This debate will exist forever. Associates want to be paid on production. Practices want to pay associates on collections. Associates say “Not my responsibility to collect money on production” or “I don’t manage the front office staff.” Practices say “can’t pay what we don’t collect” or “What if associate over-produces in order to make more money?”
It’s simple to understand and agree with either side of the argument. I have this same conversation with prospective associates and practice owners daily.
Collections pay is my preference in most cases involving FFS, PPO, and some Medicaid practices. I prefer to avoid DHMO practices since associates are better off being paid a salary rather than a percentage in those models.
Why Use Collections Based Pay?
It is in the best business interest of the practice to collect all co-pays up front and bill insurance immediately. If the practice doesn’t do this
effectively, the associate relationship will fail regardless of compensation method. Practices can’t keep paying bills if they don’t have the cash
to do it.
- Production pay in most cases is “Adjusted Production.” Adjusted production is pay based on what the practice anticipates it will collect on a procedure based on the patient’s insurance plan.
UCR may be $1,000 for that crown, but since patient x is an ABC PPO patient, the crown production is actually $800. Production $800. At 30%
associate earns $240.
Let’s assume that crown doesn’t get covered, and the practice has to attempt to collect from the patient. After 90 or 120 days the crown
fee is written off. A lot of practices will come back and deduct that $240 from a future paycheck.
- UCR may be $1,000 for that crown, but since patient x is an ABC PPO patient, the crown production is actually $800. Production $800. At 30% associate earns $240.
Based on the above, I would rather know that I am paid with money I keep and don’t have a chance of losing at a future date.
- Using a base guaranteed salary or a minimum draw will help with the initial employment period of 3 to 6 months to get the associate started. If the collections are not above the draw in that timeframe, there are problems with the practice systems, and likely not a place an associate will want to work.Side By Side Comparisons
|Associate paid when practice is paid||Associate is paid at time of completed procedure regardless if practice collects patient/insurance payment|
|Practice can cash flow collections with payroll||Practice likely has a deficit for a period of time between payroll and insurance/patient payment|
|Adjustments are made before associate is paid therefore greatly limiting future payroll adjustments||Associate is paid up front, but the practice will adjust future payroll for uncollected payments ( isn’t this “collections” pay, just delayed for the practice?)|
|Associate often questions or wants proof that money is being collected by practice||Associate feels more secure in knowing he/she is paid for work when it is done|
|Simple accounting cash in, cash out||Accounting more challenging. Adjusted production usually means the practice will want to recoup payroll paid on uncollected procedures at a later date. Lots of tracking involved.|
|If practice collection percentage drops too low then associate will leave||Theoretically, associate should be paid regardless if the practice is paid. If practice can’t collect practice would wind up terminating associate because it couldn’t afford associate|
|Collections based pay will better prepare associate for future ownership or partnership where he/she will live or die by cash flow||Production based pay can build an unrealistic view of associates abilities in actual revenue|
Stats and Red Flags
In most cases looking for collections percentage above 97%; anything out of the 90’s is no good
Practice has to open the books to the associate so he/she can see production/collection numbers. If practice is not willing to do this then the
associate should move on
As in everything, communication is vital to everyone's success. Without communication all is lost
Associate needs to be educated and understand dental insurance, collection policies, timeline of collections, write-offs, etc
Practice should been willing to give an initial base minimum to build a mutual commitment
Written by Carl Guthrie, Senior Account Executive/Dental Recruiter at ETS Dental. For more information, contact Carl directly at 540-491-9104 or firstname.lastname@example.org