Mission Possible: How to Afford a $3 Team Raise

With the hunt for doctors and staff taking much longer than in the past, practices may need to rethink their hiring strategies.  WellMP® continue to tell us they’ve found the most success with an online job posting.  For associates, the AVMA is the top resource for both employers and employees.  Word-of-mouth works well too, and getting the word out about job openings to your community of colleagues, friends, and professional contacts is a key part of a successful search.  Looking beyond the search itself, what else is important in attracting and retaining employees?  The 2017 Well-Managed Practice Benchmarks Study asked owners, associates and staff members what’s most important to employees, and here are their ranked perspectives:

In WMPB Benchmarks Study 2016 owners said the most important thing they did to improve staff job satisfaction included:

  • Offered additional incentives and perks such as bonuses for reaching goals, improving the break room and amenities, implementing a retirement plan, and writing personal thank-you cards.
  • Adjusted staffing levels, delegated more responsibilities to the staff, implemented initiatives to improve internal communication, and removed toxic employees.

In WMPB Benchmarks Study 2019, the associates and team members cited their top reasons for leaving their last position.

  • Overworked, burnt out, personal wellness.
  • Poor and/or lack of communication.
  • Low wages and too few benefits.
  • Limited opportunities for advancement.

To address the low wages and too few benefits challenge, let’s explore how to grow revenue enough to support giving all team members a $3 an hour pay raise.  The case study below summarizes how to make this significant pay increase financially viable for the practice with some key revenue growth strategies.

Case Study Assumptions:

Staff-to-doctor ratio: 5 to 1
5 Associate doctors
1 Owner doctor
  1. Employer payroll taxes represent 8% of wages ($68,000)
  2. Employer contribution to retirement plan equals 3% of wages ($26,000)
  3. Doctors produce 80% of total revenue and are paid 20% of production
  4. The owner produces 20% of doctor-generated revenue and the associates produce 80%
  5. Owner management compensation is 2% of total revenue

HOW WILL THE STAFF INVESTMENT CHANGE?

HOW TO AFFORD A $1 AN HOUR INCREASE

Reduce inventory cost – this practice has $26,000 of inventory per FTE DVM; the target is $16,000, so inventory cost is $50,000 higher than expected.  They reduced their inventory cost by $50,000 using the following strategies:

  • Eliminated duplicate or redundant drugs
  • Moved low-margin items such as diets and heartworm, flea and tick products to the practice’s online pharmacy
  • Fine-tuned the pricing of services and products.  Used fee research published in the Well-Managed Practice Benchmarks Study and AAHA’s Fee Reference as a guide for pricing services and products.  From the 2019 Well-Managed Practice Benchmarks Study, the average markup on medication dispensed in-house is 150%, and the average markup on items dispensed from the on-line pharmacy is 95%; the average markup for heartworm, flea and tick products dispensed in-house is 90%, and on-line it’s 60%.

This practice grew revenue by $70,000 by adjusting their non-shopped service fees and product pricing.  See results in Figure 1.

MAKING A $2 AN HOUR INCREASE VIABLE

To identify additional revenue growth opportunities, the team decided to complete a record audit related to capture of charges.  Many practices experience a significant loss from missed charges – sometimes the miss is intentional, and sometimes it’s unintentional.  

The team reviewed 10 outpatient cases and 10 inpatient/surgical cases for each doctor (total of 20 cases) completed by each doctor, comparing the medical record for the care provided to the invoice for the care billed to the client and compiled the results.  Here’s what they found:

Change in Average Doctor Transaction when capture above missed charges
Dr. #1:      $174
Dr. #2:      $182
Dr. #3:      $166

MAKING A $3 AN HOUR INCREASE VIABLE

Next the practice evaluated the doctors’ consistency of care by completing a Service Analysis.  They analyzed the frequency of occurrence of select services in relation to the number of exams each doctor completed and looked for the consistent and applicable use of the exam codes, consistency in the relationship between the exams and other services, and used the results to share medical philosophy, further develop the hospital’s medical protocols, and begin to create a library of standard treatment plans as a starting point for developing estimates for clients. Here’s what they found:


Services in relation to number of exams

Opportunities:

  1. Total medical progress exams represent 13% of total billed exams – target is 25% to 30%.
  2. The hospital averages 4 progress exams per doctor per week (911/52/5).
  3. The doctors aren’t billing clients for extended exams, even though they do provide extended exams.
  4. The practice has 7,400 active patients, yet only billed 6,435 exams.
  5. The practice has 6,100 patients 3 years of age or older and have a significant opportunity with dentistry given they only completed 275 prophylactic procedures.

The practice also analyzed specific lab tests and found the following additional opportunities:

  1. They have 4,400 canine patients yet only completed 1,534 heartworm tests.
  2. They have 7,400 patients yet only completed 1,800 fecal tests
  3. They have 1,100 patients on medication for chronic conditions, yet only completed 300 monitoring tests.
  4. They completed 579 anesthetic procedures, yet only completed 350 pre-anesthetic lab tests.

Finally, the practice analyzed client compliance with senior screening panels and dental care.  The practice has 3,700 patients that are more than 6 years of age and found they have a 22% compliance rate for senior screening panels versus their target of 75%.  Client compliance with dental prophylaxis is very low.  The entire team collaborated on ideas to improve compliance with these key preventive care components and developed a plan to improve client compliance.  By focusing on the opportunities identified in the Service Analysis and Compliance Audit, they were able to grow revenue another $375,000.

Focusing on strengthening patient care, client compliance with the hospital’s medical protocols, and capture of charges for all care provided results in improved patient care and improved profitability.  The improved profitability gives practices the ability to give well-deserved pay increases to team members while still improving owner ROI.  Win-win for everyone!