There are a number of ways that practices, hospitals and other entities compensate physicians. There are a multiple of variations on these formulas that are possible. As the physician looking at the compensation formula that involves collections and/or office expenses, the most important thing to do is to get a handle on what these items realistically might total.
PARTNERSHIP POTENTIAL
1. $175,000 – $185,000 salary plus incentive. Incentive plan is 20% of collections on physician-provided services after 3x salary. For example, a salary of $180,000 with collections of $600,000 would results in a $12,000 incentive bonus ($600,000 – $540,000 x 20% = $12,000).
2. Salary range of $200,000 plus 20% of any collections over 3x the salary ($600,000).
3. Salary for the first 2 years then 100% production
4. Base salary of $250,000 with 10% share after expenses for the first year, second year salary increase of $20,000 with a 15% share and the third year is partnership
5. $175,000 – $250,000 salary based on experience; will include an incentive program which is 10%-20% of 3 x salary
6. $160,000 – $175,000 plus an incentive; the first year incentive formula is 20% of the difference between the net income minus expenses to cover overhead (salary, malpractice, phone, etc.), 2nd year=30%, 3rd year=40%, 4th year=partnership
7. Base salary of $150,000 plus bonus based upon what is done in terms of collections. The bonus has no limit and is based on productivity and length of service. The bonus is calculated as a percentage of “net” revenue, once general practice overhead and physician expenses (including base salary) are deducted. The percentage is 40-, 45- and 50% in years 1-, 2- and 3 respectively. Net earnings are defined as gross earnings minus professional physician expenses and 50% of the practice administrative expenses.
Professional physician expenses include the base salary, the cost of health and malpractice insurances and the cost of professional society dues, journal subscriptions and other professional fees. Administrative expenses of the practice include all items not included in professional physician expenses. There include expenses such as rent, utilities, employees €™ salaries and benefits, marketing and advertising, legal and accounting expenses and equipment purchase or lease payments.
Partnership will be considered after 2 -3 years in practice.
An example sometimes helps. This is all very hypothetical and numbers are only used that make for easy calculations:
Gross Collections for the quarter $ 150,000
Overhead expenses 60,000
Physician expenses 60,000
Net 30,000
Bonus (based upon 40%) $ 12,000 for the quarter
8. Draw plus stipend plus productivity bonus. Can set the draw up to $250,000. The physician plan allocates overhead in 2 ways. Part of the overhead (20%) is distributed equally, and the rest is allocated based on receipts. Thus all physician partners have a basic share of the overhead and those who produce more revenue (and consume more resources) are allocated a greater share fot he rest of the overhead.
New physician are paid the draw until their practice grows to the point that receipts cover the incremental costs incurred by adding the new doctor.
No good will practice buy-in; responsible for a buy-in of one times the depreciated assets, however, that number is insignificant since the practice doesn’t own their buildings
EMPLOYEE AFFILIATION:
Compensation Type 1: Income guarantee of $200,000 + and incentive which is 33% of production after overhead is covered
Compensation Type 2: Income guarantee of $160,000 – $180,000 for 12 months with an incentive. If the percentage method pays more than the salary then the candidate can switch over to it before the first year.
The incentive will be available if the candidate makes two times his/her income guarantee. The incentive formula is the amount which is at least two times the salary guarantee minus two times the salary. The doctor gets 50% of the difference.
For example, if the net income is $400,000 and the income guarantee is $150,000, then:
$400,000 (net income)
-$300,000 (2 times the income guarantee of $150,000)
$100,000
x 50% (to cover overhead)
$ 50,000 Incentive payment
Compensation Type 3: $120,000 – $135,000 plus an incentive which is 30% of triple the salary
Compensation Type 4: Salary of $195,000 – $205,000. Also, the potential to earn two separate bonuses. One is up to 10% of their salary and the other bonus is 35% of their gross billings above their business plan.
