Get a clue: Associate compensation

Get a clue: Associate compensation

Owners and associates want to know the truth, but often each side is mired in mystery.
Jul 01, 2008

Illustrations by Rob Johnson
Dr. Green's in the exam room with the otoscope. So what's he earning? Mrs. Peacock's in the reception area purchasing heartworm preventive. So which associate gets the production? Misconceptions and partial truths abound when it comes to compensation. Now, owners and associates, I know you're not intentionally trying to deceive each other. But sometimes your interpretations of something you heard or read about compensation are unclear, leading to misunderstandings, hurt feelings, and conflict. So what's fact and what's fiction? Here are the top five mysteries about compensation exposed and solved—case closed.

Mystery No. 1

Are doctors supposed to be paid 25 percent of their individual production?

SOLVED! It'd be a crime to make production a one-size-fits-all number. A variety of percentages can be used, depending on several factors.

It can be tough for owners and associates to determine a fair and profitable production percentage. During the process, they should consider:

Practice type. Production pay will vary depending on the practice—small animal, equine, or food animal—and whether it's a general, referral, or emergency hospital. If it's a referral practice, the type of specialty will also impact the production percentage.

Blended or split-rate percentages. The numbers will also vary if you use a compensation formula with a blended percentage that applies to all medical service and product production. A split-rate formula with two percentages, one that applies to medical services and one that applies to medical products, will also impact the production percentage.

Well-managed companion animal practices that use a blended rate usually pay between 16 percent and 21 percent of a doctor's individual production. Where an associate falls in that range depends on the practice's staff-to-doctor ratio. The more staff members who assist the doctors, the lower the percentage paid.

The dollars even out because additional staff members allow doctors to produce at a higher level, increasing compensation through volume. And the practice with additional staff members pays an added layer of overhead, which the doctors must help support, thus the lower percentage.

Here's an example. With a ratio of 3.5 to 4.5 full-time-equivalent team members per doctor, an appropriate rate is 20 percent to 21 percent. With a 4.6 to 5.5 staff ratio, it's 18 percent to 19 percent. Practices with a low staff ratio need to pay a higher percentage because the doctors likely shoulder responsibilities that could otherwise be delegated to a technician or assistant, impacting their ability to produce. With a 2.5 to 3.4 staff ratio, a fair rate is 22 percent to 23 percent.

The split-rate formula comes into play a bit differently. Well-managed practices that use a split-rate formula pay 22 percent to 26 percent on services and 4 percent to 10 percent on products. Where the range falls depends again on the staff-to-doctor ratio and the service and product mix—how much of medical revenue comes from services and how much from product sales (ideally 85 percent and 15 percent).