How to calculate the right staffing for a smaller practice

Question: One of the physicians in our group is retiring, and we are left with what I think are too many employees. How do I determine the right number of employees for our smaller practice? If staff size needs to be reduced, how do I decide whom to lay off? Finally, what can I do to maintain a positive attitude among the remaining staff?

Answer: Economic conditions and trends in reimbursement make this a scary time for medical practice owners and employees. The questions of optimizing or "right sizing" staff are on everyone's minds. Coupling this with the loss of a revenue-producer makes the practice owner's and manager's jobs even more difficult.

To determine the right number of employees for the smaller practice, first see if you have the right number now. The first place to look is in payroll reports, so you can see how much overtime is being paid, and to whom. We are not able to identify a benchmark for overtime expense as a percent of payroll expense. Research seems to indicate that most practices strive for 2% or less. However, these benchmarks are internal, not compared with any national norms.

Next, review management reports and observe the office to see if there are backlogs, such as old accounts receivable and unfiled medical records and reports. Look to see how busy the staff members appear.

Do not assume that if there are no backlogs and staff does not seem busy, that the practice is overstaffed. First, it is almost impossible for a practice to have no backlogs, which means that further investigation is required. Also, sometimes staffing is determined by patient flow -- for example, to accommodate peak times. Therefore, some down time may be appropriate. These conditions should be reviewed with the practice manager before jumping to conclusions.

There are industry benchmarks published by organizations, such as the Medical Group Management Assn., that provide staff complements by specialty and geographic location. However, every practice is different, so your practice's similarity (or lack of similarity) to industry benchmarks is only one piece of the equation.

Also, being the right size not only means having a certain number of employees per physician, but also having a certain number of employees who contribute to the productivity and profitability of the practice.

Now that you have identified the appropriate staff complement for your practice, the next step is to determine how many you will need after a physician retires. Often, physicians who have been practicing for many years have at least one long-term employee. Sometimes, that employee will offer to retire with the departing physician.

If the loss of this employee does not hurt the practice, the situation is optimal. However, if that employee is a key member of the team, you might have to look for ways to convince him or her to stay.

The next step is to determine how large the staff needs to be with one less physician. In addition to comparing your practice with industry benchmarks, you will need to identify which positions represent fixed costs, and which are variable based on the number of patients, office hours, physicians, claims and other factors.

Using internal and industry benchmarks, you will need to decide how many employees are required to support the activity produced by the remaining physicians.

Generally speaking, one biller can process and follow up on 10,000 claims a year. Therefore, you can get a rough idea of the optimal size of the billing staff by determining the number of claims the practice submits per year.

So if the practice generates 15,000 claims a year, you need 1.5 full-time equivalent employees in the billing department. This will vary depending on how your practice bills and uses technology.

There are benchmarks for other positions in the practice, too. And you would need to go through the same process for each of them.

All the while, keep in mind that staffing decisions always include a subjective component.

Once you have determined the appropriate number of employees required to support the practice, you will need to decide who will stay and who will be terminated.

It is best to develop a policy regarding this subject and publicize it to the staff prior to announcing your decision. The policy might include criteria such as the position in question, the length of employment, the relationship of the employee to the departing physician and other factors you deem important. It should also contain information about the termination process, time frame and any assistance and/or benefits you plan to give the departing employees.

While the staff might not be pleased about the situation, at least there will be a sense of fairness associated with the decisions.

Often, we find that the employees who maintain their jobs are more upset than the ones who are terminated. They might harbor feelings of guilt, concern about the same thing happening to them in the future and/or anxiety associated with not knowing if and how their duties may change. This is not an easy time for anyone.

However, as true with any transition, open and frequent communication with the staff may help minimize these potential issues.

Another recommendation is to involve the staff in discussions about re-working processes and other tasks involved in the transition. This is another way to build staff confidence and help ensure their buy-in during the change.