ASK THE CAREER COACH
Should You Get a Bigger Piece of the Pie?
By William B. Rabourn, Jr.

Q: I'm considering signing my first employment contract. I think I deserve a higher percentage of the income I generate for the practice than what's specified in the contract. What's the standard percentage?

Most contracts specify a dollar amount threshold that you must meet before you can receive a percentage of collections. That threshold is often 2.5 to 3.5 times your base salary. For example, if your base salary is $150,000, you might have to add $450,000 to the practice's coffers before you'll receive a percentage of collections.

The percentage offered is usually scaled based on the additional dollars above the threshold you bring in. For example, let's say you reach the $450,000 threshold specified in your contract. Then, you might receive 10% of collections when you bring in $450,000 to $550,000, 20% when you bring in $550,000 to $650,000, and 30% when you bring in $650,000 or more. 

Collection percentages vary widely in most contracts and typically are capped based on the practice's overhead, which is why no exact standard exists. Basic finance dictates why a practice needs to tie the percentage to overhead: It has only so much money left to disburse once the practice subtracts expenses — mainly overhead — from revenue.

Furthermore, a practice agrees to hire you knowing it will take 12 to 24 months for you to pay for yourself and bring in additional revenue. Your contract, therefore, allows the practice to share collections with you at some point while still earning a marginal profit from your labor, which it is entitled to do. 

More Money Out, More Money In

It's important to understand that the percentage of collections your contract specifies may be lower if the practice has a large refractive or oculoplastic component. These types of practices typically have higher overhead because they need to spend a larger portion of revenue on marketing and advertising to attract patients.

However, while higher overhead may mean a lower percentage of collections in your contract, these types of practices typically have higher gross incomes. Yes, they spend more on advertising, but that brings in more patients who are seeking pay-out-of-pocket services. In other words, one practice's contract may specify a lower percentage of collections than another's, but it may be a percentage of a larger pie.

In addition, practices that offer cosmetic/refractive services are attractive places to be right now, especially with the advent of presbyopia-correcting IOLs. The new technology makes the merging of cataract and refractive services a reality. Chances are you will need to become skilled with these lenses and the other refractive technologies used in tandem with them to guarantee your future success.

In the meantime, unless you will be working at a practice in a severely underserved market or where the physician owner is in retirement mode, expect to earn only your base salary in your first year. Also, you can gauge whether you'll be able to meet the collections numbers specified in your contract by fully understanding the situation you're about to enter. Know what the practice is hiring you to do and what the local market's potential is for those services. If you're taking over someone's practice, know how he or she has done in the past financially. And if you're being hired because the practice is too busy, find out exactly what that means. Is the practice booked out a week, a month, 3 months or 6 months?

Do Your Homework

I'd advise you to not focus only on the compensation percentages listed in the contracts as you pursue your first position. You should look globally at each opportunity, taking into account other important aspects, such as the state of the local ophthalmology market, how comfortable you feel with the practice's people and protocols, and what your future might look like there. Also, make sure your spouse would be happy living in a particular area. Many employment deals — and marriages — have been derailed when this is not considered.

Ultimately, you should base your final decision on where you think you and your family, if that applies, will be most satisfied professionally and personally.

William B. Rabourn, Jr., is the founder and managing principal of Medical Consulting Group in Springfield, Mo. The Medical Consulting Group team possesses a wide range of expertise in staff training, development of ambulatory surgery centers, and practice development, management, financial operations, efficiency and marketing/advertising.