Productivity
In a typical example of a production-based bonus, you may be an employee of a single-specialty internal medicine group brought in to practice general internal medicine. Your salary may be $140,000 per year with a bonus allowing you to keep 50 percent of all billings or collections after you have brought in revenue equal to your salary plus overhead. In other words, revenue from patients you have seen at some point in the year may exceed the $140,000 you are being paid. From that point forward, 50 percent of the billings or collections from patients you see will go to you after overhead has been covered. There should be some expectation (though it may not be put in writing) as to what your gross will be when salary and production are combined.
Is it more favorable, then, to have a contract where the production bonus is based on billings or collections? We believe collections are more favorable, because billings won't amount to much if you are seeing a high percentage of uninsured or underinsured patients. As a new physician in a group, these types of patients very well could be funneled to you. We therefore believe that collections is the more reasonable framework.
The "50 percent" model referenced above is fairly standard, though we have seen contracts that allow new physicians to keep up to 100 percent of their production or as little as 20 percent. This is the most basic type of production bonus, but there are a variety of others. In some contracts, production may be based not just on number of patients seen but on the type of patient seen. Not all patients are equal.
Again, in the example of the internal medicine group, one physician may be seeing a high percentage of elderly patients with chronic problems. These patients take more time than younger, well-care patients. If your practice is comprised of mostly older, chronic patients you won't be able to see as many patients as a physician seeing well patients. In a production-based contract that rewards physicians for number of patients seen, you could be penalized for having an older patient base.
That is why some contracts base production not on number of patients seen but on the amount of work done by physicians. In these contracts, work is measured by a point system based on RVUs (relative value units). A physician seeing a high number of older, more acute patients will get more points per patient than a physician seeing mostly younger well patients. At the end of the day, the amount of work physicians are doing will be equal and their pay will be equal—at least that is the idea behind these types of contracts.
These contacts also may provide compensation for things other than patient care, such as scores on patient satisfaction surveys, participation in group governance and on positive outcomes. Compensation in this type of contract might work like this:
CONTRACT A
Production..........50% - 60%
Patient satisfaction..........10% - 15%
Group governance..........5%
Resource utilization..........10%
Profit share..........5%
While there are a variety of ways to "slice the pie," the one which seems to work best in our experience is the simple one in which new physicians get paid a base salary that is predicated on current physician income data for their specialty supplemented by a bonus for patients seen. At any rate, it is important that the terms be clear in the contract so that you know what is expected and you have a clear path for achieving a certain level of income.
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