Pediatric Compensation Modeling Tool Update

Have a new doctor and you'd like to figure out how much to pay her?  Does your NP want some incentive for working more?  Let's figure it out.

I can't tell you how many times I've made a spreadsheet compensation calculator from scratch while talking to a client only to realize that I'd posted one here on the blog.  I'm about 5% smarter now, and I got great feedback from a buddy, so we all share the new one.

Instructions For Using The Modeling Tool

  1. Head to the Google document.   You will need to make a copy so that it's just for you.
  2. Determine whether you want to consider a fully salaried position, a straight production formula, or a "mixed" model that includes both a salary and a productivity payment. Finally, there’s an option for a tiered production model where you can change the level of payment based on production. In the spreadsheet, you will see a tab for each one of the different models.
  3. In the tab you're examining, you need only complete the fields highlighted in light blue: Overhead - Overhead, for this purpose is the percentage of the expenses required to run the practice without the costs directly related to any clinicians. For example, you'd count rent, vaccines, non-clinical staff, your EHR, etc. Although it varies widely, most pediatric practices run somewhere between 55-65% overhead.
    Desired Margin - What is the desired profitability you expect from your employed clinician? Note that this value covers all unexpected expenses and serves as a buffer for when your Overhead fluctuates. I recommend a minimum margin of 10% - that's what you get "paid" for your risk.
    Benefits, Taxes, etc. - Most people focus on the 'salary' of a clinician and fail to account for all of the other expenses associated with an employee - from benefits (including malpractice insurance and healthcare) to employer taxes (Medicare, Social Security). Making sure to pad your analysis with money to cover these additional expenses will save you from being surprised later!
    Salary - If there is a desired initial salary for the clinician, indicate it here.
    Productivity Share – What share of the revenue do you want to share?
    Productivity Goal – What is the revenue level you require the clinician to meet in order to receive a share of the production?
  4. Once you've entered the data, the spreadsheet will then calculate a variety of important data points for you based on potential revenue levels from $200K through $800K. The key lines are:
    Revenue – Each column represents a different revenue volume.  You can change these values to get more narrowly focused.
    Extra Revenue - Tells you whether or not you can afford this payment model. If the number is negative (in red) then you are paying the clinician more than their revenue can cover, presuming your margin.

Feel free to adjust the formulas, or course, and you can always hardwire things like Benefits by entering in a direct number. Play around with the fields in blue at the top and you'll quickly see the effect. With a little spreadsheet knowledge, you can see how things impact your profitability.