The VERY basics of percentage-based associate compensation

You have the money, but knowing exactly how to divvy it out could be a ruff process.Denise Tumblin, CPA, knows how hard it is to figure out what to pay and what benefits to offer to team members and associates. She showed off her sympathy and knowledge at CVC San Diego and went into detail about what works and what doesn't when it comes to percentage-based compensation. Here are a few of the things she touched on.

What do the other practices do?

According to Tumblin's work in Benchmarks 2015: A Study of Well-Managed Practices the majority of these high-functioning hospitals at the end of 2014 now pay doctors some form of incentive-based compensation.

> 26% pay purely based on production

> 50% pay doctors a guaranteed base, plus a percentage of production over a required minimum

> 24% pay doctors a fixed salary.

Blended-rate practices

When one percentage applies to all medical service and product production, a practice has a blended rate. Well-Managed Practices typically pay doctors between 16 and 21 percent. Where they fall in that range is dependent on the practice's staff-to-doctor ratio. In other words, the more staff the practice provides to assist the doctors, the lower the percentage paid to the doctors.

The additional staff members, according to Tumblin, allow the doctors to produce at a higher level, which in turn increases doctor compensation. 

Split-rate practices

Practices use a split-rate when one percentage applies to medical service production and another applies to medical product production. These practices typically pay their doctors between 22 and 26 percent for services, and between 4 and 8 percent for products.

The service/product split (or, rather, how much medical revenue comes from services and how much from product sales) and the staff-to-doctor ratio will both affect where you end up in the stated ranges.

Keep in mind…

According to Tumblin, to make any percentage-based compensation work-blended-rate or split-rate-every team member must understand what is and isn't credited to the doctor's individual production. Doctors receive credit for all medical service revenue provided during an outpatient appointment, in-hospital treatment or dental and surgical procedures. Doctors also receive credit for medications and therapeutic foods dispensed during an outpatient appointment, during in-hospital treatment or at the end of a patient's hospital stay. Such items as prescription refills and additional food or product purchases that don't involve a doctor are credited to a hospital provider. The doctor receives credit for the refill only if it requires his or her time to review the record, assess whether the medication or dosage needs to change, and give direction to the staff member who will fill the prescription. Doctors never receive credit for boarding, grooming or retail purchases.

What do you if multiple doctors touch a case? When multiple doctors collaborate to treat a patient, the doctor who provides each point of care receives credit. For example, if Doctor A examines and admits a patient to the hospital on Day 1, and Doctor B provides or supervises the hospital treatment on Day 2, Doctor A gets credit for everything on Day 1 and Doctor B gets credit for Day 2.

And last, but certainly not least, Tumblin says production-based pay only ever works well when doctors lead with what is in the best interest of the patient. And what does that lead to, in almost all cases? Tumblin says doctors earn more.

Tumblin urges practice owners, practice managers and associates to maintain that patient-first mentality to always, always remembers it's about the medicine, not the money. With a patient-first approach, the money follows the medicine.