Joining a practice as an associate can be a stepping stone

May 8, 2012

By Christopher Wolfe, O.D.

Joining a practice as an employed associate can be a catapult to practice ownership.

An associate can undergo a trial period to decide if a particular practice is a good fit for them.

At the same time, the employer can evaluate the associate to determine if they will be a good match for a long-term relationship and if a partnership is obtainable.

As a potential associate, it is critical to understand the factors that lead a practice to take on a new employed doctor and the factors that influence salary and benefits.

When joining a practice it is important to determine if a particular practice can support another practitioner.

While one indicator of a good associateship opportunity is a gross income equal to or above the national average for similarly sized practices, other factors can also be indicators for a good associate opportunity.

These include an appointment book full weeks in advance, loss of young and new patient base, doctor volume that prohibits opportunities to provide unique services, an owner doctor who would like an exit plan or would like to reduce time in the practice.

When looking at the salary an associate is expecting to earn, one also needs to evaluate the cost the employer will incur by having an associate on staff.

For example, if the associate determines he or she wants to make a salary of $100,000 annually, and the net income of the practice is one-third of the gross, then the associate must generate a gross income of $300,000 annually to pay his or her way.

If the gross revenue per patient for an associate is $250, he or she would have to see about 1,200 patients per year (about five per day) to generate this revenue.

Salary is not the only form of income an associate should look at as compensation.

Bonuses are a good source for additional income.

As an example, if an associate generates more than $300,000 annually for the practice, the associate may receive a bonus of 20 to 25 percent for every dollar above $300,000.

This gives the associate incentive and allows the employer to still make more profit from this production.

It also tells the employer if the associate is willing to work hard for incentive, which can be a positive indicator for making the associate a partner.

Other benefits besides salary or bonus can be very valuable to the associate and the practice.

Things such as health, disability, malpractice and life insurance, continuing education, professional dues, retirement plans, sick or maternity pay can all be sources of benefits not included in taxable salary.

If associates were to pay for these benefits from their personal income they would first have to pay taxes on the income they used to pay for these benefits, while the business can pay for the benefits without the tax liability.

So if the associate is in a 28 percent tax bracket (which is the tax bracket if the associate is single and making $100,000), but receives $10,000 in fringe benefits, those same benefits payed for out of personal funds from the associate would cost nearly $14,000 in pretax income.

If a disagreement in salary, bonus or benefits is reached between the potential associate and employer, both parties should be able to document their case with statistics, such as the normal revenue currently generated by the employer or the potential increase in revenue that will come from new services that the associate will provide.

By using norms and statistics, an agreement can be reached that benefits both parties and may lead to a further partnership relationship.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: