How does one determine bonus level?

[Garp]

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How does a practice determine the threshold bonus level a new associate should need to attain in collections to gain a percentage? I know it's calculated as a function of the base salary and overhead of the practice, but I'm not sure exactly how. Thanks for any help you can give.

 

[orbitsurgMD]

How does a practice determine the threshold bonus level a new associate should need to attain in collections to gain a percentage? I know it's calculated as a function of the base salary and overhead of the practice, but I'm not sure exactly how. Thanks for any help you can give.

It can be done any way they want, whatever the contract describes. Commonly it is based on a formula of a percentage of collections above some multiple of the guaranteed salary paid (2x, 2.5x 3x, e.g.) Now that can vary depending on the usual makeup of your collections. (Some retina practices ended up unintentionally overpaying their associates relative to their overhead expenses because of extraordinary overhead costs associated with anti-VEGF therapies where the purchase of the drugs was being run through the practice along with all of the other ordinary overhead. In those cases, a total collection might be $2300 for a procedure, and $2000 of that was for the purchase of the Lucentis drug alone which was being run through the practice without markup. You could see with a couple dozen treatments in a fiscal quarter how collections would seem large, but for a service that had an effective 95% overhead cost to the practice instead of a more normal 50-60%.)

The frequency of bonus payment can be whatever the contract specifies: monthly, quarterly, semi-annually, etc., but quarterly seems common. Longer periods average out income variations from leave periods more evenly.

I have wondered why more practices don't incentive-ize every dollar collected instead of having a "floor" of production to meet. The first-dollar incentive wouldn't have to be large, only say 10% through the first $250K collected, then a larger percentage above that, but it would give an associate a more concrete motive to seek additional work. In so many practices, bonus thresholds are set too high, which becomes as much a source of frustration as an incentive.

 

[7ontheline]

I have wondered why more practices don't incentive-ize every dollar collected instead of having a "floor" of production to meet. The first-dollar incentive wouldn't have to be large, only say 10% through the first $250K collected, then a larger percentage above that, but it would give an associate a more concrete motive to seek additional work. In so many practices, bonus thresholds are set too high, which becomes as much a source of frustration as an incentive.

I am a first-year employee in a 9 or 10 doctor group (5 partners) and one of the reasons they don't incentivize every dollar is because they are afraid it would lead to selfish actions within the group, e.g. dumping poor-paying patients, hoarding procedures, etc. That's what they told me at least.

 

[orbitsurgMD]

I am a first-year employee in a 9 or 10 doctor group (5 partners) and one of the reasons they don't incentivize every dollar is because they are afraid it would lead to selfish actions within the group, e.g. dumping poor-paying patients, hoarding procedures, etc. That's what they told me at least.

As long as there is any collections-based production incentive, you could say there was the incentive to dump poorly-paying plans and those patients that have them. Ethical or social considerations aside, efficient management of practice activity--i.e., doctor time-- would always dictate this. This is true of the first dollar and the last dollar. I don't believe that reason.