I earn $300,000 as a junior associate. Is this a good deal?
Many residents or fellows understandably want to reap the rewards of their training and hard work, and therefore desire to take the position that offers them the highest salary. Often this is influenced by geographic factors, if you stay away from the coasts and big cities generally you tend to do better, but the allure of California or New York City may prove to be difficult to resist.
Most associate positions for a comprehensive ophthalmologist start somewhere between $140-200k, with some type of a bonus structure such as 30% of anything over collections three times your base salary. Then, after two or three years, you may be eligible for partnership (consultants often encourage a non- enforceable statement of good faith outlining the approximate terms for partnership in the initial contract, so the new associate knows what to expect).
As a practice owner myself, if I hired an associate I’d definitely want to make some type of a profit off of them and I offer no apologies for that. It took me a lot of work (six months unpaid) to set up and start the practice and now someone is coming in and presumably it’s easier for them to build a patient base given that the practice is already set up. But a sticking point issue is that many practice owners overvalue the difficulty in setting up shop and establishing a practice, while many associates undervalue it.
I saw a thread on Student Doctor Network about someone who saw about 40 patients per day, performed about 10 cataract surgeries per week, and took home $300,000. Many people responded commenting this is a really good salary for a non owner. Sounds good, yes? This number is considered high for an associate income and is nearing national survey averages for a owner income.
The problem with this scenario lies with the salary compared to the volume of patients seen and collections by the practice for this high volume.
Assuming 4.5 days in the office, and a half day in surgery, this is 190 encounters per week. A conservative estimate of $140 revenue per encounter is $26,600 in revenue per week. Even with seven weeks off for vacation and holidays, working for 45 weeks leads to a total yearly revenue of $1.2 million.
So your $300,000 salary, even with another $30,000 of benefits such as CME, 401k match, health insurance, etc may come out to $330,000 total compensation. That’s only 27.5% of collections-so overhead plus owner profits is 72.5%. If the practice actually runs with even 55% overhead, the owner is making $210,000 off you. If the practice can run a 50% overhead, the owner is making $270,000 off you, which is 90% of your $300,000 salary!
Some associates consider getting 25-30% of the premium lens fee a good deal. Guess what, as a practice owner you get to keep 100% of the whole fee!
I know some practice owners are gonna read this and rebut that they do everything possible they can to trim overhead, so 50-55% if not higher overhead is to be expected. Let me reassure everyone there are plenty of folks in our google group that report sub 40% overhead expenses. If you own a solo practice you can work more efficiently and see less patients for the same income, which reduces stress and burnout. This also provides for more personalized service for your patients.
Hypothetically, suppose the practice owner is truly interested in treating you fairly and lets you buy in for $700,000 (quick estimate of buy in as 60% of collected annual revenue, see my post about practice valuations for more details). If you pay the $700,000 over five years, that’s $140,000 paid back to the practice for the buy in per year.
So even if the practice runs overhead at 55%, and assuming as a owner you take home 45% of collections, $1.2 million of collections nets $400,000 of compensation and benefits for you ($540,000 of collections minus a $140,000 buy in).
This may sound like a lot, but keep in mind that many folks in our google group who control their overhead can make the same amount seeing only half as many patients- Ho Sun for example.
Additionally, in terms of income, in order to generate this many patients, many practices will take low reimbursing or capacitated plans (capacitated plans are ones that pay a fixed amount per patient covered, without regard to services rendered, thus providing an incentive to do the least amount of work possible). If you go solo you have the power to not take the lowest of the lowball reimbursing plans, leading to a higher reimbursement per patient. When big groups accept lowball offers, it simply empowers insurance companies to make reimbursements lower for all of us.
We’ve heard of instances where the practice owner has been less than scrupulous with the junior associate. It would be easy for the senior partner to “cook the books” in the management system to shift revenue earned by the junior associate to the senior one, or have the front desk shift patients with lower reimbursing patients, or patients that have already had cataract surgery, to the junior associate. In our google group there was even someone who had patients that were sent by referring doctors for cataract surgery evaluation specifically to the junior associate, only to be shifted to the senior partner’s schedule!
If you’re in a situation described above- making good money but feeling like you’re running on a treadmill seeing a ton of patients, ask yourself, is you still want to be doing this five or ten years from now?
Ho Sun and I have our own opinions about mega size practices. While we don’t claim that every single mega ophthalmology practice behaves this way, sadly enough, many if not most of them do.
If you’re fine with your employment situation and the job is tolerable and pays the bills, by all means stay there. But if you disagree, start reading our steps to go solo, or consider buying an existing practice.
Your salary might be less in the short term, but you’ll eventually build a successful practice and get back to where you need to be. And you’ll have the freedom to make your schedule and run things the way you want instead of having someone else tell you what to do- which is priceless.