Take on ophthalmology productivity bonus formula

[eudaimonia]

Hi! I'm finishing my ophthalmology residency (no fellowship) and am looking at a small private practice group offer in a sparsely populated area of the Midwest with partnership potential in 3 years. Base salary offer is $250,000 with an annual productivity bonus of 30% of revenue attributed to clinical services in excess of 2.5X the base salary. Can anyone tell me in their experience if this productivity bonus formula seems reasonable or common for comprehensive ophthalmology? I will likely ask for the percentile to be increased to 45%, but would appreciate any help or advise!

[ENT Doc]

I can’t comment on the formula being normal but I’d certainly work to reduce your time to partnership to 2 years.

[Zaphod]

Id ask frankly what that means in bonus payment with a typical or median optho production. You can hide so much or distort these 'formulas' to where they never pay out.

I'd investigate each variable and what is typical. Whats the input/output for revenue, clinical services, etc...

[EyeOweYou]

For a "sparsely populated" area, you could probably do better.. The bonus percentage usually ranges from about 25% to about 35% at a multiple of 2.5-3x base. Offers like yours can be seen in the larger or largest midwest or southeast cities, whereas the sparsely populated areas tend to offer better overall packages including time to partnership, bonus percentage, signing bonus, etc. Comes down to supply/demand for all parties involved. Best way to know whether your offer is good or not is to get multiple offers and compare. It's also fair to ask what they expect your productivity to be. If you're building a practice from scratch, you're less likely to hit the bonus range in the first year

As the above poster mentions, a lot can be hidden in these formulas.

Quick math for example. 250K base x 2.5 = 625K. If you hit 625K in revenue, you are making 40% of your revenue. Anything above that, you're getting 30%, so you're overall percent of clinical revenue decreases as the the revenue increases. Let's say you had a 300K base and a 3x multiple to reach bonus and still hit 625K in revenue. In that case, your pay is approaching 50% of your clinical revenue... better for you, worse for the practice. Simplified example

Overall, I'd say the most important factor in your future income is likelihood of partnership and time to partnership.

[GastroMastro]

Don’t know anything about ophthalmologist salary otherwise than 250K w 3 year partner track seems low. 30% also seems low. This offer seems designed to squeeze out associates. Do you have a second offer

[Dusn]

The thing about ophtho is that the only reason to join a private practice is to make partnership (otherwise the starting salary is lower than you can make elsewhere). And unfortunately a lot of people get screwed over and are not offered partnerships, or their “buy-in” is excessive and a graduated buy-in, or they discover that the group’s finances actually kind of suck and the group is dysfunctional.

Are they willing to show you the practice’s finances after you sign an NDA? I agree with ENT doc about decreasing the amount of time till partnership... at least you’ll know if you’re getting screwed sooner rather than later.

[Tim]

The thing about ophtho is that the only reason to join a private practice is to make partnership (otherwise the starting salary is lower than you can make elsewhere). And unfortunately a lot of people get screwed over and are not offered partnerships, or their “buy-in” is excessive and a graduated buy-in, or they discover that the group’s finances actually kind of suck and the group is dysfunctional.

Are they willing to show you the practice’s finances after you sign an NDA? I agree with ENT doc about decreasing the amount of time till partnership... at least you’ll know if you’re getting screwed sooner rather than later.

Regardless of the base and bonus structure, it comes down to comp as an Associate and comp as a Partner AND the price to be paid to become a Partner.
Your negotiation, for many of the reasons previously mentioned is actually to achieve partner status, with performance conditions. Without open books and open communications, you are likely to be disappointed. Are they really looking for a new partner? That you need to be satisfied with the terms and conditions. I am not suggesting they are "bad actors", simply encouraging you to vet the opportunity beyond the productivity bonus.

[TheDangerZone]

Don’t know anything about ophthalmologist salary otherwise than 250K w 3 year partner track seems low. 30% also seems low. This offer seems designed to squeeze out associates. Do you have a second offer

The offer is about average for salary and bonus level for a comprehensive associate in a private practice.

I agree with others that partnership is the biggest thing to focus on. Do they have a good track record of associates making partner? Have there been any overtures from private equity? You don’t want to sweat for 18 months then have the rug pulled out when the senior partners sell out and get their Golden parachutes.

The production bonus is within the realm of normal. It all depends on how desperate they are to get help, if they’ve been looking for years, their starting offer is usually already on the higher side to attract talent. If they really like you, there is room for some negotiation but don’t expect a huge boost.

Also agree that most jobs have a two year track. That’s where I would push back.

[ACN]

Our bonus structure is simpler for employees.

Collections -salary - overhead = bonus * 80-90% (deficit)

If you can see their books, they can tell you monthly overhead, thus u can determine which formula is better.

[chocolatebear11]

Hi! I'm finishing my ophthalmology residency (no fellowship) and am looking at a small private practice group offer in a sparsely populated area of the Midwest with partnership potential in 3 years. Base salary offer is $250,000 with an annual productivity bonus of 30% of revenue attributed to clinical services in excess of 2.5X the base salary. Can anyone tell me in their experience if this productivity bonus formula seems reasonable or common for comprehensive ophthalmology? I will likely ask for the percentile to be increased to 45%, but would appreciate any help or advise!

goodluck! I just went through this process. The 30% of anything over 2.5- 3x of base salary is fairly standard for ophthalmology contracts. It seems though for other specialities, the bonus structure are usually more favorable (lower threshold with higher percentage 40-50%).

another thing to consider is what is considered in collections. Some practices do not count technical component (OCT, b-scans) in the collections for bonus while others do. This will make a huge difference and easily you achieve your bonus.
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I was told Midwest usually pays higher (usually higher base salary)

[eudaimonia]

Thanks all for the help! I'm better understanding how important it is take the long view with this. So far their track record of associate to partnership is 100% (though it's a small group), there's a good age mix (not all about to retire), and they have been vocal about not selling to private equity. Regarding this, I am asking for language in the contract that says my non-compete and tail coverage responsibility would be void if they sell to PE - my reasoning being that if they truly aren't planning on a PE sell then this shouldn't be threatening? Sounds like if I can negotiate a 2 year partnership consideration and increase the productivity percentile (as explained by EyeOweYou) it would look more appealing, and I really should press for more transparency on how a buy-in might work.