Bonus structures on physician associate employment contracts: pearls and pitfalls

Someone on student doctor network asked:

I’m curious about the typical wording for bonus structures in ophthalmology contracts. Is it normal for the bonus to be calculated at the end of the calendar year? If you start in the middle of the year, it doesn’t seem possible to earn a bonus until 1.5 years after starting. I don’t think there is any way that people get over 3x base salary by 6 months in, right?

Usually junior associate contracts give a base salary of maybe of $160,000 to $200,000 for a comprehensive ophthalmologist. Then there is a bonus of typically 25-35% for collections over 2.5 to 3 times the base salary.

To answer the question above, bonuses are typically paid quarterly or semiannually and it takes about 2-6 weeks for payment to come in from an efficiently run practice. See what it says in your contract and try to negotiate it to semiannually. I would estimate that over 90% of revenue is collected within 30 days. As an aside, if you boss grumbles about how there are so many “challenges” in patient collections and that it takes months to get paid, it should raise a red flag- have him or her read this post about the revenue cycle.

If your base salary is $180,000 and your contract calls for a bonus of 30% of 2.75 times your base salary, then you need to generate about $500,000 in collections to get your bonus. The “typical” comprehensive ophthalmologist generates $800,000 to $850,000 in revenue. High end is $1.2 to $1.5 million in revenue.

The “average” collections per patient encounter for a comprehensive ophthalmologist varies from about $130 to $200. Note that encounters include procedures such as surgeries as well as postops which aren’t reimbursable in the global period.

This number is all over the map on purpose. If your practice takes vision plans, has crappy contracts with Medicare advantage plans and contracts with Medicaid, the revenue isn’t going to be as high as if they many patients are on straight Medicare with a supplement. If your practice has poor billing and collections practices and doesn’t collect at the time of service then this number will be lower. If you have a surgically dense practice then this number will be higher. If your practice didn’t meet MIPS they will take a penalty on Medicare payments- and your salary will suffer. Read this post about things to look for on associate contracts for more hints.

If you order a bunch of borderline unnecessary testing on everyone that walks through the door and use scare tactics to convince everyone they must get femtosecond laser for their cataract surgery, then this number will be higher. I am conservative with testing and procedures, but don’t take vision insurance and lowball contracts so my own numbers per patient are at the low middle end of the range I cited in the last paragraph, but somehow I wind up making a decent living.

So to generate $500,000 in collections to hit your bonus, you need to see about 2900 patients per year. Assuming you work 46 weeks per year, this is 63 patients per week, or 12.6 per day. How quickly does the practice you are joining expect you to reach this number? Are you building up a practice from scratch with overflow from the busy existing doctors, or are you replacing someone who has retired or left? Note that if you’re starting a practice from scratch with overflow, your practice might take a LOSS on you. Assuming your malpractice insurance, health insurance and other benefits are worth $20,000, added to your $160,000 starting salary, you’d need to see 1125 patients per year, or 25 per week to reach what the practice is paying to have you there. If you factor in that the practice will need to hire one full time equivalent employee for you, that’s another $40,000 or so with benefits, bringing the total expense to the practice at $220,000- meaning you need to see 1375 patients at $160 of revenue per patient (30 a week) or 1571 patients at $140 of revenue per patient (34 per week).

As an aside, I had 1700 patient encounters my first year solo starting from scratch- but your geographic area might be more (or less) saturated or competitive than mine, or if you are a sub specialist that is in demand you might ramp up quite quickly.

My post on why a $300,000 junior associate salary may not be what it seems underscores the importance of evaluating what the long term potential is of joining a group. You might be slower and earn less in the first year or two, but I would take a $150,000 year one salary over a $300,000 one if I was a better personality fit in the practice, it was run more efficiently, and especially if I didn’t have to run back and forth between four exam rooms and take trauma call every week.

But of course, no job is forever and you learn something from each job you have. I worked two jobs before I went solo.

The question below is from a thread on bogleheads (click on this link to see the other responses, they are interesting to read) about pracices following through with bonus payments:

A good friend is a physician-employee at a private practice. His contract states he is paid 50% of collections. This is paid every 2 weeks based on the collections received during that pay window.

He noticed his pay has dropped 30-40% since Jan 1. He already had concerns about a relatively high accounts receivable for his work but now it has skyrocketed. His 120 day + is 30% – 2-3x industry standard.

And here’s my reply:

Granted, there are many (if not most, I’d like to say) owners that are honest, want their junior associate to succeed, and will play fair with you. But unfortunately there are some that aren’t. Yes I personally know of multiple people who had games played with them regarding their bonus or compensation. Some of them are even in our google group. If you’re in that situation, start your own gig. Start reading our steps to start a solo practice.

There are SO many ways a practice owner can screw over an associate on bonus based on percent of collections;

1. Accidentally by poor collections practice- not collecting patient responsibilites at time of service, inappropriate or missed coding/ accidental downcoding, forgetting to put in certain CPT codes for procedures.

2. Using a billing company that doesn’t follow through with collections.

3. Maliciously- cooking the books. Shifting accounts they collected for patients you saw to their patients and claiming that they didn’t collect anything for patients you saw.

4. Dumping patients with lower paying insurances to you, and keeping patients with higher reimbursement for themselves.

Possible solutions:

1. If you like the practice and/or think it’s 1 or 2, speak with the owner. Perhaps ask to get paid by work RVUs as suggested. My collections is typically 99.5% of allowed amounts- because I control the process.

2. If it’s 3 or 4 lawyer up and do an audit, start looking for a new job, or both- consider going solo.

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