6 Steps to Structuring ASC Administrator & Staff Bonus Programs

Bogardus with BorderTim Bogardus, senior vice president of operations at Regent Surgical Health, discusses six steps to structure an ambulatory surgery center bonus program for administrators and staff.

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1. Explore different administrator bonus structures to find the best one. Every surgery center is different, and the same type of bonus program won't work everywhere. Explore several different options and choose one that will work best for your center's situation. A few of the most common options for ASC administrator bonus programs include:

•    Bonus payment based on the center's profitability; if the physicians receive distributions, the administrator gets a bonus as a percentage of base pay
•    Giving administrators a small percentage of distribution
•    Project-based bonus payments given if the administrator completes projects and meets expectations over a set period of time
•    A mix between center profitability and project-based incentives

"I think all surgery center bonus programs should start off with a measure of profitability," says Mr. Bogardus. "A common yardstick for ASCs has been EBIDTA of the center; you can give bonuses based on EBIDTA increase or reaching another target metric. I think at least half of the bonus should be based on profitability, but there are a lot of things that are out of the administrator's control, so the other half can be based on projects the administrator can control whether they are implemented or not."

A new center working hard to become profitable would benefit most from the profitability-based bonuses, while mature centers incentivize administrators to become better by including the project goals as well. "We go back and look at where we need to strengthen the center," says Mr. Bogardus. "That's where you can start incentivizing administrators to improve."

2. Keep it simple and easy to measure. Forego complicated bonus structures weighted for too many individual factors for simple equations that allow administrators to understand how they are rewarded. If you choose a bonus based on profitability, it's easy for administrators to make a percentage of their base pay as the bonus.

"If the administrator makes $100,000 per year, 15 to 20 percent of that as the eligible bonus is still very lucrative," says Mr. Bogardus. "For project-based bonuses, we use common indicators such as supply cost per case based on a percentage of net revenue or patient satisfaction that the administrators can control. I typically leave 10 to 15 percent of the bonus based on my goals for the administrator."

The surgery center can include any projects important for the center in the project-based bonus as long as administrators know their goals.

3. Standardize programs and keep them well defined. The bonus program should be easy to calculate and standardized from one period to the next. Calculate the potential for bonuses the same way every time and only base a small portion on judgment, if there needs to be a judgment at all.

"The more judgment you put into a bonus, the more potential for difficulty you have," says Mr. Bogardus. "If it's just your opinion, that's when you run into problems. It must be easy to show how you arrived at that number for the bonus."

4. Give bonuses on a regular basis. When the bonus is a percentage of distributions, administrators have potential to receive it on a quarterly or monthly basis, depending on how often distributions are given. Other times administrators receive yearly bonuses, but the year may be too long for them to keep their eye on the ball.

"It becomes too cumbersome when you give annual bonuses, especially when you are including specific project-based and metric-driven items," says. Mr. Bogardus. "With the annual bonus, they don't think about it enough. Additionally, if the goals set at the beginning of the year become too ambitious, there isn't time to re-evaluate the bonus structure until the next year."

Monthly distributions can work in some cases, but often when the all-encompassing bonus is in place it becomes difficult to track progress quarterly because you're more interested in trends than one good month. "If you have one month where there is inventory, staff members have extra hours and that drives up staff costs," says Mr. Bogardus. "The same is true for nurse training. In those situations, the administrator wouldn't get a bonus that month. I'm more interested in trends than monthly numbers."

5. Re-evaluate the bonus structure if the administrator constantly falls short. If the administrator falls short of achieving a bonus consistently, re-evaluate whether the administrator's goals are unattainable. On the other hand, don't allow the administrator excuses for not reaching those goals if they are achievable.

"The first thing you have to do is evaluate whether you overshot your goals," says Mr. Bogardus. "If you need to tweak your goals, you can for the next period. I'm not opposed to making adjustments, but if the goals are achievable it's up to the management company or owners to put a process in place so they are achieved."

Also consider the reason why administrators don't hit their goals. For one quarter, they might not meet staffing goals if their center loses volume. "It's a judgment call about whether the administrator should be changed," says Mr. Bogardus. "If they are missing a significant metric, you have to make those tough decisions. However, if the ASC is making a lot of money and they are missing a minor metric, it might not be worth letting that person go. You have to tweak the bonus plan constantly."

6. Structure fair bonus programs for staff members. An all-encompassing bonus program for staff members can help incentivize better quality at the ASC and promote collaboration around your center's success. Common bonus structures for staff include setting aside a percentage of distributions for staff members and either giving flat bonuses to everyone or providing bonuses based on the employee's base pay.

"It's easy to do one standardized plan, you really tweak it depending on where the center is in the life cycle," says Mr. Bogardus. "There are a lot of ASCs that incentivize leadership positions, such as business office managers to reach collection goals or clinical managers to meet their metrics. I wish more ASCs could figure out how to involve all staff, but it becomes difficult to track how they contribute to the center's success."

People at surgery centers often wear many different hats, and often the best employees wonder why they stay at the ASC when they could go to the hospital, do their cases and then go home. "There are some programs that are complicated allowing staff members the opportunity to make extra money every month, but it becomes difficult to figure out how to distribute that," says Mr. Bogardus. "You have to find a very standardized way of doing it."

More Articles on Surgery Centers:
Employer Mandate, Individual Mandate & Health Insurance Exchanges: 7 Things for ASC Owners to Know

5 Steps to Realize Huge Savings on Supply Costs at ASCs

Are ASCs Prepared to Win in the Future Healthcare Marketplace: Q&A With Lee Lasris

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