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Discussion

Contract negotiation

Hello all! I am currently in negotiation concerning my first FT position as an FNP in Texas. I have been working for this company since Jan '14 as a PRN float pool NP, but have essentially been working FT hours.

They have recently offered me a position in a clinic with 2 other physicians, essentially taking over an established practice. The salary is a bit low, in my opinion, but have also offered me 25% of net revenue to be paid quarterly. They refuse to negotiate the base salary.

I requested net revenue numbers from the last few years to establish a projected bonus and it seems that the physician who is currently there netted (on average) $100,000 per year. I would have my own cost center in which my salary, benefits, CEU $ etc would be deducted {he did as well}.

I have two major questions---

1. Shouldn't the difference in his salary and mine essentially come back to me? [i.e. if his salary was 140,000 and he collected 300,000-- his bonus (25%) would be taken from the 160,000 difference ~~40,000. Assuming that I could continue to collect 300,000 and my salary is 80,000... wouldnt that assume that would leave an additional 60,000 [profit] that would stay in my bonus share? ~~55,000}? Or will the difference in his salary and mine be absorbed by the company? I hope this example makes sense.

2. Is 25% of profit reasonable? It seems as though it could be a substantial amount of money depending on how much I am bringing in. In your experience, is there a difference in bonus when it is structured around net profiet vs. RVU? I know several of the other Np's with the company receive bonus based on RVU.

Thanks in advance for the insight!

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    • Expert

    The key would be the contract. There are three issues that would change the reimbursement:

    1. How are new patients allocated. New patients reimburse more. If the other positions cherry pick the new patients and then put them on your panel that will markedly change reimbursement.

    2. What is net figured from. In addition to the items that you mentioned consider that someone has to keep the lights on, pay the support personnel etc. Is that part of the 75% above your cost center or is it included in your cost center?

    3. As an NP at the very least you are going to take a 15% reimbursement hit from Medicare. Also how are the insurance contracts done. Are you credentialed. Do you get the same reimbursement or less.

    Finally transparency is key. To know if this will work, you will have to be able to see the books, make sure the billers are submitting your bills in a timely fashion etc.

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    Regarding #1, bonus calculation: Your example is that the current bonus for the current provider is calculated as follows (I believe): 300k(gross) - 140k(salary) = 160k net.

    160k(net) * .25 = 40k bonus.

    Now, you said the salary would adjust from $140k to $80k. So, you wanted to know if this would cause the bonus to go up. However, since you are being reimbursed at 85% rates, the revenue would drop accordingly to:

    $300k(prior gross) * .85 = $255k(adj gross)

    So plugging in the new numbers I would think the basic formula you mentioned would be:

    $255k(adj gross) - $80k(new provider salary) = $175k(net)

    $175(net) * .25 = $43.75k bonus.

    This results in a slight increase of bonus, but what all is included in the "cost center"? If there are other fixed costs included in the cost center, than it is likely that these costs will eat up not only the increase in your bonus, but some of the original bonus numbers as well. This is due to the fact that you have to work harder to produce an equal amount of revenue income. These fixed costs will not go down by 15% as will the revenue for each visit. To make up for the decreased revenue you will have to be able to bill for more visits, more complex visits, etc. To do so without increasing fixed costs would be difficult to say the least.

    I think core0's comments about transparency are key. If they wish to base your income on profits, then it is vital that they be willing to provide you with a clear picture of how your production is being turned into revenue by the practice. There are many moving pieces involved in that, and they can have a huge impact on your future income. I would suggest contacting a lawyer who specializes in these issues to assist in the development of your contract.

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    • Author

    Zmansc that is a great point concerning my first question-- fixed cost (12% annually) off the top of net revenue will be deducted for practice management fees [i.e. clinic costs, billing/coding costs etc].

    They have specified in the contract that total transparency will be provided for what is coming in vs what is going out and I will be meeting with administration monthly to go over these numbers.

    I guess I am concerned that I will be bonused on net profit instead of RVU's and I am unsure if that is to my benefit/disadvantage, or if there is much a difference between the two in regards to bonus structure.

  • Quote
    • Expert
    Zmansc that is a great point concerning my first question-- fixed cost (12% annually) off the top of net revenue will be deducted for practice management fees [i.e. clinic costs, billing/coding costs etc].

    They have specified in the contract that total transparency will be provided for what is coming in vs what is going out and I will be meeting with administration monthly to go over these numbers.

    I guess I am concerned that I will be bonused on net profit instead of RVU's and I am unsure if that is to my benefit/disadvantage, or if there is much a difference between the two in regards to bonus structure.

    There is a huge difference between net profit and RVUs. It all depends on which end takes the risk. If you are bonused on RVUs then you get your bonus regardless of collections. If collections suck (get a lot of no pay, reimbursement gets cut etc) then you still get paid and they take a hit.

    On the other hand if its based on net profit then the risk is on you. Even assuming all other costs stay fixed and don't increase then you still take the risk if collections suck. What if the biller decides NPs can't bill for visits and doesn't submit your bills for a while. What if they don't pursue your collections as aggressively as the docs. What if an private payor cuts NP reimbursement to 50%. You pay for that even if you don't have control. As far as claims paid and submitted you should get early warning if things are not going right but they still have to fix it.

    Fundamentally you have be able to live on the salary. If you get the bonus great, but don't necessarily count on it.

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