Sample practice administrator bonus plan

Practice Administrator Bonus Plan: Incentivizing Performance

I ran across this sample practice administrator bonus plan in one of the numerous listservs I subscribe to; I thought it was a pretty good one and thought you'd like to see it:

Part 1 – 1% of total practice collected revenue above the revenue target.  The revenue target is approximately 90% of what we agreed would be a good year.  The target is adjusted if necessary for special circumstances (such as physicians joining or leaving the practice).  If collected revenue is below the target, a negative bonus is possible (assuming I would even be employed).

Part 2 – 20% of the average partner’s compensation above the revenue target.  Again, the target is 90% of what the physician’s agreed would be a good year for them.  A negative bonus is possible.

Part 3 – a sliding scale based upon my annual review done by the Executive Committee.  The maximum is equivalent to 9% of my salary.  My review is done on a 1 to 5 scale.  There is no bonus if the rating is below 3.  At 3 I receive 60% of the maximum.  The percentage then increases by 2% for each 10^th of a point above 3.  In the event that they do not complete a review the percentage is assumed to be 75% (this has not happened since we went to the bonus plan, but it happened at least every other year before that).

NOTE:  An important part of setting up the plan is establishing what a good year looks like.  It should be based on realistic expectations for your practice.

For more detailed guidance on practice administrator bonus plans and other practice management services, consider consulting with REED TINSLEY, CPA, who specializes in helping medical practices optimize their financial and operational performance.