Is this a bad deal?

[facetdoc]

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I need someone who knows PP comp in and out to take a look at my assumptions and make sure I’m thinking about this correctly. I was floored once I started to understand the comp model better, I thought I was going to be doing really well in a few years.

Context: new grad, great training at a well known institution, moving to mid-sized midwest City, looking at a contract for a small PP that is co-owned by a large PE group.

Comp will be a sliding scale as a percent of profee collections - a very generous percent compared to what I had seen from online sources. Guaranteed base with ASC buy-in at one year, then switch to collections only. Maybe their overhead is really low, didn’t think much of it, got the contract sent to me and caught that collections will be determined by a “Site neutral model” that through a formula pays you as if you were performing everything in a facility. Up til now I had known the pro fees were lower for things done in a facility but they are SUBSTANTIALLY lower than office billing pro fees. Okay fine, they do most of their stuff in an ASC anyway. But then I realized, and I need to clarify with them, that my clinic visits would be billed like a facility as well. That’s a nice 100K haircut off my comp. Basically I get a large percentage of a very small pot. I’ve built out this huge spreadsheet trying to understand all this, and realized that my comp would be right at the MGMA natl average once I am up to full speed, but I think I’d be doing around 13,000 wRVUs a year. So I’m getting like $32/wRVU when the average is 93. Is that normal for PP?

Am I flat out wrong or is this a bad deal?

 

[drusso]

I need someone who knows PP comp in and out to take a look at my assumptions and make sure I’m thinking about this correctly. I was floored once I started to understand the comp model better, I thought I was going to be doing really well in a few years.

Context: new grad, great training at a well known institution, moving to mid-sized midwest City, looking at a contract for a small PP that is co-owned by a large PE group.

Comp will be a sliding scale as a percent of profee collections - a very generous percent compared to what I had seen from online sources. Guaranteed base with ASC buy-in at one year, then switch to collections only. Maybe their overhead is really low, didn’t think much of it, got the contract sent to me and caught that collections will be determined by a “Site neutral model” that through a formula pays you as if you were performing everything in a facility. Up til now I had known the pro fees were lower for things done in a facility but they are SUBSTANTIALLY lower than office billing pro fees. Okay fine, they do most of their stuff in an ASC anyway. But then I realized, and I need to clarify with them, that my clinic visits would be billed like a facility as well. That’s a nice 100K haircut off my comp. Basically I get a large percentage of a very small pot. I’ve built out this huge spreadsheet trying to understand all this, and realized that my comp would be right at the MGMA natl average once I am up to full speed, but I think I’d be doing around 13,000 wRVUs a year. So I’m getting like $32/wRVU when the average is 93. Is that normal for PP?

Am I flat out wrong or is this a bad deal?

They are overcomplicating it by blending apples and olive oil. If it's a private practice model, then the only rational way to compute your compensation and production is cash accounting: Dollars in the till - direct costs (total compensation) - indirect costs (overhead) = what's left over for your owners to keep as a ROI for your hiring risk.

The RVU model was designed to OBSCURE cash accounting and provide "plausible deniability" for CFO's running arbitrage schemes on facility fees. It was meant to separate the producers from the means of production.

You're joining a private practice. Ask for a guaranteed salary and a percent bonus on collections. If they stick you in an ASC where you don't get a hefty pro fee, then you need a higher salary. However, once you become an owner, everything changes.

 

[MitchLevi]

I need someone who knows PP comp in and out to take a look at my assumptions and make sure I’m thinking about this correctly. I was floored once I started to understand the comp model better, I thought I was going to be doing really well in a few years.

Context: new grad, great training at a well known institution, moving to mid-sized midwest City, looking at a contract for a small PP that is co-owned by a large PE group.

Comp will be a sliding scale as a percent of profee collections - a very generous percent compared to what I had seen from online sources. Guaranteed base with ASC buy-in at one year, then switch to collections only. Maybe their overhead is really low, didn’t think much of it, got the contract sent to me and caught that collections will be determined by a “Site neutral model” that through a formula pays you as if you were performing everything in a facility. Up til now I had known the pro fees were lower for things done in a facility but they are SUBSTANTIALLY lower than office billing pro fees. Okay fine, they do most of their stuff in an ASC anyway. But then I realized, and I need to clarify with them, that my clinic visits would be billed like a facility as well. That’s a nice 100K haircut off my comp. Basically I get a large percentage of a very small pot. I’ve built out this huge spreadsheet trying to understand all this, and realized that my comp would be right at the MGMA natl average once I am up to full speed, but I think I’d be doing around 13,000 wRVUs a year. So I’m getting like $32/wRVU when the average is 93. Is that normal for PP?

Am I flat out wrong or is this a bad deal?

Were you quoted $32?

 

[Agast]

There is no such thing as an ASC office visit, but clarify with them if they’re applying hospital facility fees. My guess is that it only applies to procedures, and it’s to incentivize 100% ASC based procedures. The ASC is the biggest money maker for Private Equity. That is why they allow you to buy in so early, to incentivize you.

 

[facetdoc]

They are overcomplicating it by blending apples and olive oil. If it's a private practice model, then the only rational way to compute your compensation and production is cash accounting: Dollars in the till - direct costs (total compensation) - indirect costs (overhead) = what's left over for your owners to keep as a ROI for your hiring risk.

The RVU model was designed to OBSCURE cash accounting and provide "plausible deniability" for CFO's running arbitrage schemes on facility fees. It was meant to separate the producers from the means of production.

You're joining a private practice. Ask for a guaranteed salary and a percent bonus on collections. If they stick you in an ASC where you don't get a hefty pro fee, then you need a higher salary. However, once you become an owner, everything changes.

I put too many words on the page. Thanks for engaging.

It will be a straight collections % model after the first year guarantee. I can switch at any time if I start producing over the guarantee.
Here's the actual formula to adjust my pro fees.

..scaling cash collections for service billed site of service 11 (office) by the adjustment factor defined as the lesser of ((Work
RVU) + (FAC PE RVU) + (MP RVU)) / ((Work RVU) + (NonFac PE RVU) + (MP RVU)),
or 100%

In English, facility RVU (small)/ Office based RVUs (better) or 100%, the lesser of those are how my gross collections are adjusted

@Agast I need to clarify but I think this would include clinic visits, which would make a huge hit in total comp

@MitchLevi There's no RVU component. I calculated that by dividing my wRVU for the year over total comp. Assuming 13k RVUs once I'm full.

 

[CleanUp]

co-owned by a large PE group.

Sorry, bud. Unfortunately, private equity will play these shell games. My unsolicited advice is get your experience, learn the ropes, and then look for greener pastures.

Maybe their overhead is really low,

I strongly recommend you find out what it is. And I would have an excellent accountant look over how they do their accounting. For example, I know of one such group that did not count previous debt into their balance sheet when it came to their financial statements. Wild.

 

[Agast]

The best resource is to talk to their current pain doctors and see if they have the exact same set up and are thriving financially

 

[facetdoc]

Sorry, bud. Unfortunately, private equity will play these shell games. My unsolicited advice is get your experience, learn the ropes, and then look for greener pastures.


I strongly recommend you find out what it is. And I would have an excellent accountant look over how they do their accounting. For example, I know of one such group that did not count previous debt into their balance sheet when it came to their financial statements. Wild.

I have lurked on here for years and really thought I had decent lay of the land. The site of service difference in pro fees really threw me for a loop, I had never caught what a significant difference that makes in the professional fee. Then they slap this "site neutral" collections adjustment on top. Hopefully this helps someone else out.

Thank you for the responses and advice.

 

[drusso]

I have lurked on here for years and really thought I had decent lay of the land. The site of service difference in pro fees really threw me for a loop, I had never caught what a significant difference that makes in the professional fee. Then they slap this "site neutral" collections adjustment on top. Hopefully this helps someone else out.

Thank you for the responses and advice.

...they will never love you back...SOS is the root of all evil in health care economic distortion. Just remember: Every complication is an opportunity for someone else's arbitrage. Keep it simple stupid.

 

[BobBarker]

The payment plan is confusing to me and I’m savvy with this stuff. I wouldn’t do it.

 

[agolden1]

I have lurked on here for years and really thought I had decent lay of the land. The site of service difference in pro fees really threw me for a loop, I had never caught what a significant difference that makes in the professional fee. Then they slap this "site neutral" collections adjustment on top. Hopefully this helps someone else out.

Thank you for the responses and advice.

Even after reading substantially on here, you’ll be amazed at the ways you can get screwed once you start actually working.

 

[facetdoc]

Even after reading substantially on here, you’ll be amazed at the ways you can get screwed once you start actually working.

What tripped me up was everyone on here is usually talking about office based when they are under a collections model.
The professional fees for office are MORE THAN DOUBLE what you are paid in a facility. Again professional fee only not talking facility fees.

If I'm wrong on that please let me know but CMS and perplexity say otherwise. I went through and found the RVUs that go into each pro fee for each procedure.

My academic attendings did not catch this as well when I had them look over my excel sheet. One is a very savvy biller.

 

[callmeanesthesia]

It’s not necessarily a walk-away if the location is right for you. Depends a lot on the ASC buy-in and distributions, and what both the practice and ASC non-competes look like. Also depends on what percent of adjusted collections you get to keep. Since their “site neutral” collections results in them keeping somewhere between some and a lot of money off the top, they’re already keeping some toward overhead. You also need to figure out how to 2026 changes will affect you (increase in office based and decrease in facility based reimbursements by 7-10%) which would result, with their formula, in you getting paid 7% less while they make 7-10% more off of your office-based services. I’d suggest pointing out the effects of the 2026 changes and using that as rationale to ask for a change to the comp formula - ask for incorporation of global fee for E&M codes, and office based pro fee for procedures. Or if they won’t bite on that, ask for payment of pro fee across the board, with no additional expense adjustments as they would be keeping the practice expense portion. Again though, none of that makes sense unless the ASC has a favorable payout enough to make up for the dismal office-based income.

 

[specepic]

If it is overly complex and hard to understand then most likely it is to obscure underpayment to you

 

[drusso]

If it is overly complex and hard to understand then most likely it is to obscure underpayment to you

Bingo.

This is not a true collections-based compensation model. Collections are being redefined downward using a site-of-service adjustment before your percentage is applied. You are paid a percentage of a synthetic number, not actual cash received. In real private practice, collections mean cash. Compensation is based on actual professional fees collected minus transparent overhead. RVUs are not used to reprice revenue retroactively. When they are, it is to preserve the facility and ASC economics.

This model shifts site-of-service risk entirely to the physician while ownership controls where care occurs. You absorb professional fee compression, while the practice and PE partner retain facility margin and ASC upside. The outcome is predictable. Elite productivity produces MGMA-average pay.

A standard alternative is a guaranteed salary with a bonus based on actual professional fee collections. Office services should be paid at office rates. ASC economics should be separate and additive, not compensatory. Another acceptable alternative is true eat-what-you-kill. Pay a fixed percentage of actual cash collected after itemized overhead. No site-of-service repricing. ASC distributions must stand on their own.

If a compensation model requires RVU math to explain collections and produces average pay at top-tier productivity, the complexity is intentional and designed to confuse you. Private equity does not overcomplicate by accident.

 

[DrSpine]

Eat what you kill in a PE structure setting isn't the best either, considering the MSO takes a huge chunk of the money as overhead.
RVU model is intentionally made to keep things opaque.

Are you seeing a pattern? It's a rigged game against you from the start. Also, $32 for an wRVU has to an error because that's absolutely brutal.

 

[BoardingDoc]

What tripped me up was everyone on here is usually talking about office based when they are under a collections model.
The professional fees for office are MORE THAN DOUBLE what you are paid in a facility. Again professional fee only not talking facility fees.

If I'm wrong on that please let me know but CMS and perplexity say otherwise. I went through and found the RVUs that go into each pro fee for each procedure.

My academic attendings did not catch this as well when I had them look over my excel sheet. One is a very savvy biller.

Yes, office pro fees are substantially higher than facility pro fees. In some cases e.g. Kypho or stim, it's many multiples higher.

If your academic attendings did not explain this when you ran things past them, then they aren't quite as savvy as you suggest.

That said, this comp model is obfuscation on steroids. It makes sense that they're doing this RVU nonsense because they can't pay you a percentage of your ASC revenue unless you're an owner, and they need to incentivize you somehow.

That said, even 100 percent of facility pro fees is almost guaranteed to be a haircut over what you'd get paid at 40-50% of collections in an office based practice.

This says nothing about this office visit conversation to some facility number nonsense.

Agree that you need clarity on what the actual comp is going to be in terms of a simple formula, and what your $/rvu is going to be if they're paying you on an rvu basis.

 

[drusso]

Yes, office pro fees are substantially higher than facility pro fees. In some cases e.g. Kypho or stim, it's many multiples higher.

If your academic attendings did not explain this when you ran things past them, then they aren't quite as savvy as you suggest.

That said, this comp model is obfuscation on steroids. It makes sense that they're doing this RVU nonsense because they can't pay you a percentage of your ASC revenue unless you're an owner, and they need to incentivize you somehow.

That said, even 100 percent of facility pro fees is almost guaranteed to be a haircut over what you'd get paid at 40-50% of collections in an office based practice.

This says nothing about this office visit conversation to some facility number nonsense.

Agree that you need clarity on what the actual comp is going to be in terms of a simple formula, and what your $/rvu is going to be if they're paying you on an rvu basis.

They could pay a per diem rate for ASC work and then take on the risk of managing the employee/associate's schedule to make sure it pencils out.

Eeezy-peezy. Per diem rate for ASC rate; owners keep you busy. Stark compliant, simple to administer, and fair. I wonder why no one proposes this arrangement? Is @drusso really the smartest guy in the room?

 

[BobBarker]

Yes, ASC could be per diem. The radiologists were doing various injections and kyphos at the hospital before I started. They got an “interventional day rate” and billed their own pro fees as they were an independent group which later became a key piece of rad partners.

 

[drusso]

Yes, ASC could be per diem. The radiologists were doing various injections and kyphos at the hospital before I started. They got an “interventional day rate” and billed their own pro fees as they were an independent group which later became a key piece of rad partners.

So, simple, right? But, maybe those PE MBA dude don't get it? Hmmm....

 

[au bon pain]

OP any job can screw you and the likelihood of it happening in a private equity setting is significantly higher than average.

Along with comp, key indicators of how predatory an employer may be are the notice period, noncompete/non-solicitation clauses, and tail coverage.
From the ridiculous formula they’re giving you, I’m guessing these aspects of the contract are trash as well.

 

[facetdoc]

OP any job can screw you and the likelihood of it happening in a private equity setting is significantly higher than average.

Along with comp, key indicators of how predatory an employer may be are the notice period, noncompete/non-solicitation clauses, and tail coverage.
From the ridiculous formula they’re giving you, I’m guessing these aspects of the contract are trash as well.

I'm glad you mentioned this, those were the other key areas I had concerns with:
Notice period is like 5 mo advance which seems like a lot.
Non-compete is a ten mile radius for 2 years, honestly not that bad imo the metro is spread out
No tail coverage

I have no frame of reference for what's reasonable for these things but I'm talking with a contract lawyer soon.

 

[facetdoc]

Yes, office pro fees are substantially higher than facility pro fees. In some cases e.g. Kypho or stim, it's many multiples higher.

If your academic attendings did not explain this when you ran things past them, then they aren't quite as savvy as you suggest.

That said, this comp model is obfuscation on steroids. It makes sense that they're doing this RVU nonsense because they can't pay you a percentage of your ASC revenue unless you're an owner, and they need to incentivize you somehow.

That said, even 100 percent of facility pro fees is almost guaranteed to be a haircut over what you'd get paid at 40-50% of collections in an office based practice.

This says nothing about this office visit conversation to some facility number nonsense.

Agree that you need clarity on what the actual comp is going to be in terms of a simple formula, and what your $/rvu is going to be if they're paying you on an rvu basis.

Yeah I had another HOPD that wanted to give me 100% pro fee. I'm starting pick up that once you get to 40-50% pure office collections it's substantially higher than these high percentage facility based pro fee offers. The opportunity for the ASC buy-in is the question I suppose. In my head that should be a completely separate business and offer to consider, as @drusso pointed out.

 

[au bon pain]

Yeah I had another HOPD that wanted to give me 100% pro fee. I'm starting pick up that once you get to 40-50% pure office collections it's substantially higher than these high percentage pro fee offers. The opportunity for the ASC buy-in is the question I suppose. In my head that should be a completely separate business and offer to consider, as @drusso pointed out.

I’m guessing this HOPD job is not as an actual hospital employee but as a contractor of sorts where you’d be employed by a separate private (and likely PE-backed) entity?

 

[au bon pain]

I'm glad you mentioned this, those were the other key areas I had concerns with:
Notice period is like 5 mo advance which seems like a lot.
Non-compete is a ten mile radius for 2 years, honestly not that bad imo the metro is spread out
No tail coverage

I have no frame of reference for what's reasonable for these things but I'm talking with a contract lawyer soon.

Check to see if notice period is same for both parties — if so, while that’s on the upper end it’s not totally insane.

That non-compete isn’t terrible. Check for a non-solicitation clause though—a PE favorite.

For med mal is this occurrence or claims made? If it’s the latter and there’s no tail coverage then that’s bad and certainly a flag. On the flip side this can potentially protect you if you negotiate right and really feel you need to take this job.
But reading these tea leaves for a PE-employed gig not offering any tail for a claims-made policy: this is their way of telling you that if that if you become inconvenient to them in any way (not moving enough meat, not accepting a paycut if they ask etc) or their business model changes (ie less docs more midlevels), they’ll have a very low threshold to cut you loose.

 

[Laryngospasm]

Also find out their history with previous prospects. Private pain is notoriously known for screwing people til it’s time to make partner then cutting them loose. Rinse and repeat. Call around and talk to other pain guys in that town. Talk to them, or if possible talk to previous prospects.

 

[MitchLevi]

The obvious answer is to speak with the current guys. I personally think this sounds fishy and that you’ll be unhappy, and yes, the primary reason for that is the fuzzy math and PE involvement (PE is not always bad).

 

[Ducttape]

I'm talking with a contract lawyer soon.

that should always be the first step.