Managing a successful allied health clinic goes beyond just delivering excellent care.

It involves making strategic decisions about how to structure wages, balance billable hours, and ensure the clinic remains profitable.

This topic came up recently in a conversation I had with a clinic owner. They were facing a common “double whammy” in the industry: high pay rates and low billable hours. It’s a situation that can leave clinics financially strained and struggling to sustain, let alone profit.

In this post, I’ll break down the challenges and considerations that go into setting wages, managing costs, and balancing productivity to create a financially sustainable clinic.

1. The Cost of Running a Clinic

Running a clinic isn’t just about paying staff and keeping the lights on. Costs range from rent, utilities, and insurances to equipment, administrative support, and software subscriptions. And then there’s ongoing professional training, certification, and resources for staff development – all of which add up quickly.

Make sure you are super clear on what it costs to run your business.

2. Aligning Wages with Profitability

Paying practitioners too much, especially without the corresponding client revenue, can lead to financial stress and, in worst cases, threaten the clinic’s viability.

But if pay is too low, retention suffers, and it becomes difficult to maintain a quality team.

When reviewing wages, clinic owners need to consider three critical factors: the cost of each practitioner relative to revenue, and how productive (or “billable”) each role is within the practice, and competitive salaries needed to attract and retain quality talent.

For context, here’s a snapshot of typical base salary ranges in the field:

• Remedial Massage Therapists: $65,000 – $75,000
• Occupational Therapists: $80,000 – $95,000 (up to $110,000 for seniors)
• Physiotherapists: $75,000 – $90,000 (up to $115,000 for seniors)
• Chiropractors: $85,000 – $100,000 (often with commissions)

It’s worth noting these ranges take into account both graduates and therapists with five or more years of experience.

The goal is to remain competitive within these ranges without overshooting – a balance that can be achieved through different strategies. You may have competitive all inclusive salaries, or slightly lower base salaries with an added commission structures and other performance-based incentives.

3. The Role of Utilisation in Balancing Wage Costs

Utilisation rates, or billable hours, play a key role in the financial health of any allied health practice. Essentially, utilisation is the percentage of a therapist’s available hours that are billable. High utilisation leads to better financial performance because more of the time paid is directly tied to revenue-generating activities.

Here are some target utilisation rates for different clinic settings:

• Occupational Therapy: Aiming for around 65% billable time is fairly common.
• Other Practitioners (e.g., physiotherapists and chiropractors): Typically targeting 80%+ available appointment slots being filled.

These benchmarks are helpful in setting realistic expectations for staff and evaluating productivity levels. Tracking and managing these utilisation rates will often require a good practice management system that can help with scheduling, reminders, and billing.

4. Controlling Wage Costs as a Percentage of Revenue

Many allied health clinics aim for wage costs, including superannuation, to fall within the 43-55% range of total revenue.

This percentage should reflect the added investment of time and training into junior staff, whose contributions grow over time, and competitive pay for senior practitioners, who bring additional skills and experience.

For remedial massage therapists, however, reaching below 55-60% wage cost of revenue can be difficult due to lower time-based charge rates.

5. Relying on Industry Pay Guides

Industry salary guides can be helpful but may sometimes are not very accurate. For instance, one commonly known guide lists Occupational Therapists at an average of $66-78k, and Physiotherapists at $70-89k, with entry-level roles starting as low as $55k for graduates.

I couldn’t believe my eyes reading that! Considering that the Award minimum for a Graduate is around $59-64k and for someone with 3-5yrs experience, the Award minimum is around $72-80k!

Perhaps that guide was based more on public health roles….

But certainly in private practice you’d be unlikely to attract anyone at those rates.

6. Practical Steps to Balancing Remuneration and Profitability

To summarise, here are key actions you can take to ensure a balance between competitive pay and clinic profitability:

• Evaluate Your Operating Costs: First, understand the complete financial picture of your clinic, including all ongoing costs, to assess what you can realistically afford for wages.
• Benchmark Salaries Against Industry Averages: Use industry data but adapt it to your specific business. Consider different wage structures, such as commissions or bonuses for performance.
• Focus on Utilisation Rates: Track each practitioner’s utilisation and consider setting targets that are reasonable and achievable within your service model.
• Calculate Wage Costs as a Percentage of Revenue: Aim for a percentage that keeps your clinic profitable, adjusting wage structures as necessary.
• Run Projections: To avoid any surprises, run wage cost projections against different revenue and utilisation scenarios. This can be as simple as using a spreadsheet to try out different staffing configurations and utilisation rates to find a sustainable model.

Use this simple model as a starting point:

Operating expenses divided by profit per treatment =

# treatments the clinic needs to break even

For example, $3,000/wk to operate the business, net profit per 60 minute treatment after practitioner wages averages $80 = ~38 treatments per week.

Think about these questions:

·         What is the capacity of your clinic? Do you have 1 or multiple treatment rooms?

·         What is the capacity of your current team? Do you have staff with sufficient availability?

·         Are they already at capacity or can they see additional clients?

·         Do you have a waitlist of clients or can turn on marketing to bring in new clients?

From there you can consider do you need to hire additional staff, improve their utilisation or billable hours, bring in new clients, review your outgoing expenses or  a combination of these.

What next?

Balancing wages and profitability doesn’t have to be a headache. By understanding where your clinic stands, what your staff costs are, and where adjustments may need to be made, you can create a sustainable model that allows you to both attract talent and stay financially healthy.

If you don’t already have a good worksheet to show you this – grab a copy of my Clinic Profit Pulse Tracker

Book in a free 15 minute chat with me if you’d like to see how I can support you.