Paid as You Go

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December 2004

By Rich Smith

(Left to right) Adriane Burns, PT, Beth Gage, MS-CCC/SLP, Mitzi Holmes, PT, and Brian Arldt, MSIE, of CarePartners Thoms Rehabilitation Hospital, Asheville, NC, have helped to implement the organization's morale-boosting pay for performance (PFP) program.

How smoothly a rehabilitation hospital runs depends on many factors, but among the most crucial is employee satisfaction. Happy staffers tend to be loyal, collegial, ever willing to go the extra mile. A sign of that satisfaction is recognition from employers - with either a formal pat on the back or a generous monetary reward, both ways to acknowledge a job well done.

CarePartners Thoms Rehabilitation Hospital in Asheville, NC, has taken recognition to the next level by combining both verbal praise and monetary awards. In fiscal 2002, Thoms instituted a job-performance incentive program designed to reward employees for more conscientiously tackling their day-to-day duties as well as for demonstrating greater supportiveness to their coworkers. By the end of the program's second year, the hospital had distributed more than $250,000 in rewards - a sure sign the system, pay for performance (PFP), was living up to its name. "I think this program is great," says Beth Gage, MS-CCC/SLP, coordinator of inpatient speech pathology services. "It really enhances teamwork for patient care."

An important element of the program is the frequency of PFP reward disbursement: every 3 months, rather than once a year. Typically, earners receive their money 45 to 60 days after the close of each quarter. "You don't wait a long time to receive your payoff for good performance, and that's been one of the program's strong points in the eyes of the staff," says Mitzi Holmes, PT, executive director of inpatient rehabilitation.

Employees accumulate credits toward PFP dollars by meeting well-defined goals - as many as five all together and varying from person to person, depending on the individual's role in the organization. Most of the goals pertain to the employee's job performance; the remainder relate to the performance of the entire care team to which the employee has been assigned. This serves to make staffers accountable to one another and thus encourages greater cooperation. The goals for most staff are reassessed each quarter. The goals for administrative team members are assessed at the end of the fiscal year. Probationary employees and part-timers working fewer than 100 hours per quarter are deemed ineligible.

PFP money is awarded in the form of an hourly rate. "PFP money is above and beyond an employee's base pay, though the base pay is used to calculate the hourly rate for the award. An employee can pull in up to approximately 25 incentive-reward hours per quarter - to a maximum of 100 hours in any given fiscal year. Let's say a therapist earns $30 an hour as his base rate of pay; he would earn an extra $750 were he to score the highest number of hours for that one quarter by achieving the highest performance criterion for each of his goals," explains Gage.

To be able to afford these payouts, the hospital budgets an amount equal to 2% of the total wages annually paid to those staffers eligible to participate in the PFP program.

The most daunting aspect of the PFP program is grading the employees on their performance so as to determine whether they met the minimum requirements for attaining each goal or whether they went beyond it - and, if so, by how much. "Figuring all this out is a very labor-intensive process," says Holmes.

Feedback is required from several departments during the assessment process. "Human Resources provides a tally of the number of hours that were worked during the quarter by each employee. Finance gives a rundown of how well each care team's department managed its expenses for one of our financial goals. And our patient/guest relations department supplies results from the satisfaction surveys we ask patients and their families to complete," says Holmes.

But the program is more than tabulating figures and cutting a check. Employees first receive praise from their superiors.

A PAT ON THE BACK
Once the process of calculating how well an employee met his PFP goals for the quarter and the reward is decided, the results are reported to the staffer. Though made in writing, they are presented in person by the employee's supervisor. "The employee and the supervisor meet in private to review the results," says Holmes. "They talk about each goal's score and the total amount of incentive hours earned. This provides an excellent opportunity for the supervisor to give the employee formal recognition for their performance, but also to identify opportunities for improvement."

Holmes adds that this face-to-face interaction is an important component of the PFP program's success. "We wanted there to be discussion, not just have the results summary show up in the employee's mailbox," she says. "We felt the PFP program wouldn't be successful without this verbal feedback component."

The PFP results summary is straightforward in what it reports. Its weakness lies in that employees on their own cannot readily glean from it a sense of what they could have done differently to score higher and what they can do to improve their performance in the quarter ahead. "We're looking at ways to make the summary more informative for the employees," says Holmes. "We think it will help the staff if they can have a summary sheet they'll refer to all quarter long with actual recommendations given for doing better."

Following the distribution and discussion of the PFP results summary comes the money. However, it is not issued in the form of a separate check. The earned amount is simply added to the employee's regular paycheck.

Employees use the money to cover a variety of expenses, with many of the recipients using the extra money to help pay down bills. "The payout from our first fiscal quarter of the year is distributed in early February, just when the bills from holiday shopping are arriving or coming due, so the timing of that one couldn't be better," says Holmes. "The payout from the final quarter of the fiscal year occurs in November, which gives the employees more money for their early holiday shopping. Again, the timing is ideal."

Not everyone puts their PFP reward money into shrinking the size of what they owe. Gage, for instance, used one of her bonus pays to redecorate at home and to splurge on entertainment when her grandchildren came for a recent visit. She socked away some of another payout for a rainy day.

Meanwhile, Adriane Burns, MPT, a staff therapist who used the money she earned to help buy a new car, says she feels the system "heightens our awareness of some aspects of our job that we might otherwise overlook, such as length of stay and departmental expenses."

That is precisely what Thoms executives hoped would happen. "Each quarter that goes by, it seems that employees' understanding of the program helps to focus their performance on the goals," says Holmes. "We've been pleased by the employees' response."

This growing understanding is a benefit that has come out of several years of change for Thoms, which began in the mid 1990s.

REWARD SYSTEM
CarePartners Thoms Rehabilitation Hospital is a freestanding hospital, licensed for 100 inpatient beds and providing outpatient services at five different locations. In 1996, when it was Thoms Rehabilitation Hospital, it became a founding member of CarePartners, a nonprofit post-acute health care continuum now generating about $52 million a year in services and employing 930.

Soon after the formation of CarePartners, Thoms began encountering heightened difficulty maintaining employee morale. Some of it had to do with the new organization, but also playing a role was salaries. The only ways employees received more money were by earning a promotion or if hospitals elsewhere in the market lifted the wage bar and Thoms needed to match them in order to remain competitive.

Thoms attempted to remedy this with a system of merit raises, but subsequently decided it was unworkable. "Merit raises had been rather inconsistently awarded because the decision-making was left to each supervisor's discretion and, for the most part, had no ties to the bigger picture of our organization's performance," says Holmes.

So the hospital began looking at alternative ways to improve morale and motivate the staff. But in early 2000, the hospital's attentions were diverted by Medicare's new prospective payment system for inpatient rehab, which prompted Thoms to redesign its care delivery model. As part of this shake-up, the hospital moved from department-based operations to services delivered by patient-centric clinical teams. These teams were tasked with maintaining good clinical outcomes and improving patient-satisfaction scores, length-of-stay numbers, and overall cost-effectiveness. "To be successful at this four-part mission, we realized that we needed a meaningful way to motivate integrated team performance and, at the same time, be able to give recognition for outstanding individual performance," says Holmes.

PFP was offered as the solution to that and to the long-simmering morale problem. The idea originated with Brian Arldt, MSIE, director of decision support, who had seen something similar utilized to good effect at the hospital where he previously worked. The main difference in the version Arldt proposed was that payouts would occur quarterly rather than, as was the case at this other hospital, annually.

However, once PFP rolled out, reaction to it was mixed. "It isn't a perfect system," says Burns, admitting that even now in determining how well an individual meets quarterly goals, the program sometimes still skews against the employee. "There are going to be situations beyond the control of the employee that will adversely affect his or her ability to meet goals. For example, take the goal of increasing patient satisfaction. The employee's patient might complain of not being well satisfied during his stay-not because of anything the therapist did, but simply because of the traumatic circumstances that led to his admission here in the first place."

Holmes believes an improvement the system could use is a mechanism by which supervisors can track goal progress continually, rather than having to wait until after the close of the quarter to learn how things went. "With goal-accomplishment status visible and accessible to supervisors on a weekly or even daily basis, it would provide a great opportunity to recognize good performance or to offer coaching before the quarter ends in those areas that are falling short," she says.

Even with its apparent flaws, PFP has been a success.

POSITIVE EFFECT
Despite its shortcomings, PFP is seen by proponents as having made life better for employees, benefitting patients and the organization as well. "It has brought focus to what's important for our operations," says Arldt. "It has built awareness of those things we as senior management see as important for our success and has instilled that awareness among the staff, so they have a much better sense of what those key things are that will help make our enterprise successful."

The program has improved morale in other ways. "PFP affects the way we interact with the others on the staff," says Burns. "One of the goals we're given is to keep employee turnover low-it helps make us more aware of our attitudes toward each other and how we can contribute to the job satisfaction of our coworkers."

Arldt agrees, marveling at how the program has brought together the staff in ways that never used to happen. "This is a solution that proves itself to be very integrated and, as a result, has facilitated synergistic relationships between staff who otherwise might not have the opportunity to work as closely together were this program not in place," he says.

Of course, there is an upper limit to how much hard work can be coaxed from employees from any incentive plan. "We view PFP as a means to encourage employees to work smarter, not harder," says Holmes. "The staff here are terrific and truly care about providing the highest level of quality care to our patients. So, it's not about just earning extra money. The whole purpose of PFP is to focus our efforts on goals that improve our patient care and enhance the organization's viability in a dynamic and competitive environment. In lots of ways, it's helping us do just that."

Rich Smith is a contributing writer for Rehab Management.

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