For the nurse practitioners in restrictive states that require collaborative physicians, it is important to understand how you are going to compensate your physician collaborator. How much you should compensate them is discussed here. What we are going to discuss in this article are the two models of compensation.

1. Fixed rate.
2. Production.

There are advantages and disadvantages of each compensation model. The biggest thing to consider is how much money you have and what your risk tolerance is.

If you have a substantial amount of cash when starting a business, go with a fixed rate. If you are strapped on cash and worried about compensating your physician collaborator, then a production model might be more suitable for you.

Fixed Rate Model:

The fixed rate is just that, you are paying your physician overlord a set amount of money every month. This could be $500 to multiple thousands depending on where you live and what service you are providing.

This is the option for the nurse practitioner entrepreneur who has a little money set aside for this expense. If you are starting a business and have $3,000 extra to pay the physician for 3 months until revenue starts building up, then go with a fixed rate model.

This will be a fixed expense that is predictable every month. It doesn’t matter how much money you are making; you will always pay the physician this amount of money. This is the advantage of the fixed rate.

The biggest downside is the fixed expense though. What if your practice is not doing well? That is a real possibility and one you should consider. If you are not bringing in enough revenue monthly to cover all your expenses, including the physicians fee, then you are going to be running into financial troubles early.

Basically, if you have the money, then go with a fixed rate. If you are operating with very thin margins, then consider the production model.

Production Model:

The production model pays the physician a percentage of collections. This will be a variable expense and will depend on how well your practice is doing. If you make zero dollars, then the physician makes zero dollars. On the other hand, if you make $20,000 one month, then the physician is going to get a cut of that… for doing nothing most the time.

I personally would not pay this individual more than 10% of collections, but I have heard of some nurse practitioners paying upwards of 50%, which his total robbery in my opinion. I think 10% is fair, but I would not go higher than 20%. If the physician wants more than that, find another one. There are always thirsty physicians looking for easy money out there.

The biggest advantage of a production model is the risk associated with it. This expense will vary on the revenue coming in. So, if you are strapped on cash when starting your side practice, this will significantly reduce your anxiety. You will not have to worry about finding the money to pay your collaborator. The money should be there as long as you are operating a low expense practice. If you have a low risk tolerance and/or have limited startup money, then consider a production model.

The main disadvantage though is the cost. If you operate a niche side practice and follow The Elite Nurse Practitioner Model, chances are high that you will generate a significant profit. You will bust your ass on growing this practice and have to pay a percentage of the money to your physician collaborator. This could become very discouraging after some time. This is why you only have the collaborative agreement active for 1 year at most. Do not sign an agreement for 2-3 years. You will become very mad if your practice succeeds and you are just forking over your money for years. Sign the agreement for no more than 1 year, I cannot stress this enough!

These are the 2 collaborating physician compensation models. I truly feel for my brothers and sisters who practice in restrictive states who have to deal with this nonsense, but it is what it is. The physicians do not want to hand over their power and the easy gravy train. You can fight for independent practice through your states legislature as much as you want, but the fact remains, you must follow these rules for the time being. Go with a fixed rate if you can afford this expense for 3 months. If you have limited funds, then go with a production model and only sign an agreement for 1 year.