Negotiating in an \"Eat What You Kill\" Practice Structure

[engerland66]

I am about to graduate from a fellowship in a procedurally-heavy IM subspecialty. I have interviewed at various practices and some are eat what you kill. They offer a base salary. When my collections "pay" my base and cover my overhead, they then get re-distributed back to me. I am trying to figure out the pros/cons of this structure and what to focus on in negotiations. I think base salary is less important to negotiate than in an employed model. If I ask for more up front in base, I will make less on the back end in distributions. A higher base could be nice up front as I am building up my practice. However, they have a long waiting list for patients and space for me to jump right in, so I should be producing more than my base within a year -- so it won't matter in a sense. Therefore, I think it may be more important to have other things in my contract -- ie tail insurance.

Since my salary is collection-based, I understand insurance/payor mix matters. Having assurances I will get an equal mix of more desired insurances will be important. In addition, paying close attention to my own collections and comparing with their records will be important.

What are some other considerations in joining a group with this pay structure? Am I correct in focusing less on base salary and more on other benefits?

[Wiscoblue]

Just make sure that there is a mechanism to share equally with others anything that walks in the door. You could be picking up Medicare and Medicaid and uninsured as that would be the overflow and the rest are 'already established patients'.

[Hank]

Make sure you get patients and procedures that are attractive from a net production perspective.  Also make sure that the girls in billing / front office are aggressive about following up with insurance companies and patients to collect outstanding balances versus writing things off.

There's nothing worse than doing a procedure, incurring the med-mal liability, and then having lazy support staff refuse to collect the money owed for the procedure and thus deny you a paycheck for the work you performed on behalf of the patient and the office.

You should eat what you kill.  You shouldn't starve because the support staff wasn't willing to put the effort into collecting payment for the valid work you already performed.

[q-school]

this is how all offers start.  don't get caught up in the excitement.

existing partners don't always know how they feel until their income is slashed.  there sometimes are a couple who think since you get a base, it's ok to dump the non pay patients on you (no matter what the agreement was).  it's hard to catch at first and hard to be the new guy complaining.

make sure if you do any special procedures not currently offered the billing people are up to date.  collections rates vary widely, and especially if you are on lower base pay/ collection, you won't even know for several months whether collections are going the right way.

in answer to your question about focusing on production, i think that totally favors the group but certainly it depends.  if you have known them for a long time and trust them implicitly fine. if they just seem like a nice group of people from a couple days interviewing, then i would favor high base for first couple years.  why take the chance on another group moving in, change in referral base, change in reimbursement rates, slow to pay insurers, poor collections, confusing cost allocations, slow distributions for a/r, and confusing and late k1.

if you wanted to split the difference you could take a higher base first year and go to this productivity model second year.

if i were you, i would view tail as incredibly important.

good luck

 

[Hatton]

I agree with q school in that the tail is vital.

[ENT Doc]

Regardless of a payer mix or competent level of collections staff, it's always better to have a higher base given what you describe.  You'd be expected to cover your overhead regardless of what base salary you earn (I'd also check to see how the overhead is allocated), so the higher base you go you'd either make that anyway eventually or you wouldn't but get the higher base.  On the flip side if you go with a lower base salary, you run the risk of not making as much given collections issues, etc.  Higher fixed income = lower risk to you, more for them.  Lower fixed income = higher risk to you, lower for them.  I'd seek to know how patients are allocated, collections/billing for each provider and the practice, and negotiate on things like tail insurance as mentioned, and a higher base.

[engerland66]

Thank you for the responses thus far -- they are very much appreciated. Regarding overhead, what are some pitfalls to watch for in terms of how it is allocated? In my case, there is an ASC involved. If physician A uses the ASC more than physician B (who may do more hospital cases or more cases at non-practice owned ASCs etc), would it make sense for A to have more overhead allocated to him/her since they are using the facility more often? Or is it common to just split overhead equally?

[childay]

How big are these practices?  Is everyone paid on the same sort of formula?

In terms of overhead i'm sure it varies.  In my spouse's group, certain high-cost per-case overhead is deducted to the individual.  Mostly it is split evenly for fixed overhead expenses.  Make sure you understand all this completely.

Her group also has a portion of the individual profits (err killings?) redistributed to the other partners.  So if someone is doing a lot of private insurances or well reimbursed things, everyone benefits.

Consider negotiating for a high base-salary, at least for the first year.  It may take 6months before your collections really start rolling in even if you are busy.

[engerland66]

They are medium-sized...8-15 physicians. Associates get a base salary + collections minus overhead (to which the base salary is added...in order to start getting collections back, you have to collect the base salary + rest of the overhead). Partners are collection-based plus they split ASC/ancillary revenues equally. Collections are individual for each physician and nothing on that end is shared/distributed. They claim the collection varies minimally and take-home differentials for the partners are <5% between highest and lowest paid

[ENT Doc]

I think it makes sense to allocated fixed costs evenly but variable to the individual.  That being said a lot of fixed costs can be allocated based on time.  Every place probably does it differently, but what you're looking for is to avoid something that creates bad incentives.  Look into the path to partnership, buy-in for ASC, partnership, etc.  Also, make sure you get all the financials when you get further along in the negotiations.  Don't forget the 1st rule of residency - don't trust anyone.

[DrW00kie]

Make sure that your contract has terms dealing with termination, either you leaving or them firing you, and what happens to your collections afterwards. If it is a fee-for-service model, then you should make sure that upon leaving the group for any reason, that you are still entitled to your remaining collections as they return. This may seem obvious, but in my experience the group will try to keep it.

[engerland66]

Thank you all for your responses -- they have been very valuable.