NP salary negotiations

core0 · Jan 24, 2008

I'm currently in an FNP program in Oklahoma, and have been approached by a hospital in my hometown about coming to work for them. I remember reading a long time ago on here about a PA, maybe his name was David...Carpenter (its been sooo long) and he talked about how to negotiate a salary and something about getting a bonus of a % of what you bill...I look for the post and cannot find it. I know they are ready to start negotiating, but I want to go in their with all the knowledge about this bonus thing. Please reply or show me where that posting is!!! Thanks!:pumpiron:

I'll be honest I don't remember it either. Usually there are two pieces of advice I give on negotiating salary. One is to look at what they can pay as salary in terms of what you bring in. For example if you bring in $300k They should be able to pay around half of that as salaries and benefits (this is for specialty practice, primary care is a different story).

What I think you are referring to is a strategy for setting bonuses in a practice setting. Generally what you do is look at the cost of the provider and set the bonus as a percentage of the money you make over the cost.

The issue is always going to be what is the cost. There is an old saying. There are lies, damn lies and statistics. The medical corollary is there are lies, damn lies and what the practice manager says you brought in;). Generally there are three ways of measuring income. Collections, billing and RVU. Collections are what the practice receives for your work. Billings is what the practice charges for your work. RVU is an assigned value that means revenue value units that is what Medicare says is the work involved in delivering a particular unit of medical care.

Look at these separately. Take the code 99213 - mid level established patient visit.

Collections - Medicaid may pay $55.00 to $100.00 from some insurance.

Billing - This is the published amount that your practice bills for an encounter. Most are set at some percentage above the average collections in case the one last person with real insurance stumbles into your office. In this case most billing for a 99213 would be around $150.00.

RVU - The RVU for a 99213 is 1.66. RVU is usually associated with a conversion factor. This is the amount that the insurance pays for the RVU. For example if the conversion factor is $59.79 then a 99213 will pay $99.25 for that service. Most insurance companies set their rates by paying some percentage of the Medicare conversion factor. They occasionally have different RVUs but that is rare. The standard way for Medicare to tamper with reimbursement is to change the conversion factor which globally increases or decreases spending. If they find a particular item is reimbursing too much then they decrease the RVUs associated with it. This is also why it is important to have your published charges above the rate of the insurance. If you charge less than the RVUxcoversion factor then the insurance company will pay the lesser amount. For further tutorial on this this is a good example:

http://www.cbs.state.or.us/wcd/rdrs/mru/hosfee.html

It is important to understand this because it reflects which strategy you want to use. Essentially collections will be billing(max insurance reimbursement) x %lost revenue. Lost revenue is the amount you do not collect. This can be from many reasons including self pay patients refusing to pay, insurance companies rejecting payment or inefficient billing services. If you go to the AAPA billing services they will tell you a story about a practice that did not bill for a PAs services for six months because they did not know how. When he went for his six month eval it showed he was bringing in no revenue.

So essentially which of these strategies you want to use depends on how efficent the office is at billing and how much you trust the practice. A lot of EM practices use RVU for bonuses because they measure how hard people work. It is usually salary plus rvu x 5-15% of conversion factor. This assumes a good payor mix in a suburban ER.

Another way is to use collections. For example 10% of collections over salary x 1.5. 1.5 is a common conversion factor used that represents insurance, malpractice, and other costs of employment of the provider. If the practice expenses are higher than another conversion factor can be used. Also a higher percentage could be collected. There are two issues here. One is are the other costs of the practice billed to the provider or the practice. The other is this assumes the practice is efficient at billing, has little bad debt, and is being honest with you about collections.

The final way is to do the same thing with billing. The formula is similar to collections except you use billing. Bonus for example can be 10% of billing - Salary x 1.5. The advantage here is that it encourages the practice to be efficient in their billing without it being your problem. If the practice has a lot of bad debt it will lead to a larger loss for the practice. If the manager is at all bright they will not go for this.

Assuming that the practice is reasonably honest my favorite would be %collections - salary + practice expenses as a bonus.

There are a ton of ways to game the system. Collections could be credited to a physician. Billing could expend more time on the physician collections leaving the NPP with more bad debt. The practice expenses could be charged to the NPP only. It goes on and on. You really need to be able to audit the books to make this work. Some practices are willing to do this. Some are not. For the last five years all of the providers at my previous practice were compared and it was easy to see what people were bringing in.

Now my cautionary tale. The perfect contract. A PA I knew worked in specialty practice and negotiated a contract with a physician in solo practice. Bonus = 50%Collections - salary x 1.5. Lets say the salary was $100k. He worked his butt off. Worked through lunch. Kept on the billers, brought in mad collections. At the end of the year the collections were north of $450k. Under the contract the physician owed him more than $100k. Problem was the physician didn't have it. He hadn't paid attention to this coming debt and didn't envision paying the PA more than $250k. He refused to pay it. The net result is the PA is no longer working there and the case is as far as I know still wending its way through the courts and eating up the money in attorney fees.

The moral is that many physicians are not good business persons and you have to protect them from themselves.

So my perfect contract would be %collections - Salary + practice expenses. Set an upper limit to the payments and make the bonus quarterly. Then you can set this however you want it. You could take $0 salary and 70% of collections. You could take more salary and less risk (and bonus). In general try to make sure that your salary and bonus is less than you expense to practice (salary + bonus + practice expenses). If NPP income > Practice income for NNP = replaced by cheaper NPP.

Unfortunately hospitals are notoriously bad at billing for NPPs (or physicians). I would negotiate an RVU based bonus and let them eat their poor business practices if it was me.

I bet you thought this was simple? Hope this helps.

David Carpenter, PA-C

BrandiannRN · Jan 24, 2008

Wow. that was the best answer I could have asked for. Now, I didn't understand lots of it, but I will. I just want to thank you so much for taking the time for such a thorough reply. It just touches my heart that you take your time to help so many people! I printed it, and now I'm going to read it over and over until I figure it out. Again, thank you so much. You intelligence and experience are so appreciated!

brandi

ECMOismygame · Jan 24, 2008

to mods: a recommendation

make David's post a sticky

:up:

Editorial Team / Admin · Jan 24, 2008

Done, ventjock. This has been added in the thread entitled, Other "Sticky" Threads of Interest - Please Read .

Thanks, core0!!

midwifejudy · May 8, 2008

David Carpenter Thank you for your clarity.

It has helped me and I am sure others as we forge new career pathways.

I have an opportunity to join a private practice and would appreciate your feedback on the deal they are offering me.

It is a primary practice, and I will be an independent practitioner i.e. have my own practice within the practice. They will refer pts to me if they need help.

I will be bringing alot of specialized skills into it- since I am a CNM also I will be doing alot of the gyn that the docs prefer not to do.

I also will be developing a whole new aspect with hormone replacement and dealing with metabolic syndrome and pcos (my special passion :redpinkhe) and to round things off will be bringing in aesthetics (laser hair removal botox et al) which is a money maker, and again which I am skilled in and the docs aren't (they want to learn.......)

So they are offering me 50% for the medical side---- told me that that is the going rate.(????) No salary. No benefits. Just 50% of the income that I bill for.

They are a medium practice 4 docs, so I think the expenses should be under 40%, my consultation needs are minimal becuz not only am I experienced but I am bringing new and different skills, i.e. will be doing more than just making their lives easier by doing rounds and taking call and all- although I would be doing that too.

I mean it is win=win so I thought I might ask for a larger percentage-----

what would be reasonable in your view?

When it comes to aesthetics I have asked for more- they have said I can have all the profit, but I want to be fair and use this opportunity to demonstrate that I know what I am talking about (even tho I don't--- but may know more than them re NPs and what we can do - they just want help :bluecry1: but it sounds like they don't totally know what they are talking about---- and may change their tune once they find out more about aesthetics, so I thought I will offer them 10-20% off the bat for asethetics, and have them pay for the expenses i.e machine rental, product & supplies etc.) ie if I am fair with them in this they would trust me more if I ask for a larger percentage for the medical things.(?)

Appreciate your help

midwifejudy

core0 · May 8, 2008

david carpenter thank you for your clarity.
it has helped me and i am sure others as we forge new career pathways.
i have an opportunity to join a private practice and would appreciate your feedback on the deal they are offering me.
it is a primary practice, and i will be an independent practitioner i.e. have my own practice within the practice. they will refer pts to me if they need help.
i will be bringing alot of specialized skills into it- since i am a cnm also i will be doing alot of the gyn that the docs prefer not to do.
i also will be developing a whole new aspect with hormone replacement and dealing with metabolic syndrome and pcos (my special passion :redpinkhe) and to round things off will be bringing in aesthetics (laser hair removal botox et al) which is a money maker, and again which i am skilled in and the docs aren't (they want to learn.......)
so they are offering me 50% for the medical side---- told me that that is the going rate.(????) no salary. no benefits. just 50% of the income that i bill for.
you have to be more specific about this. usually you are talking about either a percentage of billing or a percentage of collections. it sounds like they are talking about collections, but you need to clarify this. you would have to look around to find out what the standard rate is. for pas in autonomous practice i've heard the going rate is 5-10% of collections.
they are a medium practice 4 docs, so i think the expenses should be under 40%, my consultation needs are minimal becuz not only am i experienced but i am bringing new and different skills, i.e. will be doing more than just making their lives easier by doing rounds and taking call and all- although i would be doing that too.
i mean it is win=win so i thought i might ask for a larger percentage-----
what would be reasonable in your view?
i would suggest that the job description needs to be nailed down a little more. you suggested two primary duties:
1. metabolic syndrome and pcos
2. aesthetics
however here you discuss doing rounds, taking call etc. all of this pulls time away from you making money doing #'s 1 and 2. if you are going to be doing what is essentially an "independent practice inside a private practice" how are they going to compensate you for this time. they can either reimburse you for the time or increase the percentage of collections. also don't underestimate the support structure you need. i won't profess to know much about pcos but i am guessing that like most chronic conditions its very time intensive. unfortunately current reimbursement for time intensive chronic conditions is very poor. 50% of very poor reimbursement is even worse. this means that your fixed costs of practice are a much larger portion of practice expenses.
when it comes to aesthetics i have asked for more- they have said i can have all the profit, but i want to be fair and use this opportunity to demonstrate that i know what i am talking about (even tho i don't--- but may know more than them re nps and what we can do - they just want help but it sounds like they don't totally know what they are talking about---- and may change their tune once they find out more about aesthetics, so i thought i will offer them 10-20% off the bat for asethetics, and have them pay for the expenses i.e machine rental, product & supplies etc.) ie if i am fair with them in this they would trust me more if i ask for a larger percentage for the medical things.(?)
appreciate your help
midwifejudy

overall i would be very leary of this proposal.

first you have to realize that with the aesthetics practice you have a valuable skill set. however, your access to patients (ie referral from their practice) is controlled by them. in addition you state they are interested in learning aesthetics. there is nothing to prevent them from letting you develop the practice, teaching them aesthetics procedures, and then taking things over.

second it is usually a bad idea to take a contract based solely on collections for the first year. there is generally a lag between billing and collections. with some insurers the lag is normally three months. however, with a new practitioner it is not unusual to see a six to nine month lag. because of this practices usually start out new practitioners either on salary until they become a partner or with a guarantee vs. collections. ie if % of collections is greater than the guarantee then you get that instead.

worst case scenario is that you get hired, spend time and energy building up the practice while not getting any money then have them fire you once they learned how to do aesthetics. you could then spend time and money trying to get your collections from them (given that they have no real incentive to pursue your collections).

of course all the other standard warnings about collections based employment contracts apply:

1. you have to be able to look at the books

2. you have to be able to monitor your collections

3. you need guarantees that your collections will be given the same priority that the other practitioners are

4. that practice expenses are spelled out in exquisite detail to ensure you don't end up paying more than your fair share.

there are so many ways to screw someone in a collections based system its not even funny. you could consider this offer, but you would have to have a bullet proof contract.

finally, your profile says you are from florida. there are several aspects of florida law that are "unique". it has what is probably one of the worst practice acts in the us. whenever i hear "which i am skilled in and the docs aren't" in the setting of supervised practice (which florida has) i would be concerned not only about the liability but also practice act violations. add in that the dermatologists in florida will not hesitate to deploy lawyers over aesthetics practices by npps and you have a lot of red flags here.

david carpenter, pa-c

midwifejudy · May 9, 2008

david

your feedback has been most helpful and provided much food for thought and will help me in discussions with the docs.

autonomous pas get 5-10% of collections? isn't that low??

re

you discuss doing rounds, taking call etc. all of this pulls time away from you making money doing #'s 1 and 2. if you are going to be doing what is essentially an "independent practice inside a private practice" how are they going to compensate you for this time.

they say that they will refer patients to me, overflow, and that those pts will be billed under me, when i do rounds it will be billed under me.

then, yes whatever is collected will be divided 50-50.

also don't underestimate the support structure you need. i won't profess to know much about pcos isn't the support structure is part of the expenses? mas nurses, office staff, billers etc. that is a large part of what they are taking 50% for. i just wondered if 50% is alot becuz the expenses don't include benefits (health, malpractice, phone, beeper whatever) for me.

of course all the other standard warnings about collections based employment contracts apply:

1. you have to be able to look at the books

2. you have to be able to monitor your collections

3. you need guarantees that your collections will be given the same priority that the other practitioners are

4. that practice expenses are spelled out in exquisite detail to ensure you don't end up paying more than your fair share.

yes that is my question-- what is my fair share? any ideas?

yes thank you for validating my impressions the offer made me leary, and that's why i wrote. thanks for answering.

can you tell me a bit more about practice acts in florida, or where i might find more info about it.

yes i see your point.... although there are many things that an np can do without supervision as long as a protocol agreement is in place, the agreement should be with a physician who knows about what i am doing.

thanks for sharing your clear thinking. appreciatively,

core0 · May 9, 2008

david
your feedback has been most helpful and provided much food for thought and will help me in discussions with the docs.
autonomous pas get 5-10% of collections? isn't that low??
re
sorry pas usually pay the supervising physicians 5-10%. of course they are paying the rest of the bill.
you discuss doing rounds, taking call etc. all of this pulls time away from you making money doing #'s 1 and 2. if you are going to be doing what is essentially an "independent practice inside a private practice" how are they going to compensate you for this time.
they say that they will refer patients to me, overflow, and that those pts will be billed under me, when i do rounds it will be billed under me.
then, yes whatever is collected will be divided 50-50.
every hospital that i have dealt with requires the chart to be cosigned within a certain time frame. usually 48-72 hours. also most groups co-bill for npp rounding (ie the physician participates in one part of the encounter). this allows them to bill at 100% for medicare instead of 85%. the other thing to consider is how much travel time is involved in rounds. if you are having to drive to 2 or 3 hospitals the travel time really cuts into your ability to make money.
also don't underestimate the support structure you need. i won't profess to know much about pcos
isn't the support structure is part of the expenses? mas nurses, office staff, billers etc. that is a large part of what they are taking 50% for. i just wondered if 50% is alot becuz the expenses don't include benefits (health, malpractice, phone, beeper whatever) for me.
so essentially their 50% involves the building support staff then. if you are paying your own benefits (especially malpractice) then you are going to be short. one issue is that physicians in florida can go bare while nps can't. this dramatically raises your liability as can be found here (bottom of page 2):
http://www.floridanurse.org/arnpcorner/arnpdocs/floridanursepractitionerscopeaugust2006final.pdf
a typical family practice will have around 3 people per provider. with four providers it may be more like 2.5 but that still amounts to a fair amount. depending on your location building and other costs can mount up. i've seen projections that a single family practice can have fixed costs of up to $17k. lets say you collect $300k a year (not unreasonable for fp) this will leave you with $150k which is pretty nice. however, if your malpractice is $30k for example and you health insurance is another $10k it gets pretty small pretty fast. this of course assumes that your collections will be that high your first year which i doubt. bottom line is to determine what you will make, you have to determine what your costs are. thats the hard part of working for yourself.
of course all the other standard warnings about collections based employment contracts apply:
1. you have to be able to look at the books
2. you have to be able to monitor your collections
3. you need guarantees that your collections will be given the same priority that the other practitioners are
4. that practice expenses are spelled out in exquisite detail to ensure you don't end up paying more than your fair share.
yes that is my question-- what is my fair share? any ideas?
like i said above, you would have to know what your collections will be and what your expenses (med mal etc) are going to be. in the first year this is going to be almost impossible. this is why the first year its almost always better to go salary unless you can get some incredible deal (say 85% of collections) and think you can stay really busy with no insurance problems (unlikely in florida from what i hear).
yes thank you for validating my impressions the offer made me leary, and that's why i wrote. thanks for answering.
can you tell me a bit more about practice acts in florida, or where i might find more info about it.
yes i see your point.... although there are many things that an np can do without supervision as long as a protocol agreement is in place, the agreement should be with a physician who knows about what i am doing.
thanks for sharing your clear thinking. appreciatively,

the np practice acts can be found here:

http://www.doh.state.fl.us/mqa/nursing/protocol64b.htm

this is the part that could cause you problems:

general supervision by the physician or dentist is required unless these rules set a different level of supervision for a particular act. the number of persons to be supervised shall be limited to insure that an acceptable standard of medical care is rendered in consideration of the following factors:

(a) risk to patient,

(b) educational preparation, specialty, and experience of the parties to the protocol,

(d) practice setting, and

(e) availability of the physician or dentist.

if this did not involve aesthetics you might be able to slip something by. this still leaves you vulnerable. however given this:

" © a physician who supervises an advanced registered nurse practitioner or physician assistant at a medical office other than the physician's primary practice location, where the advanced registered nurse practitioner or physician assistant is not under the onsite supervision of a supervising physician and the services offered at the office are primarily dermatologic or skin care services, which include aesthetic skin care services other than plastic surgery, must comply with the standards listed in subparagraphs 1.-4. notwithstanding s. 458.347(4)(e)8., a physician supervising a physician assistant pursuant to this paragraph may not be required to review and cosign charts or medical records prepared by such physician assistant.

1. the physician shall submit to the board the addresses of all offices where he or she is supervising an advanced registered nurse practitioner or a physician's assistant which are not the physician's primary practice location.

2. the physician must be board certified or board eligible in dermatology or plastic surgery as recognized by the board pursuant to s. 458.3312.

3. all such offices that are not the physician's primary place of practice must be within 25 miles of the physician's primary place of practice or in a county that is contiguous to the county of the physician's primary place of practice. however, the distance between any of the offices may not exceed 75 miles.

4. the physician may supervise only one office other than the physician's primary place of practice except that until july 1, 2011, the physician may supervise up to two medical offices other than the physician's primary place of practice if the addresses of the offices are submitted to the board before july 1, 2006. effective july 1, 2011, the physician may supervise only one office other than the physician's primary place of practice, regardless of when the addresses of the offices were submitted to the board.

basically the way that this is being interpreted is that the supervising physician must be a dermatologist for aesthetics practices. its basically a way for the dermatologists to keep people from doing precisely what you are trying to do. this has been around since 2006 and i don't know if its ever been tested in court.

good luck

david carpenter, pa-c

midwifejudy · May 9, 2008

Yes I do know that there have been or are well over 100 court cases challenging that by docs other than derm or plastic surgeons.

There is alot of gray area. Like what is skin care services? Is botox and restylane skin care? chemical peels? photo therapy?

It is being hashed out in court by the docs that want a piece of the pie, and they are on every street corner down in south florida, so the derms will have a hard time keeping that one. they lobbied, and pushed it through, but it probable won't stick.

:up: You are great, David! Thanks for all the leads and help.

(I just want to earn an honest living- tired of slave labor)

Do you do this for fun or are you just a nice guy or what?

joyrochelle · Aug 26, 2008

Question-- any new grad NP's getting as "starter" or training salary first?

My employer is stating that its the norm--- i disagree.

lsutigerrn · Aug 26, 2008

Question-- any new grad NP's getting as "starter" or training salary first?
My employer is stating that its the norm--- i disagree.

I know a specialty practice that does the same thing. Starting pay - 60k for the first year without benefits, etc. I think that it is an insult. What do you guys think?