How Much Productivity Bonus Should I Ask For?

Carolyn Buppert, MSN, JD

Disclosures

July 09, 2019

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A nurse practitioner (NP) writes:

My employer has mentioned the possibility of offering me a bonus if I achieve a specified level of productivity. That level has yet to be determined, as well as the amount of the reward. What should I ask for, in terms of a bonus structure?

Response from Carolyn Buppert, MSN, JD
Healthcare attorney

There is no standard provider bonus structure. I have never seen two contracts with the same language regarding productivity-based bonuses, and I have reviewed at least 300 nurse practitioner and physician contracts during the past 20 years. Most employers don't offer bonuses; some do. In some contracts, the bonus is "optional"; that is, the employer can give one, or not, at his or her pleasure. In some contracts, the bonus language is so vague that the provider really can't tell when, how, and if he or she would get a bonus. But in some contracts, the bonus language is clearly worded and fair. A well-structured bonus option can incentivize providers to be efficient and to capture all appropriate charges by learning and applying the rules on billing and coding. Here are some examples of language I have seen in NP contracts:

Sample Contract 1

Provider shall be paid an amount, if any, equal to (i) the Applicable Percentage of Net Collected Receipts received during each quarter of each calendar year during the term of employment from all professional services performed by Provider on or after the Effective Date, less (ii) the quarterly Base Salary paid to Provider. For purposes of this paragraph, "Applicable Percentage" means twenty percent (20%) of the Net Collected Receipts received during each quarter of the term of employment from all professional medical services personally performed by Provider on or after the Effective Date.

Example: If Provider generates $150,000.00 in Net Collected Receipts in any calendar quarter, Provider shall be paid a Base Compensation amount of $22,500.00 plus a Productivity-Based Bonus Compensation of $7500.00 (Net Collected Receipts of $150,000 × 0.20 = $30,000 less Base Salary of $22,500 = $7500 bonus).

Sample Contract 2

Provider shall be eligible to earn Bonus Compensation of up to ten percent (10%) of Provider's Base Compensation, each year, based on Provider's performance related to finance, quality measures, and professionalism as set forth in the Bonus Compensation Chart during the previous calendar year. The Bonus Opportunity amount shall be prorated for periods of less than a year. Bonus Compensation earned by Provider is paid within thirty days of January 1st of each year. [Performance in each category — finance, quality measures, and professionalism — is defined at length in the contract.]

Sample Contract 3

This contract came from a dermatology practice:

For each 12-month period beginning on Provider's commencement date, the Practice will pay Provider a base annual salary of $170,000 per annum. In addition, Provider will be entitled to a bonus equal to eighteen percent (18%) of the Net Collections (gross collections less refunds, overpayments, penalties assessed, and the cost of the supplies) received by the Practice during each Contract Year for services rendered personally by Provider in excess of $340,000. The Practice will provide Provider with Provider's collection data on a quarterly basis, and Provider will be paid interim quarterly bonuses with a "true-up" as of the end of each Contract Year.

Sample Contract 4

Employee may be eligible for an annual incentive compensation based on a percentage of cash collections for his/her personally performed professional services during the Employer's fiscal year. The incentive will be calculated as follows:

  1. The incentive shall be 30% of Employee's professional services cash collections exceeding (salary plus $80,000.00).

  2. The incentive calculation shall be calculated 30 days after the end of the Employer's fiscal year, which is July 1 to June 30. The incentive compensation will then be paid by 60 days after the Employer's fiscal year ends.

  3. Upon request by employee, employer shall provide employee a report reflecting cash collections on a monthly basis, and revenue and expense reports on a quarterly basis. Employee will be entitled to reasonable access to Employer's books.

How Much Productivity Bonus Should I Expect?

One size does not fit all. Here are the basic premises for productivity bonuses:

  1. The employer usually needs to recoup what the employer spends for the NP's salary, benefits, and expenses of practice before giving a bonus. A general, unofficial rule for billing professionals is that the employee must generate enough to cover at least two times the employee's salary, and some employers want the employee to generate three times the employee's salary. Everything the employee generates over that threshold could and should be shared in some way with the employee. The employer still retains the majority of the revenue the employee generates, but the employee gets a percentage of collections over a threshold amount. The percentage the employer offers the employee varies greatly, from 1% to 50%.

  2. The incentives should encourage the employee to practice efficiently and reward extra effort, but not go so far as to encourage rushed or unsafe care. So, for example, a bonus structure for a NP evaluating nursing home patients should not reward the NP for evaluating more than 50 patients per day. That may encourage the NP to move too fast, thereby providing suboptimal care.

  3. The terms of the bonus structure should be clear to the employee.

  4. The employee should be able to verify that the bonus terms have been applied correctly; that is, the employer should offer the employee monthly or quarterly data on the billings and collections attributable to the employee.

  5. If a bonus is based on collections, the employer should maintain a collections rate of at least 90%. Collections rate = Collections divided by billings.

A NP wanting to negotiate a bonus structure should gather data on his or her billings and collections from the previous year. From those data, the NP can figure out whether he or she has covered his or her salary, benefits and expenses and to what extent the NP has generated income for the practice over that amount. Then, run the numbers on various percentages of the amount over two times salary and over three times salary to see what the bonus might be. Think about how hard you want to work and whether you can increase your efficiency and your revenue generation. Ask for something reasonable and negotiate.

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