Special Report:

Incentive and Bonus Plans

Incentive and Bonus plans for administrators are like medical group compensation plans – "when you’ve seen one plan, you’ve seen one plan."

However, there are a number of methodologies that show up over and over again, and we have collected some to support your contract negotiations.

Several important points:

	There is no “best” incentive plan. What is right for one group might not work for another.
	It is important that the plan be tied directly to yearly personal performance objectives. Otherwise the plan is left to the whim of those giving the bonus.
	Incentive plans can be tied to both financial performance and personal performance objectives.
	The following methodologies do not represent all options, but point to a number of alternatives that could be modified or combine to result in a useful plan.

System

Details

Sign on Bonus

One time payment when hired.

Discretionary Bonus

	Set a potential bonus percentage.
	At end of year, physicians discuss and decide amount to be distributed on a discretionary basis.

Bonus based on Reaching Identified Goals or Targets

Could set a bonus of 1 to 15% based on reaching certain goals or targets.

Could set a certain percent for each goal/target (say 3-5% for each goal selected).

Could set goals/targets considering MGMA specialty statistics.

Goals/targets could include:

Increasing patient collections to a certain level, or by a certain percentage.

Increasing gross collection percentage to XX%.

Increasing net collection percentage to XX%

Reducing days outstanding in accounts receivable to XX or below.

Reducing overhead to a certain percentage (Total Medical Revenue/Total operating costs [excluding MD draws] not to exceed XX%)

Reducing staff to a certain level.

Quality of service and care programs, as measured by such factors as:

	Patient satisfaction results.
	Employee satisfaction results.
	Employee turnover rates.

Completion of identified projects. Examples:

	Bring accounting in house.
	Build new building.
	Implement new computer system.
	Physician recruitment.

Percent of Shareholder’s Income

Examples:

	XX% of the median physician’s compensation.
	Employee receives additional compensation equal to XX% of the average quarterly productivity bonus paid to shareholders.
	Physician shareholders receive 1/3 of their annual compensation in draws throughout the year and the balance as an “end of year bonus.” The Administrator’s bonus is 25% of the physician’s bonus in year 1, 30% in year 2 and 35% thereafter.
	Bonus is 30% of a shareholder’s year end bonus up to a maximum of $50,000 in bonus pay.

Bonus Based on Increased Physician Compensation

Examples:

	At the end of each fiscal year, XX% the average shareholder compensation over the prior year’s average will be calculated and the difference paid as a bonus.
	For the year, you will receive a bonus of 1% of base salary for every 1% increase in average physician W-2 compensation and benefits.

Bonus Based on Cash Receipts

Example:

XX% of cash receipts over $XXX.

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