Associate Pay: Collections vs Production

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?

1. 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.
   
2. 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. 
   1. 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.
      
   2. 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.
      
3. 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.
   
4. 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

Collections	Production
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 cguthrie@etsdental.com

Base Salary (AKA Minimum Guarantee) for Associate Dentists

Over the past ten years, base salaries for General Dentists seeking associateships have become more commonplace in response to an increasingly competitive dental job market. Several factors have played into this change, including the ever-growing level of student debt and increased presence of Dental Service Organizations (DSOs) in the industry. From a practice owner’s perspective, the practice can use the guaranteed minimum to say “we have the patients and potential production available - can you produce?” As such, there is a perceived financial security with a base salary.
Below are some common ways we’ve seen dental practices pay base premiums to its associates.

Common Ways Dental Practices Pay Base Minimums

1. Daily/Monthly Draw on future commission : This structure is, by far, the most common method in dentistry. The practice will pay the associate dentist a fixed amount that will be deducted out of the associate’s future commission.
   
   1. Pro : the associate has greater security at the beginning because there is a cash flow.
      
   2. Con : if the associate does not produce/collect enough the practice cannot recoup the draw if the employment is terminated by either side.
      
   3. Most common example : $500 to $600 per day ($10,000 to $12,000 per month).
      
      
2. Salary + bonus : This structure offers both sides more of a win/win at the early part of the relationship. The practice and associate agree to a set salary that is paid regardless of the associate’s production. The bonus is a carrot for achieving a higher level of production.
   
   1. Pro : Practice can pay based on what it expects associate will/should produce while offering a bonus if goal/expectations are exceeded.
      
   2. Con : Such as the draw, if the associate is underperforming the practice will lose money on the arrangement.
      
   3. Example : $10,000 month; Associate can bonus by being paid 15% of collections on anything exceeding $35,000 per month. Calculate monthly or quarterly.
      
      
3. Salary only : As simple as it sounds. The Associate is paid a base salary. In most cases, a practice does this because it realizes there needs to be a lot of growth in the practice overall. It is more of an investment in the associate and potential of the practice. In many cases a practice and associate will agree at a future time to convert from salary to commission in order for the associate to be incentivized on their production.
   
   1. Pro : Great for a new grad that receives mentorship from a senior doctor. Allows the practice to secure an associate without making unrealistic claims to what an associate can earn on a commission plan.
      
   2. Con : if you don’t have an associate who sees the big picture, you can have an associate who doesn’t strive to grow in this position due to the lack of incentives, thus making a bonus option a great addition to the salary.
      
   3. Example : $120,000 per year.
      

Why should you offer a base minimum?

• Excellent way for practice to back up their claims of available production and income potential
  
• Offers initial short term security to associate by providing a minimum cash flow
  
• Helps while production and patient base is built up by associate
  
• Competition for talented dentists
  
• Security for your practice by limiting associate turnover
  

Hiring an Associate Dentist – Experience vs. Potential

When we start working with a practice, we collect a lot of information about the owner, practice, and the position. Some details are quantitative, but many crucial points are open for interpretation. Most practice owners tell us they need an experienced dentist for their position. In most cases, that is the best option. In fact, over 90% of the doctors we place have over one year of experience in practice or residency. But what are the tradeoffs to experience? When should an office consider hiring a doctor a year or two out of school rather than five to seven years out?

Experience

 Pros-

• Production: Dental School is just the beginning. It takes several years, lots of CE and thousands of chair side hours for most dentists to hit their stride. An experienced dentist should be better able to handle a full schedule.
• Known quantity: A seasoned dentist brings credentials, a work history, and track record of past successes that will allow a new employer to project reasonably accurate results
• Less Babysitting: With experience comes independence and the ability to handle

Potential

Pros-

• Malleable: While an experienced dentist will come to your practice with his or her own idea on how an office should operate or with a well-defined clinical philosophy, a less-experienced dentist will be open-minded and receptive to guidance.
• Less up front needs: This is true of patient load as well as guaranteed income. While many recent graduates have huge student loan debts to consider, they typically have less expense in the rest of their lives. They also come to your practice without the burden of trying to reach previous income levels. They typically are better able to handle a growing practice than a dentist who needs to maintain a higher standard of living
• Superstars are still available: Most practices would love to hire a dentist who is motivated, great with patients, can keep procedures in house and who will be a boom to the practice for years to come. Dentists like that are rarely available long. These are the dentists who are partners or practice owners within a few years of practice.

Posted by Morgan Pace.

Morgan Pace is the Southeastern U.S. Account Executive and Senior Recruiter for ETS Dental. He can be reached at mpace@etsdental.com or 540-491-9102. ETS Dental is a Dental Recruiting firm specializing in finding and placing General Dentists, Dental Specialists, and Dental Staff throughout the United States. www.etsdental.com