How do straight production contracts work?

[darkavenger]

I am an experienced derm PA and I just finished my first year and my contract is up for renewal.

Currently, I get a base salary plus 20% production bonus on collections over $250K.

Now, they want to put me on a straight production contract. 

I haven't seen the contract terms in detail yet, but they did mention that my compensation, including direct expenses, would be 30% of my production.

I've asked for clarification on how my compensation would be calculated and how it would be paid out.

Questions:

1.  Those of you who are on straight production contracts, how do your's work? 

2.  Did you retain all of your benefits? 

3.  What should I keep in mind when negotiating this renewal?

Thanks,

DA

[PACShrink]

At my last practice (outpatient Psych) I was getting 58% of collections as a W-2 employee. I paid my own malpractice and there were no benefits (other than the practice paying taxes). I was seeing a mix of new patients and follow-ups. Follow ups were Mostly 99213 and 99214. New patients were 99203 and 99204. I was seeing 100+ patients per week.

 The practice I am currently working at has me on salary for 6 months then per patient. This agreement is really interesting...  The practice will count the number of patients I see and I get paid on the rate x #. $80 for New, $40 for follow ups.

   30%. You have to consider several things WRT production. When you take time off = No pay, holiday = No pay, Practice closed due to weather = No pay. Training days/CME = No pay, Sick time = No pay. The other question is how good is the collections department? What % do they collect? Also, there is a lag from the time you see the patient and the time they collect...

Will you be W-2 or 10-99? There is a 7% difference in tax benefit. Just my thoughts....

I hope that helps...

On the bright side, Straight production can be great... I doubled my salary in year 2.

[anewconvert]

What percentage is the practice typically paying their physicians to work production?  Typically the rate is 40-55% depending on a lot of variables. You are already taking a 15% hit being a PA, and now they want you to take another 10-25% hit over the physicians in the group?  

Hiw mich did you bill for last year?

Will you have complete control over your schedule, or will the physicians have control of it?  Are they going to cherry pick and leave you with the low reimbursement cases?  

 

[darkavenger]

On 10/1/2017 at 7:20 PM, PACShrink said:

At my last practice (outpatient Psych) I was getting 58% of collections as a W-2 employee. I paid my own malpractice and there were no benefits (other than the practice paying taxes). I was seeing a mix of new patients and follow-ups. Follow ups were Mostly 99213 and 99214. New patients were 99203 and 99204. I was seeing 100+ patients per week.

 The practice I am currently working at has me on salary for 6 months then per patient. This agreement is really interesting...  The practice will count the number of patients I see and I get paid on the rate x #. $80 for New, $40 for follow ups.

   30%. You have to consider several things WRT production. When you take time off = No pay, holiday = No pay, Practice closed due to weather = No pay. Training days/CME = No pay, Sick time = No pay. The other question is how good is the collections department? What % do they collect? Also, there is a lag from the time you see the patient and the time they collect...

Will you be W-2 or 10-99? There is a 7% difference in tax benefit. Just my thoughts....

I hope that helps...

On the bright side, Straight production can be great... I doubled my salary in year 2.

PACShrink,

Thanks for your response.  I will be W2 and I'll have to see what benefits I'll retain if I go straight production.  Collections is pretty good at around 80% of billed, but I don't know about the lag time. 

[darkavenger]

On 10/2/2017 at 4:23 PM, anewconvert said:

What percentage is the practice typically paying their physicians to work production?  Typically the rate is 40-55% depending on a lot of variables. You are already taking a 15% hit being a PA, and now they want you to take another 10-25% hit over the physicians in the group?  

Hiw mich did you bill for last year?

Will you have complete control over your schedule, or will the physicians have control of it?  Are they going to cherry pick and leave you with the low reimbursement cases?  

 

So you are saying I should ask for 35-40%?  I billed $900K in a year's time and the collection rate is around 80%.  As for my schedule, my physician does not have control over it and it is handled by the front desk people. 

[PACShrink]

On 10/8/2017 at 7:43 PM, darkavenger said:

So you are saying I should ask for 35-40%?  I billed $900K in a year's time and the collection rate is around 80%.  As for my schedule, my physician does not have control over it and it is handled by the front desk people. 

You billed $900K? That sounds a little high... That may have been the charged amount. I think what you need to know is how much was the allowable amount. If you know how much collections were specifically on your patients, that might give you a better idea on expected income.

[anewconvert]

On 10/8/2017 at 7:43 PM, darkavenger said:

So you are saying I should ask for 35-40%?  I billed $900K in a year's time and the collection rate is around 80%.  As for my schedule, my physician does not have control over it and it is handled by the front desk people. 

So the value of working production for you is significantly higher pay. The risk is that your pay is tied directly to your output. You don’t output, you don’t get paid. For that risk you should not be expecting to get paid at a similar level to what you are making now, or even a few tens of thousands of dollars more. You should be earning a similar cut as the physicians as you are now taking on the same financial risk as they are. 

 

You should at a minimum do some research of what a new Derm doc would cost them, what that new docs contract would look like and what your productive abilities would be relative to that doc. That will give you an idea of what your value is. If you are truly collecting $700k a year for the practice then you are crazy valuable to them. A doc collecting that much is taking home $300k+... if you are doing the same work you should be coming in around the same number in my opinion. 

[darkavenger]

Thanks for the excellent thoughts you guys.  You've given me a lot to think about.  I am now reviewing my numbers to see if collections were as good as they said when I joined.  They had mentioned that they were around 80%, but my own numbers show collections around 40%.  I may be miscalculating that, since the breakdown spreadsheet is confusing, but if that is the case, I may stick to base + 20% instead of a straight production 30%.