How to determine and budget compensation for new medical practice staff

Unless you are fresh out of residency, you know there are several components to calculating compensation packages. Compensation isn’t just about base pay, but a complex blend of elements that includes bonuses, incentives, benefits, and calculable perks.

Knowing about these components is one thing, but applying them to ensure you pay your medical practice staff competitive market rates is another. Read on to learn more about current pay practices and how to offer genuinely competitive rates for your area.

Should a physician or office administrator be paid the same regardless of where they work? The basic answer is no.

Many factors determine how any given position is valued and paid within the marketplace. A few of the critical elements include:

How a given position is valued within the marketplace doesn’t necessarily indicate how it is valued in terms of the practice’s success, but can indicate how challenging it will be to hire for it.

The costs of living and labor are different measures that are tied together. 

For instance, hiring a medical billing specialist in San Francisco, CA costs more than hiring a medical billing specialist in Columbia, SC. It is more expensive to live in San Francisco than in Columbia, but the role is the same. The cost of labor for the job is based on job expectations. Once you establish that cost of labor, apply geographic differentials to that position’s monetary value to adjust for the variance in the expense of living in your area.

So, how do you find competitive salary rates for specific positions in your area? There are several avenues you can take to uncover this data.

One option is to buy salary survey results. Reputable salary surveys are compiled from numerous participants nationwide. These results are lagging data. However, they remain relevant because they provide a general pay range for each job (minimum, midpoint, and maximum). These surveys are available from multiple sources:

Review local job postings for your specific area. Looking at sites such as Indeed, LinkedIn, Comphealth, Monster, or Hire Velocity, among others, can indicate what others offer for similar positions.

Create or join a local network or roundtable. Learning from local physicians or medical administrators can provide valuable insight, both into others’ approaches to hiring and compensation and into the local challenges you may share. 

AMN Healthcare’s 2022 salary survey provided some interesting base salary results. These results test the perception that every position’s salary value increases year over year. Still, there is high-level information available about average general pay practice for experienced medical providers/practitioners.

Even though their positions are paid differently than a physician’s, your office administrative staff’s functions are critical to running things efficiently and smoothly. They’re your patients’ first impression of your practice and take the brunt of their frustrations. Indeed.com has provided the average annual salaries for 12 different jobs, some administrative in nature, others focused on medical staff functions.

Base salaries will account for the majority of your staff budget amounts. However, there are still more items to consider when planning a total compensation number.

A salary range spans the minimum to the maximum that a position might be compensated. Where an offer falls within a salary range generally indicates the experience, expertise, and training that a candidate brings to the job. An individual paid toward the minimum end of the salary range is likely new to the field or role and has much to learn. Midpoint earners are often competent in the position and contribute to the overall development of the practice. A staff member paid near the maximum end of the salary range brings extensive experience to the functioning of the practice and brings innovative ideas and skills.

If you only have a mean number and want to develop a reasonable salary range, a 50% spread is appropriate in today’s marketplace for salaried, professional-level jobs, and 40% is generally used for administrative or hourly functions.

Planning for bonuses and incentives can be challenging in a medical office environment. Most bonuses are offered up-front as part of the physician/provider hiring process. However, others, such as the quality of service bonus, may be earned by most staff members annually or in an effort to retain staff.

These bonuses are often given in terms of the following:

As with any well-structured bonus or incentive program, these should not be considered a guarantee but an enticement or reward.

With the exception of annual performance bonuses, most bonuses have stipulations attached to ensure the practice and recipient receive fair compensation for the amount in question.

Below are examples of how physician/provider bonuses may be structured:

Have your legal counsel draft these agreements to ensure they comply with your local, state, and national compliance standards. Additionally, both parties must sign these agreements to ensure everyone understands the expectations attached to the associated compensation amounts.

A total cash compensation picture evolves when base salary is combined with eligible bonuses and incentives. A 2022 compensation survey published by Medscape.com evaluated annual salaries for physicians and medical specialists. Another relevant source of up-to-date information can be found at MGMA.

On average, benefits account for approximately 30% of a total compensation package. This figure includes components such as:

Physicians/providers in today’s marketplace consider most of these benefits a basic expectation of employment.

You can offer several benefits to improve morale and job satisfaction. Some examples include:

The above optional perks can lift your practice above others when it comes to employee satisfaction and retention.

Determining optimal medical staff compensation and benefits can be challenging. Employers and employees face multiple variables, including local and regional competition, as well as practice and individual needs.

It is safe to say that the medical marketplace and characteristics of medical staff compensation and benefits are under constant change and evolution. Practices must balance their needs with their finances.

Creating your staffing budget based on the experience level you need for a position and working within the salary range with those parameters in mind will set up your practice to offer the competitive compensation required to attract and retain skilled medical staff.