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Wage Woes

Every business in America is feeling the wage pinch right now, and private practices are feeling the brunt. While large corporation happily pass these wage increases onto their customers by raising prices, increasing volume, & reinvesting in more efficient processes, many practices aren’t. Let’s talk about a couple simple things every practice can do to fight the wage squeeze.

1. Increase fees: Let’s say you were paying your assistants $22/ hr pre pandemic and that’s ballooned to $25/hr now. $3/ hr increase equates to a 14%. Since labor is your largest overhead category, it seems silly to not increase your fees at least 3-5% each year. In fact, it’s still a loss, but does soften the blow. Do this every single year, even if you are primarily insurance driven. It can help with contract negotiations or help position you to drop lower contracts if you can offset the volume loss with higher paying quality patients.

2. Adjust goals, be transparent: Your collections and profit goals are derived from your overhead and personal needs. We call this your “Goals-Based Breakeven”. As your costs rise, so should your Goals-Based Breakeven. Goals should also be clearly communicated to staff in annual, monthly, and daily terms, as they serve as everyone’s “north star” guiding success. Always think about raises/ hires in terms of monthly costs and recalculate new goals. Let’s say you need to give raises totaling $3k/ mo and your target labor is 30%. Take the monthly increase ($3k), divide it by the target labor (30%) and you’ve calculated the increase in your monthly collection goals (+$10k). Are those staffing decisions worth having to produce $10k more per month? This math exercise alone can help you answer some tough questions. Share this information with key staff and put them in the yoke with you. It will force some resourcefulness if the new goal in unreasonable. Especially if their bonus is tied with said goal.

3. Offer a bonus: Fighting higher wages with more wages might seem counterintuitive. But if the bonus is designed with the practice’s goals in mind, then it can broker a win-win partnership between you and the staff. Let’s say, for example, a hygienist wants a $3/ hr raise and they’re receiving a bonus based on them producing 3x their daily rate. This would then increase their production requirement by $72/ day ($3 x # of hrs x 3 multiplier). Fine, take the raise, but here are the new results we expect accordingly. If they hit the new numbers, who cares if you’re paying them more - you’ve offset the cost with higher revenues
It also helps to review your non-monetary rewards.

The workforce places more value on non-monetary incentives than ever before, and this trend will only continue with younger staff. What are you offering that other offices are not? It could be flexibility options, training, coaching, access to personal enrichment/ wellness programs, team outings, or an annual trip/ getaway if the practice hits the annual goal. Whatever is unique to you and your staff, make sure their experience is more than a 9-to-5 job.

Remember that you and your staff are in this together, and your success in inextricably linked with theirs. Ideally, they want your practice to thrive just as much as you do, and will work together to figure out a solution in a rising cost environment.
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