My partner is in his last year of ob/gyn residency, and he's about to sign a contract. Since he's still very much entrenched in residency, I'm trying to help him sort out some of these financial issues. He's getting a two year salary guarantee. As part of his contract negotiation, his new employer (a sole provider) has agreed to the idea of some sort of performance bonus in the event he goes above a certain collections amount. Since he will be their first physician employee (new, small group), they don't know what method is the best for calculating it and asked him what he would like to see.
Another job offer he had (but declined for other reasons) worked like this: for any collections above the targeted collections amount (which is what creates his base salary), a 25% bonus is paid to the physician. This one seemed like a bad deal to me, because the target collections amount was 2.5x the salary, so in my mind the collections above the target collections were more of a benefit for the employer than the physician, as they got to keep 75% of it. Example: assuming a salary of 200,000, target collections would be 500,000 (2.5x200,000); for any collections over 500,000, he would get only 25% of that amount. You're getting 1 over 2.5 or 40% of collections to get to your base salary, and once you hit the total for that it goes down to 25%? This is the only bonus setup that was every explained in any of his other offers.
Does anyone have any other suggestions? I was thinking bonus collections above his target should be more like 40% (collections divided by 2.5, in line with how the base salary is created), but maybe I'm overlooking something in the bigger picture of running a practice. Thoughts?
Another job offer he had (but declined for other reasons) worked like this: for any collections above the targeted collections amount (which is what creates his base salary), a 25% bonus is paid to the physician. This one seemed like a bad deal to me, because the target collections amount was 2.5x the salary, so in my mind the collections above the target collections were more of a benefit for the employer than the physician, as they got to keep 75% of it. Example: assuming a salary of 200,000, target collections would be 500,000 (2.5x200,000); for any collections over 500,000, he would get only 25% of that amount. You're getting 1 over 2.5 or 40% of collections to get to your base salary, and once you hit the total for that it goes down to 25%? This is the only bonus setup that was every explained in any of his other offers.
Does anyone have any other suggestions? I was thinking bonus collections above his target should be more like 40% (collections divided by 2.5, in line with how the base salary is created), but maybe I'm overlooking something in the bigger picture of running a practice. Thoughts?
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