Contracts, salary, and collections

[4ophtho]

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1 - what are common salary agreements for associates
(Flat salary, bonus schedule, percent of collections)

2 - what is a reasonable amount you can expect for net collections as a 1st year associate? 2nd year?

 

[odieoh]

I think you'll find that there is no set number for any of what you are asking-- it's all highly variable depending on:

1) Practice situation
--Are you replacing someone, and therefore walking into a full clinic schedule rather than building up volume slowly? Also, how much are you going to work- 6 days a week for 51 weeks?

2) Geographic location- "Desireable" areas are going to be able to pay you much less. Starting in a big city, you may be offered 120-150k as the base salary. Sometimes even less from what I hear. Rural areas will often start you higher, up to 200k, with some extreme outliers even higher. Generally ophtho seems to start quite a bit lower than a lot of other subspecialities, but then you ramp up over the first several years.

Net collections are also going to be dependent on #1- if you walk into a full schedule, obviously you are going to bill more and collect more. A common bonus structure would include a % of collections(usually 20-30%) at a preset multiplier of your base salary- often 2.5 or 3. For example, lets say your base is 150k, and you agree on 30% of collections above 3x base, and you bring in 500k in collections your first year. Your pay would be 165k.

Whether 500k is reasonable or not in the first year is again very dependent on what you're walking into.

 

[90 diopter]

1 - what are common salary agreements for associates
(Flat salary, bonus schedule, percent of collections)

2 - what is a reasonable amount you can expect for net collections as a 1st year associate? 2nd year?

I started out on base salary plus bonus for x percentage above y collections. My practice started from scratch, so I had no expectation to get any bonus the first few years. If given the choice between a lower base salary with a generous bonus versus a higher base salary with a lower bonus, most people starting out would do much better choosing the higher salary.

In my first year out my net collections were in the low to mid 300's. I had a nice starting salary, so collections didn't really matter at that point, other than the boredom of having many days where I would only see one or two patients.

Right now I get a flat cut of everything I bring in.

 

[Visionary]

odieoh pretty well nailed it. I've also heard of contracts that are all over the map. I used to think it was pretty standard across the industry, but that's not the case. You'll mainly find base + % of collections (e.g., 25-35%) above a certain threshold (e.g., 3 x base), but folks have told me about arrangements that sound more like limited partnerships (base + any profit above threshold). I've heard about partnership tracks with buy-ins close to $1 mil and others with no buy-in at all. Generally, if you're starting from scratch, you shouldn't expect much the first year, and the higher a base you can negotiate, the better. Keep in mind, though, that the attractiveness of the long-term arrangement may justify lower early pay. In my case, I knew I was taking less on the front end, but my buy-in is low and the potential is huge. It's worked out very well.

 

[4ophtho]

Thank you for the replies; I always appreciate you members sharing your experience on these forums.

My other question is about malpractice insurance- I have to estimate what I'll be doing next year even down to how many glasses/contacts I'll prescribe. Any help here?

 

[Visionary]

Very difficult to estimate such numbers, as a lot of your productivity will be dependent on whether you're starting from scratch, taking over for a retiring doc, what the market is like in your area, the amount of competition. So many things to consider, and even then, you could be off by a ton.