Building a better carrot: Developing a staff financial incentive bonus program

Practice administrators need excellent employee performance to drive best practice outcomes. Those employees need to be recognized for the role they play in the delivery of excellence in service and clinical quality.1 An aligned financial incentive program is crucial to recognize staff and engage them to help achieve desired outcomes.2

Editor’s note: This article was adapted from a paper submitted toward fulfillment of the requirements of Fellowship in the American College of Medical Practice Executives. Learn more about ACMPE certification: mgma.com/acmpe.

The importance of recognition

People desire recognition for the work they do and the role they play in the organization. There are three major rationale for recognizing employees:

1. Morale: Clinical operations function in many non-standard work schedules, including various shifts and hours to meet the needs of patient care. Individuals engaging in meaningful work validates their time as professionals. Recognizing and rewarding employees for their contributions and achievements helps give greater meaning and a sense of purpose and provides a greater holistic perspective of their individual importance.3
2. Relationships: Rewarding and recognizing performance makes individuals feel valued by leadership, which builds trust in the workplace. It also reinforces desired performance, which aids in strengthening culture.4  
3. Performance: Showing genuine appreciation and recognizing people is crucial to ensuring employee engagement and work performance. Employees who are recognized and rewarded for their work perform at a higher level and are more likely to positively interact with patients.5

Financial incentives

Financial incentives are another way to motivate employees to achieve goals or desired performance. The level of incentive is based on industry demand, role or position, geographic location, employment status (full-time, part-time, etc.), skill set and degree of difficulty for achieving results. It is a huge investment to offer this type of incentive, which is a factor in why many healthcare organizations choose not to offer a bonus program.

When a financial incentive is dangled for outstanding work, meeting targets and achieving desired goals, what happens if the reward is discontinued? Attaining the same level of performance with no bonus poses the danger of promoting a lack of motivation or drive. The negative impact can potentially affect morale and performance when the incentive is removed.

Developing an incentive bonus program

When done correctly, a financial incentive bonus program is an effective tool to further drive the desired performance and outcomes for the organization. One health system in the Midwest implemented an employee bonus system for ambulatory clinics. In three years, patient satisfaction rose from the 12th percentile nationwide to the 78th. Initially, only six clinics were meeting the organization’s aligned goals; after implementation, this jumped to 33 of 50 clinics.6

To ensure a successful program, several key elements must be clearly agreed upon and developed prior to implementation, including organizationally aligned goals, measuring reliable and objective data, planning in the financial budget, employees’ ability to impact outcomes and taking a team-based approach to performance and payout.

Aligned goals with the organization

The heart of an incentive bonus program is establishing goals for measurement and performance targets. Whether they are developed at a higher system level or locally and approved by a leadership team, clear organizational goals guide employee action. If the goals are not in harmony with the overall strategic direction of the organization, the program will not meet desired outcomes.

It is common for many healthcare organizations or systems to embrace the five pillars of excellence championed by the Studer Group: service, people, quality, finance and growth.7 They serve as a foundation for organizational goals in meeting service and operational excellence, while providing a focus for leadership strategy. Using the pillars as a framework for ensuring balance helps focus on key performance actions by not being narrowly subjective in one area.

Reliable and objective data

Regardless of the aligned goals utilized by the organization, it is imperative to use reliable and objective data in producing standard reports. Ensuring the data is accurate and easy to understand for all staff provides credibility for the bonus program. After selecting the appropriate data, another component is maintaining transparency and consistency. Any incentive program in which expectations, rules or standards change mid-program-year stands to be in jeopardy. Program perception has a better chance of remaining unbiased with objective data and the removal of any potential judgment errors.

Financial budget

Including the bonus program in the annual budget ensures financial responsibility and a commitment by leadership to invest in their team.

Including the amount for total bonus payouts in the annual budget ensures that a bonus program is a priority in the overall financial expectations of operations. Estimating the cost of incentives correctly, while using total possible payout for maximum goal achievement, provides a safety net in which underperformance has a smaller payout. Weighting goals ensures performance is emphasized in terms of financial payout.

Individual ability to impact

In healthcare, there are distinct actions staff perform that are within their control and form the basic elements for incentives. Key items that an individual can impact in a clinic setting are patient experience scores, which rate office staff or communication, clinical quality data with correct documentation or medication reconciliation and revenue cycle functions with insurance eligibility or copayment collection rates. There is objective and measurable data in each of these areas in which a staff member is responsible for performance and outcome.

Team approach

When using patient experience scores, all staff play a part in the patient’s experience. Similarly, access to care metrics often include patient preference in scheduling the appointment, phone and message response times, clinic wait times and time to see a provider, which touch multiple people on the team.

A bonus incentive program enhances value within individual and collaborative roles. Without the emphasis on a team approach, division, disruption, and all that is essential for effective care delivery dissolves. Employees benefit from a team bonus approach, wherein the entire team wins or loses based on the aligned goals, while individuals directly contribute to the results.

Case study

A group of ambulatory clinics, owned and operated by a large healthcare system, consists of 12 primary/specialty care clinics, 30 providers and 85 staff. The clinics struggled to improve in key areas, including patient satisfaction, quality and productivity, reaching a point of stagnation over a five-year period. During this same time frame, four directors led the market, representing various management styles with varied outcomes in operational performance.

A new leadership structure was implemented based on a dyad model, with a medical director and operations director. In addition, the clinic leadership team, composed of various administrative roles, provided day-to-day, on-site direction in working with staff and providers. The dyad team worked during the first year to advance the overall goals for clinic operations, strategic growth of the market, recruitment and retention, along with advisory roles to the hospital executive team in relation to the ambulatory clinic environment. At the end of the first year, performance was consistent month to month but was not considered “world-class.”

At the onset of the second year of the dyad leadership team, the health system set aggressive clinic growth goals to achieve top-decile performance in quality and patient satisfaction, and top-quartile performance in operations by 2020. This was the platform for the local market to determine how best to improve overall clinic operations. The dyad and clinic leadership evaluated what direction to take to meet the high standards and to achieve performance excellence.

• The solution: It was determined that a financial incentive bonus program should be implemented for associates. All providers working in the clinic had value-based financial incentives built into their employment agreements (clinical quality, productivity, timely chart completion, patient satisfaction, etc.), which was also largely impacted by staff. The greatest strategic opportunity for performance improvement to achieve operational goals would be to align the bonus structure to mirror what providers were incentivized to achieve in performance outcomes.
• Results: The ambulatory clinics became the sustained leader out of 23 markets in all aligned goals for the entire system, including significant improvements in clinical quality scores and patient satisfaction. In 2018, many key performance measures already met the target set for 2020 and were in the top decile nationwide. Beginning in 2019, the entire system had a standardized financial incentive for ambulatory staff.

Incentive program implementation

Even the most advanced and well-designed incentive bonus program can be unsuccessful. New initiatives fail because of inadequate communication and focus, inability to properly measure or track performance and poor follow-up with action planning.8

• Communication and clarity: With potential conflicting agendas, it can be confusing where to focus. Communicating the implementation of an incentive program with clarity helps achieve the desired results with performance outcomes.
• Clearly defined expectations: To ensure communication is successful, all levels of employees from senior leaders to frontline staff need to understand the program in simple terms, including how the actual bonus is calculated (see Figure 1 for a sample quality incentive bonus calculator tool).
• Communication channels: The planning and approval initially involves senior leadership, and it can’t be assumed that one general announcement will guarantee success. Pursuing a multitude of communication avenues should be the goal. At a minimum, creating a slide deck or handout with all the details for staff to refer to whenever needed is helpful. Cascade communication through multiple email announcements, newsletters, bulletin boards, staff meetings or employee huddles. Disseminating the information across multiple channels helps to ensure that everyone hears the message multiple times. Even when the program is implemented, regular communication and report outs in the same format help maintain momentum and keep the focus of frontline staff on performance improvement.

Measurement and tracking

Reporting metrics consistently and updating the staff regularly for tracking purposes provides transparency. Data can be obtained from pulling reports from the EHR, a human resources system or other internal software programs. However, depending on the reporting ability, manual calculations for some reports are unavoidable. In utilizing the aligned goals of the organization, developing a balanced scorecard can show actual performance against targeted goals.

Updating staff regularly ensures accountability and shows how their work effort drives results. All staff need access and a clear understanding of the big picture.

Action planning for future results

Many of the aligned goals measured by the established metrics are presented as lag measures, viewed as past performance without the ability to change, such as net operating margin or patient satisfaction. However, a lead measure — something staff can control or influence to help achieve the goal — contributes to the success of achieving the goal. Utilizing the performance dashboard to show past performance of lag measures allows leaders to work with staff to set up action planning for lead measures in driving outcomes.

For example, office staff quality is one measure under patient experience. The actual score is only known after the month is over, making it a lag measure, but the team must drive performance with plans to influence this score through a lead action. A lead measure can be as simple as smiling, asking patients if there is anything they need or saying “thank you.” The development of an action plan ensures all staff are participating in those lead measures, which can directly influence how patients respond to survey questions on office staff quality as it relates to professionalism, courtesy and respect. This should be done for every patient, every time, which includes tracking, monitoring and spot audits.

After developing and clearly communicating the action plan to staff, accountability ensures actions and lag measures are achieved. Action planning helps employees see how their performance directly influences the goals being measured for the bonus incentive. In addition, action planning fosters greater accountability to perform to the standards or actions agreed upon.

Conclusion

Engaging staff in organizational goals is crucial for long-term performance and sustainably within the healthcare industry. Recognizing employees for their work yields higher staff and patient satisfaction, better quality care for patients, as well as improved financial performance. When done correctly, financial incentives are a key component in enhancing employee experience.

A bonus program must be aligned with the goals of the organization, based on reliable and objective data, financially sustainable and allow for individuals to directly impact results while focusing on a collaborative team approach. With clear communication during the implementation phase, appropriate measurement and tracking along with action planning for future results, a staff financial incentive bonus program will drive the performance goals of the organization.

Notes:

1. Larson J. “The connection between employee satisfaction and patient satisfaction.” AMN Healthcare. Feb. 21, 2012. Available from:  bit.ly/2n0wEXs.
2. Negussie N. “Relationship between rewards and nurses’ work motivation in Addis Ababa hospitals.” Ethiopian Journal of Health Sciences, 22(2), 107-112.
3. Grawitch M, Gottschalk M, David M. “The path to a healthy workplace: A critical review linking healthy workplace practices, employee well-being, and organizational improvements.” Consulting Psychology Journal: Practice and Research, 58(3), 129-147.
4. Mann A, Dvorak N. “Employee recognition: Low cost, high impact.” Gallup. June 28, 2016. Available from: bit.ly/2nv0PGq.
5. Larson.
6. Adams H. Leader accountability within OU physicians. October 2010. Available from: bit.ly/2n6QekL.
7. Studer Q. Straight A leadership: Alignment, action, accountability. 2009. Gulf Breeze, Fla.: Fire Starter Publishing.
8. Leonard D, Coltea C. “Most change initiatives fail — But they don’t have to.” Gallup. May 24, 2013. Available from: bit.ly/2lvaGLZ