Productivity-Based Pay

January 1, 2007

When you are paying an employee using productivity standards, should you include the receipts from vaccines or IUDs in the pot from which the salary is paid? For example, a DTAP vaccine for adults costs my practice $35. My employee orders it for a patient, and it is billed under her name. The insurance company pays $35 (maybe $40 if I'm lucky). Now, this employee gets 40 percent of her receivables, so she will get 40 percent of $35, or $14. But I, the owner of the practice, paid $35 for the vaccine, and now I'm paying her an additional $14. I lose money on the deal, and all those little vaccines add up.So what do people do? Do you just lump it all under overhead? Or do people separate out the actual cost of items such as vaccines with the assumption that overhead is for rent, staff salaries, malpractice, and so on?

Question: When you are paying an employee using productivity standards, should you include the receipts from vaccines or IUDs in the pot from which the salary is paid? For example, a DTAP vaccine for adults costs my practice $35. My employee orders it for a patient, and it is billed under her name. The insurance company pays $35 (maybe $40 if I'm lucky). Now, this employee gets 40 percent of her receivables, so she will get 40 percent of $35, or $14. But I, the owner of the practice, paid $35 for the vaccine, and now I'm paying her an additional $14. I lose money on the deal, and all those little vaccines add up.

So what do people do? Do you just lump it all under overhead? Or do people separate out the actual cost of items such as vaccines with the assumption that overhead is for rent, staff salaries, malpractice, and so on?

Answer: One solution would be to switch the productivity formula altogether. Instead of basing it on receivables, you can offer a base salary and then a profit share (a pre-set percentage of the practice’s profit after expenses) if employees exceed a certain productivity level based on work relative value units, or RVUs.

By offering a profit share at the end of each quarter or year, you share only profits. Basing profit shares on RVUs means you reimburse the employee for her effort, not for how many vaccines she gives.

Either way, openly address your concern with your employee, and ask her to help you think through a solution that is fair to both of you. The fact that the current system isn’t working is not her fault, but she’ll surely balk if you insist on a change that has a negative impact on her salary and also seems to discourage her from giving vaccinations.