In the brief existence of this blog, I think you have noticed that we have regularly preached the importance of numbers and good reporting. More important than just having the information is understanding what that information is telling you. Does the data appear to indicate one thing, but the practice is moving in a completely different direction?
When it comes to employee incentives, the importance of quality information and goals is doubly important because if your team is unfocused or has goals different from yours, you will end up with a mess on your hands. And by mess, I mean you are paying a bunch of money for reaching an incentive that has nothing to do with the overall success of your practice.
I’d like to give you a story of one case in which we thought we had all the incentives lined up properly, but ended up learning a costly, yet valuable lesson instead (kind of like the plot of most sitcoms).
When we would go into a new practice, we would implement an incentive plan devised along the lines of a report card. We would grade each practice in 10 categories: consults appointed, show up rate, batting average, collections, new contracts, delinquencies and a handful of expense-related categories. Based on the grades, each staff person would get a cash incentive.
And, invariably, after putting the system in place, numbers would improve. Show up rates would move higher, the rate of closing contracts jumped and we were able to proclaim our systems a success. We could show the doctor how results improved with us and the staff were pocketing extra dollars. According to our internal logic and sales pitches, by reporting these numbers and tying performance to a bonus, everyone focused on them and worked hard on improving results. We were geniuses!! But were we really? While the genius label never stuck, in a number of cases the reporting/incentive combination was extremely effective. But in some cases, it proved to be a detriment to the practice. Why?
In those less than savory cases, rather than produce bottom line results, all the program did was incentivize certain individuals to adjust the way data got entered to make the results look better. For example, if a patient was past due, the office would simply make a financial arrangement with that person to make the balance current. As a result, delinquencies dropped even though no additional money was paid. Our intent with the delinquency incentive was that the office would take steps to actually collect the funds due, not to recycle the balance back to current. For the owner of the practice, a bunch of current balances with no collections to show for it provided absolutely no benefit to the bottom line. In fact, things got worse because patients who should have been in collections or in discussions to resolve their situation were carried along for several more months without payment being requested.
In the case of the show up rate, if a patient made an appointment and didn’t show up or showed up and didn’t sign, that patient might not even get entered into the system (a separate manual system was maintained). So, while the consults appointed number might take a bit of a hit, the show up rate and batting average looked better. Chicanery? Shenanigans? Maybe, maybe not, but that is completely irrelevant. The fact is that in these cases, the incentive programs were creating goals that were not consistent with focusing on quality of care, quality of information or the profitability of the practice. Rather, the system created an incentive to get to a certain number.
So, how did we solve it? By boiling the incentive program down to its essence: collections. One goal. If you collect more than you did in the same period last year, the staff would enjoy a cash reward. The amount of the reward depended on how much collections improved. We do not care if the collections came from past due patients, new patients or the regular ongoing group. When the money is collected, everyone benefits financially (and while we do appreciate the importance of quality of care, we focus on the business side of things in this blog).
Collections are easily verifiable. Money gets into the bank and then is checked against what gets entered into the practice management software. Easy, especially if you have that process automated.
All of the other values we track support the analysis of collections. If collections fall, let’s look at the new patient numbers, consults and whatnot. So they are very important. But if performance doesn’t result in income flowing in, what’s the point.
But won’t that incentivize the staff to try to collect a down payment or reject patients who won’t pay something extra up front? Not if they are smart. As we’ve discussed before, the decision usually isn’t whether not to get a $750 down payment or $100 per month. The decision is whether or not to get $100 per month or nothing. A number of patients simply cannot pay that down payment so the down-payment option is not an option at all.
Got a story from your practice? Looking to set up an incentive program in your practice, but don’t want to pay to have it developed, implemented and monitored? Contact us.
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