What Should I Know About a Percentage Payment Per Visit vs a Salary?

Carolyn Buppert, NP, JD

Disclosures

April 08, 2005

Question

Does the Stark law make it illegal for an NP who is employed by an MD to get paid per visit by a percentage of what is reimbursed, instead of getting paid hourly or a salary? What would a reasonable percentage be if the NP does not get any benefits and is responsible for his/her own medical and malpractice insurance?

Response from Carolyn Buppert, NP, JD

Yes, it is legal for an NP to be reimbursed a percentage of billings or collections. The Stark law prohibits self-referrals, such as a physician referring all patients to a laboratory the physician owns. The US Department of Health and Human Services has stated that the Stark laws do not apply to NPs, and paying a percentage is not the same as making a referral.

The federal antikickback laws do apply to NPs. Under federal law, there are penalties for individuals who knowingly and willfully offer, pay, solicit, or receive remuneration in order to induce the referral of business reimbursable by a federal healthcare program. The issue you raise is whether an NP is getting a kickback if taking a percentage of billings or collections. The answer is no, as the employer is not paying the NP for referrals, but for work performed.

The best percentage-based arrangement for a NP would be a percentage of billings . Most employers want to pay a percentage of collections . (Billings are the amounts billed; collections are the amounts actually received.) An NP has some control over his or her billings, but little or no control over collections. Some practices are better than others at collecting on their billings. So, the first point to negotiate is whether the NP will get a percentage of billings or collections. Ask the employer to reveal the practice's collections rate. If the collections rate is 90% or above, the practice is doing a relatively good job. If the collections rate is below 90%, the NP should press for a percentage of billings until such time as the practice improves its effectiveness at collecting.

As for the percentage figure, employers are paying anywhere from 30% to 60%, depending upon how much the NP generates, what the percentage covers, and how effective the NP is at negotiating. Taxes such as Medicare and Social Security should be split between employer and NP, so the employer's share of the NP's Medicare and Social Security payments should not come out of the NP's share of billings or collections. Benefits such as health insurance and disability insurance usually cost an employer about 25% of salary. Health insurance rates vary widely, depending on the number and ages of people covered by the policy and the terms of the coverage. Malpractice premiums can cost anywhere from $750 to $8000.

As an example, if an NP generates $270,000 a year in billings and the practice's collections rate is 90%, the collections attributable to the NP will be $243,000. If the NP agrees to 37% of collections, that will leave $89,910 for the NP, which needs to cover salary, health insurance, and malpractice insurance. If the NP's health insurance costs $4000 and malpractice insurance costs $1500, that leaves $84,410 as salary. The employer gets $153,090, which covers the practice expenses attributable to the NP (rent on office space, telephone, assistant salaries, and so on), compensation for collaboration, and profit.

There is no one-size-fits-all answer to the question of what percentage is fair. Each NP must work out the numbers based on his or her own situation, go over the numbers with the employer, and negotiate a number acceptable to both parties.

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