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Top Two Forms of Compensation for the NP

Every nurse practitioner should have some form of part time or PRN job while running 2-3 practices. It is the most optimal model in terms of generating a diverse income, protecting yourself, keeping practice fresh and creating redundancy in your life (redundancy in this context means a system design that duplicates resources to provide alternatives in case one resource fails). Regardless if you are working part-time or full-time though, what is the best form of compensation for a nurse practitioner who is employed?

PRODUCTION BASED!

Working production can put a lot of cash in your pocket compared to a standard hourly rate or salary. You can make some massive bonuses if you negotiate the pay structure correctly and work in a high-volume practice.

What are the benefits of hourly pay or salary?

  • You get paid regardless of how busy it is. If it is slow, you are paid.
  • It is a predictable income.
  • You do not have to “produce” to receive payment.

Cons:

  • If you bust your ass, your pay stays the same. Ever work at an urgent care during influenza season on a basic hourly rate? It sucks.
  • If you are a high functioning nurse practitioner and can generate a lot of revenue for the practice, you do not see the benefits of it.

What are the benefits of working on a production model?

  • You get paid for what you do. If it is busy and you are working your tail off, you will be financially compensated for it.
  • A high functioning nurse practitioner who is very productive can generate MASSIVE bonuses. I am talking to the tune of $20,000 quarterly in addition to a base rate with the right set up.
  • It motivates you to work harder.

Cons:

  • If you do not work, you do not get paid.
  • If you work for a low volume or slow practice, you will not make very much.
  • The taxes on those bonuses are like a punch to your stomach!

There are generally two types of production-based models in medicine:

  1. A percentage of collections
  2. Dollars per Relative Value Unit, or RVU

A percentage of collections is just that. The nurse practitioner is given a percentage of everything they collect within the practice. Most nurse practitioners report this being in the 30%-60% range. So, if you generate $30,000 one month to the practice, you would earn your negotiated percentage of that number. The rest then goes to the overhead of the practice and into the owner’s pocket, which if you were smart would be YOU since you are starting side businesses right?

This model is great because it is so simple to calculate and keep track of. From my experience, smaller practices generally pay by collections because of its simplicity. I do this for my telemedicine practice. It is simple and to the point. But be wary, there are very dishonest people in this world that can “fudge” the numbers and pay you less than what you actually earned. If you are being paid by collections, keep very close track of the numbers yourself and demand to see the books on a monthly basis.

Another downside of a collections earned model is that you are usually not paid any sort of base salary. Consequently, you could go weeks with earning very little. This could cause potentially financial problems if you are strapped for cash.

The most common production model is being paid a base salary with bonus calculated by how many RVUs you produce. This model is widespread among larger practices and corporations. This is because most EMRs can generate reports on how many RVUs the provider produces in a certain time frame. So, it is imperative that you understand how the RVU production model works.

RVUs are units of measure assigned to most codes in medical billing. Everything you do in practice has an RVU amount assigned to it. So, for example, a basic established level 3 visit awards 0.97 RVUs, a knee injection awards 1.94 RVUs, etc… The more you do, the more RVUs you accumulate.

It is a fantastic model and much easier to keep track of than collections. Also, these larger practices and corporations can’t really keep track to see if the insurance actually reimbursed for the RVU you produced. You know what that means? You earn your commission on the RVU regardless if it was paid out or not! This is a huge advantage compared to earning a percentage of collections.

Typically, every quarter the number of RVUs you produced is multiplied by a dollar amount, anything over your base rate is paid out to you resulting in a large bonus if you have been productive.

Now, what type of model should you ask for during a job negotiation? It varies by specialty, experience and region; these numbers are general recommendations based off my experience.

Collections: Think about how much you generate for a practice and then what the overhead is for the practice. If you are working in a top of the line practice that has a $10,000 a month lease, fancy furniture, lots of employees, etc… then the collection amount you will receive will be lower than for a more modest practice. Keep this in mind.

So, before you negotiate this rate, try to guesstimate what their overhead is. Sometimes the practice manager will tell you but more times than not, this will have to be a rough estimate on your part.

If it is a high overhead clinic, I believe 40%-50% is reasonable or ask for RVUs. If it is a smaller practice, then I would try to go as high as 70% of collections. REMEMBER, ALWAYS START HIGH WHEN NEGOTIATING A SALARY! The worse they will say is no.

RVU: You want to negotiate the highest amount per RVU as you can. The more dollars you make per RVU, the more you will be paid. It is that simple. Let’s look at how much an established level 3 visit reimburses.

On average, a level 3 visit will be reimbursed through insurance at around $75-$100. Therefore, if you are offered $18 per RVU, you are only receiving around 20% of collections!

As you can see, it is imperative you understand this concept when negotiating your RVU rate. In my opinion, you should ask for $32 per RVU during job negotiations. That is closer to 40% of collections and is totally reasonable.

My first job out of nurse practitioner school was an RVU/salary hybrid. I was paid a base salary with RVU production. I had to earn a certain amount of RVUs to meet my base salary, then anything after that was paid as a bonus. I earned $22 per RVU, it was a bad set up, but I was new and didn’t know any different. The other problem though was that they also capped the bonus! I was naïve back then, so I didn’t understand the ramifications of having a salary/bonus cap.

NEVER ACCEPT HAVING A SALARY/BONUS CAP!

You will end up working for free after you hit that cap. There is nothing more de-motivating than knowing you are working for free. It sucks so do not ever, under any circumstances, let an employer put a salary/bonus cap into your contract!

Be very proactive when negotiating a bonus structure. If you can get a large percentage of collections such as 60%-70% then go for it. You could really kill it. Otherwise, stick with $28-$32 per RVU produced. You can earn some very lucrative bonuses in addition to a base salary that pays the bills!

10 thoughts on “Top Two Forms of Compensation for the NP

  1. Thank you for these articles. I really want to start a business… I have some ideas so we will see. This information is gold. I have 2 months full time urgent care, and a month as inpatient observation for my 2nd job. Dream is to start my own thing, thank you for the motivation and inspiration.

  2. So I am curious if Anyone has heard of a “negative”bonus ? Meaning if the percent of collections does not exceed salary, then the NP owes the company the difference ??

    1. Yes, and that is an awful form of compensation. You need to negotiate in your contract a “salary” that is paid regardless of production. Then once you meet that number, you receive bonus. BUT, when you negotiate a higher production type model then the payoff can be huge. So there are plus and minuses. Go straight production if the clinic is busy. If it is not, I would do a salary/production hybrid.

  3. Thanks Justin! Great information. So, that is the situation I am in, working in internal medicine in a rural clinic, and I could not survive on just RVU bonus, as my numbers are still fluctuating, but I do want to renegotiate my rate. You mentioned on another site to ask no less than $30/RVU. We are paid in work RVUs, does that change this rate any? And if I can find out what I billed all last year, I should be asking for at least 50% in salary? We have 5 providers and I am the only one with 1 CMA, they all have 2, which even though they have higher numbers (3 providers also do addiction tx which are 5 minutes & level 4 visits), I still don’t see how they justify the need/cost.
    The other concern, however, is we are negotiating with a larger health system to buy us out within the next few months. My salary was better than working in a bigger city 2 years ago (new NP), but averages now are 103-108K. They did just give a 2% raise across the board (I think to retain staff since no raise in years) which puts me closer to this number. Is this a bad time to ask for wRVU increase? or better to try now before new system takes over?
    P.S. I know you would prefer I just go open my own clinic, LOL, but that is not an option right now!

  4. Great post as always. Quick question, what do you think about a part-time once a week gig offering only 2 weeks of UNPAID vacation a year?
    Figuratively speaking, since I am only there once a week, it’s actually just 2 days a year, No?
    I mean the whole idea of me getting a part time gig was for more flexibility to enable me plan on how to start up my own business. Is this a reasonable agreement or am I thinking too deep into it?

    1. Your thinking to much into it. Work one day a week and earn a little side income to support you while you start your business. The 2 days of unpaid vacation is peanuts in the grand scheme of everything.

  5. Hi Justin,
    I am a fairly new NP and am being offered a position as a primary care hospitalist. I am being hired as an independent contractor and will be paid based on production at $35/patient. I haven’t signed a contract yet. Is this form of compensation equivalent to the RVU method. Any thoughts on whether this is a fair starting point. Thanks so much for all the information. It’s been very valuable especially when deciding to become an independent contractor.

    1. Hi Nikki,

      $35 per patient is similar to the RVU model, but that seems awfully low to me for hospitalist work. You see 10 patients a shift and only make $350? That is laughable. What is the expected volume per day?

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