deliver or for physicians to hear. “It’s hard for us consultants to say, ‘It’s not what you can afford; it’s what you have to invest.’”

Yet the rewards of investing in staff members and in providing a good working environment for them pay off handsomely.  

After its annual nationwide staff salary survey, for instance, MGMA identifies “the practices with the best financial performances, and then we interview them,” Gans says. “The theme that we’ll hear is that ‘we reward our long-term staff with better wages, but we have higher expectations.’ The better the [practice’s] financial performance, the lower the turnover.&rdquo

Bill Sonn can be reached at editor@physicianspractice.com.

This article originally appeared in the October 2004 issue of Physicians Practice.