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The truth about doctor compensation (Proceedings)

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Apr 01, 2010

What's fair when it comes to associate compensation? Owners and associates want to know, and too often each party's understanding of what's fair lies at opposite ends of the spectrum.

Misconceptions, partial-truths, and even a little fantasy abound when it comes to doctor compensation. Owners and associates aren't intentionally trying to deceive the other. But sometimes their interpretation of something they heard or read about compensation is muddled, leading to misunderstandings, hurt feelings, and perhaps conflict and severing the work relationship.

So what's fact and what's fiction? Here are five myths about compensation that it's time to set straight.

Myth #1 – Doctors are paid 25 percent of their individual production.

Truth: A variety of percentages could be inserted in this statement, but the truth is the percentage isn't a one-size fits all number. Items to consider when determining the appropriate number include:


Figure 1 – Compensation ranges by type of practice (blended percentage)
     • The type of practice. The percentages will vary depending on the species - companion animal, equine, or food animal – and whether you have a general, referral, or emergency practice. And if you have a referral practice, the type of specialty will also impact the percentage. See figure 1.

     • Whether the compensation formula is a blended percentage that applies to all medical service and product production, or it's a split-rate compensation formula with one percentage applied to medical services and a different percentage applied to medical products.

Well-managed, companion animal practices that use a blended rate, pay somewhere between 16 percent and 21 percent of the doctor's individual production. Where they fall in the range is dependent upon the practice's staff-to-doctor ratio. The more staff the practice provides to assist the doctors, the lower the percentage paid to the doctors. The additional staff members allow the doctors to produce at a higher level, which increases their compensation. And the practice has an added layer of overhead for the additional staff, which the doctors must help support thus the lower percentage.

For example, with a 3.5 to 4.5 full-time equivalent staff-to-doctor ratio, expect a rate of 20 percent to 21 percent. With a 4.6 to 5.5 staff ratio, expect a rate of 18 percent to 19 percent. Conversely, practices with a low staff ratio should offer a higher percentage because the doctors likely have responsibilities that would ordinarily be delegated to a technician or an assistant, which impacts their ability to produce. For example, with a 2.5 to 3.4 staff ratio expect a rate of 22 percent to 23 percent.

Well-Managed PracticesSM that use a split-rate formula, pay 22 percent to 26 percent on services and 4 percent to 10 percent on products. Where you fall in the range depends on the staff-to-doctor ratio and the service/product mix – how much of medical revenue comes from services and how much from product sales (ideally, 85 percent/15 percent).

     • The services and products credited to the doctors. See Myth #2 below.

     • What the percentage paid to the doctors covers. See Myth #3 below.