Physical Therapy Profitability | Staff Compensation Strategies – Part II

physical therapy staff compensationBy Yuval Lirov, PhD, Dave Macolino, and Kevin McGovern, DPT


Peter went to college with Katherine. They graduated together and were good friends. Katherine opened her physical therapy practice four years ago and was in the process of opening her fourth location. She was averaging 800 patient visits a week.  


“We didn’t speak for long because she was about to take her golfing lesson but in the few minutes we spoke, I thought of an idea,” said Alicia.
“I couldn’t even consider taking a day off to golf,” thought Peter to himself. “OK Alicia, what did you come up with?” Peter relented.  


“You know, she pays her physical therapy practice staff based on performance. Let’s start with some facts. Employee salaries vary in three ways: type of service, years of experience, and location. For instance you can see in (“2011 Staff Salary Survey” Physicians Practice):

 2 Years Experience – South East 20 Years Experience – North East
 Front Desk Staff $22,147 $41,147
 PTA $45,243 $72,165
 Billing Staff $26,995 $42,625


There are four kinds of basic staff compensation: hourly, monthly, base salary plus performance bonus, and profit sharing or pure commission,” said Alicia, handing the table to Peter. “Employee compensation is a cost of doing business. If you had no employees, you would eliminate that cost but if you spend time greeting patients and chasing insurance claims, you have no time to treat patient and manage referral relationships. So to grow, you need help.”


“So, you hire staff to treat patients, to greet them and schedule their visits, and to chase insurance payments. The problem is motivation. Can you tell me what are the costs of unmotivated front office staff?”


“Well, Alicia,” said Peter, “A careless front office person might get patients upset, forget to collect co-pays, not follow up on a missed appointment. They could also get other office staff upset because they would not work together as a team. The cost of unmotivated front office person in terms of physical therapy profitability could be increased patient attrition, impact cash-flow, and the bottom line ultimately. The cost of an unmotivated hire is much more expensive than a few more dollars per hour…”


“So, Alicia,” Peter sparked up in spite of the late hour, “Should we look for more qualified front office staff and pay $15, or maybe, $18 per hour?”


“Not so fast.” said Alicia. “If you pay more per hour, you will reduce turnover because fewer practices around will compete with your compensation, but you will still have the same motivation problems, regardless if you pay $12 or $20 per hour. Tell me, what’s the problem with paying hourly wages to staff that needs people interaction skills? What is the ultimate goal that your font office staff must meet?”


“I get it now!” Peter didn’t notice his voice rising. “The physical therapy front office staff is responsible for patient loyalty and referrals. Working with people requires attention to detail and interest in their problems. Especially when you work with injured or sick people. It’s hard work, people feel burnt out.  So, compensation and incentives must acknowledge their results, such as new referrals, fewer missed appointments, fewer missed co-pays. I could structure the front office salary so that they get minimal pay for standard work and a percentage of collections to give them incentive to grow referrals and keep patients compliant with their plan of care.  Since more referrals, fewer missed appointments, efficient collection of cop-pays and balances increases collections, they could work more and make more than the best paid staff around!


“Right,” said Alicia, “and not every person will be ready for this kind of compensation. But that’s OK too: why waste time hiring a wrong person for the job and then discovering that they lack the skills and motivation to do the hard work?”


“So, what about the PTA? Should I also pay him a bonus? but for what?” asked Peter.


“Sure, you do not want to pay him for idle hours during no-shows, and you do want to pay him proportionally to the number of patients he sees and for better plans of care. That’s called profit sharing,” said Alicia.


“…or commission,” continued Peter her thought. “OK, I get it – commission and bonus helps people focus on the result of their work and not on its difficulty. The compensation structure helps motivating my staff and improve teamwork, avoiding problems and contributing more to my bottom line.”


“So, why don’t we move all of my staff on commission?” asked Peter.

To be continued.