Productivity Bonuses for NPs

February 1, 2007

I need help structuring a production bonus for my nurse practitioner (NP). Is it possible to bonus out a percentage of collections above cost? I am a solo practitioner, and cash flow is a priority.

Question: I need help structuring a production bonus for my nurse practitioner (NP). Is it possible to bonus out a percentage of collections above cost? I am a solo practitioner, and cash flow is a priority.

Answer: Sure. The structure you describe is known as a profit-sharing program. Each quarter- or year-end, your NP would get a bonus, in addition to a base salary. The bonus is a set percentage of profit or net revenue, bottom line, or however you define it. Note that if your NP helps generate more revenue, the profit will increase accordingly. You’ll want to be quite clear on when she’d get this bonus: Will it be once collections are complete for patients seen in the first quarter? Maybe just based on where you are at the end of the month? Or something else?

You’ll also want to run some numbers to see whether this works for you, bottom line-wise. If you’d enacted it two years ago, where would you be now?

The only trouble with a profit-sharing plan is that your NP will not have full control over all things related to profitability. What if you are a habitual under-coder or you decide to hire a nurse? Circumstances such as these would cause a negative impact on your NP’s earnings. She’ll either want to have more of a say in policy decisions or simply be quietly (or not so quietly) annoyed - which could affect her job performance.

An alternative scenario is to give her a salary as well as a bonus that’s based on just her productivity. Typically, her earnings would derive from the RVUs she produces. Check out your practice management software - it should have such a report. If she exceeds a certain baseline - set by, say, 100 percent of her past performance or an industry benchmark - then she gets some agreed-upon additional dollar amount. If she exceeds it by more than 20 percent, she gets that much more. You might want to exclude RVUs for some lab work - I’ve been hearing lately that such reimbursements can be so low that practices end up paying their NPs for work on which the practice already lost money. Again, you’ll want to run some financial reports to make sure that the extra cash you promise will actually be available.

One last thought: Ask your NP how she’d like to see the plan structured - that’s a sure way to get her backing.