How Dental Associates are Paid in a Productivity Model

How are dental associates paid in a productivity model? There are different ways a dental associate can be paid based on productivity. But we’re going to kind of go through each one of them and then maybe a discussion of which is best. And some of the red flags you need to think about. The most common productivity model would be net collections. That simply means any of the services attributed to the dentist, any of the cash that’s collected by the practice attributed to those services will be considered the collections. And then normally, the dental associate would get a percentage of those collections and it could be done in several different ways.

One, it could be pure net collections, meaning, you eat what you kill. You do these, you would get a percentage of it. If it’s just pure net collections-based, it’s probably going to be somewhere between 35 to 45%, although 45% would be high, to be honest for a dentist. So, probably more between 35 to 40% of collections, and that would be it. They would do a reconciliation at the end of the month and then you’d be paid out whatever it was. And that’s it, that’s your compensation. The next thing would be if you’re on base salary plus net collection. For instance, let’s say, you’re being paid 120,000 a year. Then the employer may say, alright, once you’ve collected 10,000, so to cover your base salary, then you’ll get X percentage of the net collections above that.

Now, that’s going to be a smaller percentage somewhere between 15 to 25% in that scenario where you have a guaranteed base. So, you can’t go below 20 in this scenario, but you do have some opportunity if you’re productive to get more than that. Probably the most common way is to have a hybrid of base salary and net collections. The problem with the pure net collections agreement is, especially at the beginning, let’s say, a dental associate starts with practice. Well, if the kind of accounts receivable cycle for a dental service that’s done through insurance is somewhere between 30 to 90 days, you could be working for a month or even two without seeing almost any net collections at all. And most people aren’t willing to work for a thousand dollars per month or something. Other blogs of interest include:

I mean, it’s going to be more than that, but this is just an example. And then another consideration and these are the two biggest red flags are just starting with making little money in the first couple of months. There are some contracts that will state after the contract is terminated, the dental associate will not be paid anything else that’s outstanding. If you’re on a pure net collection-based employment agreement and the language states, you won’t be paid after the contract terminates, you essentially worked for free for two to three months because all those collections that are outstanding up until the date of termination aren’t going to you, they’re going to the firm, and you just worked for free. So, you want to absolutely make certain if there’s net collection-based agreement, either one, pure net collections or a hybrid of base salary and net collections, there has to be language in there that states you will receive all of the services, all of the money for the services that were attributed to you and collected by the practice.

You’re going to get that regardless of when it’s collected by the practice. I mean, some places will try to limit it to 60 or 90 days, which for the most part, is reasonable. But ideally, it would be no matter when it was collected, you would get a part of it. Because one thing to think about, I’m not saying everyone’s going to do this, but with a short window, we have had instances of practices sitting on those claims and not submitting them timely, just so they knew that they would get past that window so the dentist wouldn’t get the collections that they deserved and some sneaky stuff, but it’s happened. Anyway, think of it that way. It needs to be language that says you’re going to get paid for all the collections that they receive. And then also, if you have both the base salary and collections, it needs to say the same thing as well.

Now, different practices are going to reconcile it at different intervals. For the most part, most places will do it monthly. However, if it is like a hybrid of base and net collection, some places do it quarterly. They would just take your base salary for those three months, and then anything that you collected above that you would think of that percentage, then it would be paid out at the end of the quarter. You also want language in the contract that states exactly when it will be paid out. Another scenario could be a dentist could earn a bonus, but then terminate the agreement and leave before it gets paid. And then the language in the contract may state, they don’t get paid anything once the contract terminates, and then you’re out of your bonus, even though you’ve earned it. So, you need to make certain there’s more language in there about the bonuses that states when they will be paid out, and if the contract terminates prior to the payment, you will still receive it when it normally would be paid. A couple of other ways that it can kind of have a productivity model for a dentist.

You could do it by encounters. Some practices will just have a list like a fee schedule, and then the dentist would simply receive this much for doing this and this much for doing that. That’s rare. I mean, honestly, for the most part, for dental associates, it’s either a daily rate or a base salary or the base salary plus net collections. It’s rare you’ll see purely net collections-based agreements. It’s a big red flag if the employer is not willing to even give you a moderate guarantee. Trust me on this, it’s usually a bad sign and they’ve had a lot of turnover or they’re just cheap and they don’t want to guarantee anything to the dentist. And then in those situations, it usually doesn’t end up well. At least that’s my experience with it. Anyway, those are a couple of ways of having a productivity model for a dental associate.