Squashing ProSal myths
One of the most common questions I'm asked is how to compensate associate veterinarians properly. Some time ago, I developed a method called ProSal, which combines a guaranteed salary base with a percentage of an associate's production. It's now one of the most common forms of compensation used in veterinary practices, but it's often misunderstood or inappropriately applied. Practice owners say, "We pay our associates based on the ProSal method," but when I dig a little more, it turns out to be some mutant system and not ProSal at all. Let's see if we can clarify how ProSal is supposed to work and squash some of the common myths.
MYTH: DOCTORS RECEIVE PRODUCTION CREDIT FOR EVERY TRANSACTION CLIENTS INCUR.
First, some definitions. Production is defined as "the fees generated and collected for services or products a doctor is directly involved in delivering." Here's the important distinction: The doctor must be involved in delivering a service or product in order to receive credit for it.Here's how it works: Let's assume Dr. Smith earns 21 percent of her production with a guaranteed base salary of $70,000. She'll receive production pay for any services she's directly involved in. So, for example, if she's in the exam room and conducts a comprehensive physical exam, administers vaccinations, performs fecal and heartworm tests, and sells preventive medicines, she'll receive 21 percent of the total revenue from those services and products, because she was directly involved in delivering them.
However, when the client returns a month later for a refill and doesn't see Dr. Smith during the visit, Dr. Smith won't get a percentage of that sale because she wasn't directly involved in the transaction. To clarify this further, I've developed a worksheet that lists the most common sources of production income and states whether credit goes to the doctor or the hospital. Download the "Crediting doctor production" PDF by clicking here. To keep production straight, create two provider codes for each doctor in your computer system—for example, "Dr. Smith" and "Dr. Smith: Rx." Use the latter code for refills the doctor doesn't get credit for. This code helps the receptionist and bookkeeper keep accurate production records but still ensures that the doctor's name is on the prescription label.
MYTH: THE MAGIC NUMBER FOR PRODUCTION IS 21 PERCENT.
The going rate for production percentages is anywhere from 18 percent to 25 percent. In general, the greater the number of benefits you offer your associates, the less their production percentage should be; the fewer the benefits, the greater their percentage. No matter what production rate you pay, a doctor's total compensation—including health insurance, dues, licensing fees, continuing education, FICA matching, and other costs of employment—should not exceed 25 percent of his or her production.
Your first step is to figure out your associate's current total compensation—in other words, your total cost to employ him or her. To do this, use a total compensation statement. (Click here for an Excel spreadsheet to get you started.) This form lists possible costs associated with employing an associate doctor. Total these costs, then add the associate's current production compensation (W-2 income), and divide by the associate's total production. The resulting number is the associate's total compensation rate, which shouldn't exceed 25 percent. If it does, you're paying the associate out of your pocket and reducing your return on investment.