Our work with medical practices often involves analyzing a practice’s data against benchmarks from sources like MGMA, NSCHBC, specialty society surveys, etc.  But, it’s not enough just to compare against the averages and percentiles; you have to know whether meeting or beating a benchmark is a good thing.  Believe it or not, this is not always obvious.

Among the benchmarks most subject to misinterpretation are staff per provider and staffing expense per provider.  Most physicians and practice managers we work with are very focused on keeping headcount and staffing expense low — and so they’re pleased to learn they’re in the lower tiers for headcount and staff expense ratios.  The pleasure shifts to confusion, though, when we explain that squeezing staffing down to the lowest possible expense is not usually a path to higher profitability — and can often be associated with lowering profitability!

There are several reasons for this.  The most important is that well-trained, well-paid, motivated staff — and enough of them — free up providers to focus all their attention on the tasks only they can do.  Coincidentally, the tasks that only providers can do are almost always also the only tasks that generate revenue for the practice.   Increase provider time spent on revenue generating activities (and not on unpaid tasks that don’t require their training), and you’re on the way to more profitability.

Consider that an additional medical assistant might cost a practice about $100-$150 per day.  If that additional assistant allows a practice to see as few as 1-2 more patients per day, that’s a profitable addition.  Often, one additional assistant can help more than one provider — and help the practice quickly generate more revenue than is needed to make the addition a profitable one.

When a practice is focused primarily on expense control and minimizing headcount, sometimes that results in providers doing too many tasks that could be handled less expensively by staff — an opportunity cost for the practice and a direct hit to revenue potential.  What’s more, when a practice is too reluctant to add headcount, existing staff can quickly become overtaxed and feel overwhelmed, unsuccessful and unappreciated.  Poor morale has a direct impact on patient service — which in turn affects patient satisfaction, retention and referrals.  Even worse, when staff is kept so lean that any unexpected surge in volume leads to overtime, then you’re not even meeting the goal of expense control — you’re cutting into profitability with both overtime pay and lost revenue.  A lose-lose-lose for morale, patient service and profitability.

It’s true that staffing costs are usually the biggest single overhead expense for many practices.  But your staff also represents an investment that can pay off dramatically for your practice.  Make sure you understand what the ideal staffing level is for your practice — and that’s unlikely to automatically correspond to “as few employees as possible.”

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