How is Dental Production Calculated?
Meaning, that if a dentist is paid via production, what are some common ways that happen? Let’s get into compensation for dentists and dental associates. Dentists are one of the few healthcare providers where they’re given a daily rate. I mean, it’s common for a dental associate to be paid just via a daily rate. There’s a set amount that they get per day. And then if there’s a half-day, they get a little bit less. That’s one standard way of compensating a dentist. The other is base salary, where they get a flat base. They work the agreed-upon hours, and that’s that.
Production-Based Calculation Methods
Now, if they’re paid purely on production, it can be done in several ways. The most common way is through what’s called net-collections. Net collections are what the dental practice receives from the patients with services provided by that specific dentist. There will be times when maybe there’s an insurance claim that’s denied. Perhaps the patient can’t pay or refuses to pay a write-off. Sometimes, a dentist can provide services and ultimately not get paid for them. And if you’re on a net collections-based employment agreement, you’re out of luck. You’re just not going to get paid for those things.
Practice Valuation Methods and Average Annual Earnings
As far as normal percentages, if a dentist is paid purely on net-collections, meaning from the very beginning, the only thing they make is the percentage that’s collected for them. Usually, it will be somewhere between 30 to 40%. So, you take whatever the net-collections are by that specific dental associate and multiply those by 40%. Then that would be the take-home for that dentist. In that scenario, the employer would do it monthly. Now, there are also hybrid ways of doing it. Let’s say a dentist has a base salary of 120,000, and then the practice may say, okay, so you’re going to get 10,000 a month. And then, if you have net-collections exceeding 10,000 a month. You’ll get a bonus based upon the net-collections beyond that at a percentage.
In that scenario, when it’s a hybrid of a base salary and net-collections, a normal percentage would be somewhere between 18 to 25%. So, you have that guaranteed base. But then, you also can make more based upon that percentage. If you’re on a pure net collection, somewhere between 30 to 40, and if you’re in a hybrid, usually between like 18 to 25 is a standard amount. A dental practice would rarely compensate just based on encounters. It varies so much from patient to patient that the insurance company will provide different amounts for whatever they’re doing. I don’t think encounters are a standard way of doing it. It’s most of the time based on net-collections.
Beware: Low Volume and Net Collections
Can the dental associate now negotiate the base salary and the net collection percentage? Certainly, they’re going to have to do some math. Now, suppose you’re on a pure net collections-based compensation structure. In that case, the first thing that a dental practitioner must think about is the volume of the practice or the likely potential volume once the patient base is built up?
You will not make much money if you move into practice and get paid purely on net-collections, and the volume is low. So, you need to have a conversation with the owner about the expected volume, such as how many patients you expect I’ll see a day? What’s a normal amount of net-collections in a month for an associate dentist here? These are conversations that they must make in advance. Not having any discussions about the actual statistics is a bad idea. I’ve had some people who have signed an agreement for net-collections with a non-compete. They get in there. They’re making a tiny amount of money. They immediately recognize it’s a bad opportunity and give the notice to leave. Still, then they’re stuck with this onerous non-compete.
So, it’s much better to do due diligence upfront. That way, you can save yourself from getting in a tough situation. So, that’s kind of how productivity is calculated for a dentist.
How Should You Negotiate a Dental Associate Salary?
I will provide tips and tricks as far as how to get the best compensation. The first thing to speak about is how often dental associates are actually paid via salary versus another compensation model. There are usually four common types of compensation structure. The first would be a base salary, so you just get paid a set a month, you work whatever the agreed-upon hours are, and that’s it. The second would be a hybrid-based salary with the net-collections model. Net-collections would be any money that the practice brings in based upon your personally performed services.
And so the dental associate would get a smaller monthly base salary. Then they get a percentage of net-collections, whatever the practice brings in monthly or quarterly. The third way is pure net-collections. This means the dental associate only gets paid based upon what they bring in. That’s risky. And then the last is a daily rate. Many dental associates will get a daily rate and then work either half-day, full-day, or whatever, and that’s how much they get.
How to Negotiate Better Compensation?
I think I don’t want to focus completely on salary because there are other avenues that the dentist needs to think about. Let’s talk about salary. First, you need to know what your worth is. You need to know the going rate in the area you’re looking in. The experience you provide, if you’re in a specialty, and what kind of normal computation for that.
There’s no great resource that aggregates all the data for salaries across the country that I find accurate for the dentist. So, talk to colleagues, mentors, and people you were training with. I think it is usually the most accurate way of determining the going rate. And sometimes, some of the dental associations can provide, I guess, some data that’s okay, but I wouldn’t completely rely upon it. When you get an initial offer, let’s say it’s for 120,000. Most employers expect at least some kind of back and forth as far as compensation is concerned. So, don’t feel bad asking for more.
Now, how much more depends, but you need to be reasonable. If 120 is kind of the average for a, let’s say, you’re right out of training, you have no experience building up a practice, and you say, you know what, I don’t want 120, I want 240.
Other Blogs of Interest
- How Much PTO Should a Dental Associate Get?: How Many Days of Time Off Should a Dentist Get?
- Dental Clinics: How to Negotiate a Dental Associate Salary?
- Employment Agreement: How to Negotiate a Dental Associate Contract?
- Dentist Days Off | How Much Time Off Should a Dental Associate Get?
Dental Production Models: How Dental Associates Are Paid in 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 collected cash 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, which could be done in several different ways.
Pure Net Collections
One, it could be pure net-collections, meaning you eat what you kill. If 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 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 whatever it was. And that’s it, that’s your compensation.
Base Salary Plus Net Collection
Next will be if you’re on a base salary plus net collection. For instance, let’s say you’re being paid 120,000 a year. Then the employer may say, ” All right, once you’ve collected 10,000, ” to cover your base salary. 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 to get more than that if you’re productive.
Probably the most common way is to have a base salary and net-collections hybrid. The problem with the pure net-collections agreement is, especially at the beginning, let’s say, a dental associate starts with practice. Well, suppose the accounts receivable cycle for a dental service done through insurance is between 30 to 90 days. In that case, you could be working for a month or even two without seeing almost any net-collections. And most people aren’t willing to work for a thousand dollars per month. It will be more than that, but this is just an example.
Dental Associates Contract Red Flags
And then another consideration is the two biggest red flags, starting with making little money in the first couple of months. Some contracts 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 that you won’t be paid after the contract terminates. You essentially worked for free for two to three months because all those outstanding collections up until the termination date aren’t going to you. They’re going to the firm, and you just worked for free.
So, you want to make certain if there’s a net collection-based agreement, either pure net-collections or a hybrid of base salary and net-collections. There has to be language that states you will receive all of the services and the money for the services that were attributed to you and collected by the practice. You will get that regardless of when the practice collects it.
Some places will try to limit it to 60 or 90 days, which is reasonable for the most part. 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 will do this. Still, with a short window, we have had practices sitting on those claims and not submitting them timely. They knew they would get past that window so the dentist wouldn’t get the collections they deserved and some sneaky stuff, but it’s happened.
Make Sure Your Percentage Is Paid
Anyway, think of it that way. There needs to be language that says you will get paid for all the collections they receive. And then also, if you have both the base salary and collections, it needs to say the same thing. Now, different practices are going to reconcile it at different intervals. For the most part, most places will do it monthly. However, some places do it quarterly if it is like a hybrid of base and net collection. They would take your base salary for those three months. employer would pay out anything you collected above that you would think of that percentage 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 that 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 about the bonuses that states when they will be paid out, and if the contract terminates before the payment, you will still receive it when it normally would be paid.
Productivity Model Based on Encounters
A couple other ways is to 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.
You’ll rarely see purely net collections-based agreements. It’s a big red flag if the employer is unwilling even to give you a moderate guarantee. Trust me on this, it’s usually a bad sign, and they’ve had a lot of turnovers, 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 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.
How to Negotiate a Dental Associate Salary?
How should you negotiate an associate salary? I will provide tips and tricks as far on how to get the best dental practice compensation. The first thing to discuss is how often employers pay dental associates via salary versus another compensation model. There are usually four common types of compensation structure.
Common Types of Compensation Model
The first would be a base salary. You just get paid a set a month. You work whatever the agreed-upon hours are. And that’s it. The second would be a hybrid-based salary with the net-collections model. A net collection would be any money that the practice brings in based upon your personally performed services. And so, the associate would get a smaller monthly salary. Then they get a percentage of net-collections, whatever the practice brings in monthly or quarterly. The third way is pure net-collections. This means the associate only gets paid based on what they bring in. That’s risky. And then the last is a daily rate. Many dental associates will get a daily rate, working either half-day, full-day, or whatever. And that’s how much they earn.
Tips for Negotiating Better Compensation
Essentials of negotiating a dental salary. I won’t focus entirely on salary since there are other avenues the dentist needs to think about. Let’s discuss salary. First, you need to know what your worth is. You need to know the going rate in the area you’re looking in. The experience you provide, if you’re in a specialty. And what kind of normal computation for that.
There’s no great resource aggregating all the data for dental salaries across the country that I find accurate. So, talk to colleagues, mentors, and people you were training with. It’s usually the most precise way of determining the going rate. And occasionally, some dental associations can provide some data, but I wouldn’t entirely rely upon it. When you get an initial offer, let’s say it’s for 120,000. Most employers expect at least some kind of back and forth as far as settlement is concerned. So, don’t feel bad asking for more.
Now, how much more depends, but you need to be reasonable. If 120 is the average for a, let’s say, you’re right out of training, you have no experience building up a practice. And you say, you know what, I don’t want 120, I want 240. Well, the employer will likely laugh it off.
And it will put you, or at least start you on the wrong foot. It needs to be reasonable if you’re asking for a larger amount. It needs to be as informed as you can be. One good way of doing it is if you’ve identified an area you want to practice. Reach out to multiple practices and try to get an average of what they offer you. And then, that way, you can determine if one place is kind of low-balling you or not.
Ancillary Benefits Mentioned in the Agreement
Beyond salary, you also need to consider all the ancillary benefits like health, vision, dental, life, disability, and retirement. But then are there potential bonuses? Are they paying for your malpractice insurance and tail insurance? What are the restrictive covenants? When people base employment on the baseline number for salary and not anything else, I think that’s shortsighted. One work paying $20,000 less could be much better considering all the different bonuses and benefits. And maybe a lesser restrictive covenant. The non-compete, for instance, versus another one paying 20,000 more but doesn’t offer all those other good things.
Another tip: when searching for your first workout of training, go into an environment you can learn from. There should be other experienced dentists around you in a professional environment. You need to interview and go out and look at the practice and see how they operate. Is there proper staffing? Are you going to be efficient? If they’re paying you for productivity, will they do everything necessary to make you as efficient as possible? Because if they don’t, your production will be less, and you’ll make less.
Dentist Daily Rate and Other Compensation Models
Now, as far as the other compensation models, a daily rate is pretty simple. I mean, it’s the same analysis of determining how much they will offer you if you have a base salary. Usually, it’s somewhere between eight hundred to a thousand per day, a thousand on the high side. Suppose it’s a compensation structure involving a base salary and net-collections. In that case, they’d depend upon how much base salary you’re getting. But typically, if it’s a hybrid, meaning base salary and collections, your collections will be somewhere between 15 to 25%. And then the last one would be pure net-collections. That’s usually somewhere between 35 to 45%. I think closer to 35 would be most likely as far as that goes.
So, that’s a little breakdown of how to negotiate an associate salary. It’s tough when you have no experience. You’re not bringing any patients into a practice. You must think of the best learning environment or build your skills. And then utilize that down the road to leverage the salary.
How to Negotiate a Dental Associate Contract
How should you negotiate an associate contract? I’ll give some tips and tricks to get a better contract. There’s a difference between negotiating a contract with somebody just out of training versus someone established in a community. You have more leverage if a corporate practice or another group brings out your practice. Or wants you to join them. And you have an established patient base. Suppose you’re coming out of training. What do you need to do to put yourself in the best position to negotiate a contract?
For most dentists, the most important things are salary. Is it a base salary? A daily rate? Could it be a net collection? How do you terminate the contract? Can you get out of it with a certain amount of notice or the benefits? Are they paying for your license, DEA registration, credentialing, or continuing education, and are there signing bonuses and relocation assistance? Will you be paying them back if you leave within a certain time? Probably the two highest priorities are: who’s paying malpractice insurance. And who must pay for tail insurance after the contract terminates if it’s a claims-made policy.
Also, the non-compete. This is some people’s absolute, most important thing in the contract. If they’re tied to a community, kids in school, or family, they absolutely can’t leave. Then you need a reasonable non-compete that will not make you move entirely out of the area.
Know The Average Pay in Practice
Those are the most important things to dental associates. Now, you’re coming on training. You have a position offer, they’re giving you a certain financial amount. How do you know what’s reasonable? Talking to your classmates is the best way to find that information. What offers are they getting? How much are they getting, and how are they structured? Where do offers come from? That’s the best and most accurate means of determining the going rate at that time. The compensation is going to vary wildly. Is it a base salary? Could it be a daily rate? Is there some net collection involved? Or is it a hybrid? And could it be half base, half net-collections?
Other Things to Consider Beyond Compensation
Dental compensation for a job may look great, but the benefits are inadequate. They’re not paying for your tail insurance, or the non-compete is terrible. So, you can’t just take a salary as the number one factor in determining a good opportunity. But it is undoubtedly vital. Knowing whether a non-compete is fair or not is something you probably must talk to a professional about.
Mostly, anywhere between one to two years and 5 to 15 miles from your primary practice location would be reasonable. If you’re in a non-compete that’s more than two years, it knocks out like multiple counties. Or maybe they’ve attached the non-compete radius to 10 locations. Say it’s a corporate practice in a big city having 10 locations. And they’re saying, well, you can’t work within 10 miles of every site we own. That’s not a reasonable non-compete.
The actual negotiation will depend on two things. One, do they give you an offer letter, or do they give you the employment agreement? They expect those terms to be negotiated in advance if they give you an offer letter. They were then incorporated into the employment agreement. And then, they’re going to give you the employment agreement. Sometimes it’s challenging coming to terms with the main parts of an offer letter without seeing the full employment agreement. If I had a perfect scenario, there would be no offer letter. They would give the employment agreement.
Then you’d completely understand what the work entails and the expectations for both parties. You could agree to a salary, the length of term, that there’s a non-compete, that’s the things they’ll pay for. But seeing the specific language in the contract could significantly change how you look at its value.
You Can Negotiate The Contract Even After Signing the Offer Letter
Just because you’ve signed an offer letter doesn’t mean you can’t renegotiate if you provide proper context to the employer. I was okay with making $110,000 a year and a base salary. Not knowing the non-compete effectively knocks me out of this state. If you want me to sign this dental contract with that non-compete, I need 130,000. There are many ways of going back and forth. Some employers will just say, this is a take-it or leave-it. I would be wary of signing a contract with an organization unwilling to make any changes in the agreement.
It usually means they’re difficult to work with down the road or have a very rigid and unprofessional environment. So, if you find that someone says, take it or leave it, I would leave it and move on. And try to find a better opportunity. I’m just telling you. If their mindset is that they’re not going to change anything in the contract, like nothing at all. No change at signing bonus, relocation assistance, benefits, or anything. It is a bad sign moving forward.
Top Tip: Check the Without Cause Termination
One more thing to remember when signing a dental contract or negotiating the terms of an agreement. Every employment contract should have what’s called without-cause termination. Either party should be able to terminate the agreement at any time with a certain amount of notice to the other. Usually, somewhere between 30 to 90 days.
If your contract doesn’t have without-cause termination. It means you must fulfill the entire initial term of the agreement somewhere between one to three years. Normally, it is an enormous red flag. You absolutely should not sign that contract for this reason. Suppose they have excluded without-cause termination, which is standard across all healthcare professions. In that case, it usually means they’ve had a ton of turnover or very dissatisfied dentists who wanted to leave. So, they’ve removed that ability and ensured they must stay there for three years, two years, etc.
Usually, it’s not in the contract because they’ve had a ton of turnover, and it’s normally due to bad management. Either it’s a toxic work environment. Or the compensation is not worth the amount of period or effort you’ve, you’ve had to put into it. It makes sense that there’s always without-cause termination in the employment agreement.
Talk to Dental Associate Contract Lawyers
Don’t feel bad about asking for things. If you’re negotiating the terms of employment, most smart employers expect there will be some back and forth. Ask for a little more salary, a little more bonus, and a little less non-compete radius. Incremental things you can change in the agreement can make a big change in the value of an opportunity. So, don’t feel bad.
Now, if they’re offering a hundred and you ask for 300 or some crazy amount. They’ll think you have no idea what’s going on. They’ll probably move on. When you ask for something, it needs to be reasonable. How do you find out what’s reasonable or not? Once again, talk to your classmates, any mentors, or attorneys who understand what they’re doing. Those dealing with these contracts every day. That’s where you need to get in. But if you ask for these ridiculous changes to an agreement, most places will pull the offer and say no. So, that’s how you negotiate an associate contract.
Dental Associate Contract Red Flags
Associate contract red flags. There are dozens of red flags in a contract. However, a handful is necessary to take a solid look at, and we’ll go over those. The first thing would be no without-cause termination. In any employment contract, there will be a term, which means how long the contract is. And termination, how people can terminate the contract. Parties can terminate contracts in several ways. The term could end, and it’s not renewed. Parties can terminate it by mutual agreement. Or for-cause. Suppose one of the parties breaches the contract but doesn’t fix the breach. The other party generally has the option to terminate the contract immediately. And then the last and most important way is without-cause termination.
This means that either party can terminate the agreement at any moment with a certain amount of notice. Normally, it takes somewhere between 30 to 90 days. I find this especially important for dental associates for whatever reason. Suppose the associate has a two-year contract and cannot terminate without-cause. You’re essentially stuck there for two years without the ability to terminate the contract at any time. Unless the other party breaches the contract.
Employment Red Flags: Net Collections and Long Notice Period
If an associate is on net-collections, volume, and compensation, the owner will generally overestimate what the associate will make. And so, they can get a job if they’re not paid a daily rate or a salary. It’s more of eating what you kill and getting a percentage of whatever is collected, and the volume isn’t there. And you’re not making nearly as much as you expected.
You still would have to play out the rest of those two years. And that is a situation no one wants to be in. So, the first thing is to ensure there’s no-cause termination at any moment. Sometimes, the employer will say, you can’t give notice in the first year, or the first six months, whatever. No, anytime, if you start, you provide notice. You do your, whatever the notice period is, move on. It’s necessary. Two, compensation. Suppose you’re a dentist earning on either net-collections, encounters, or some volume metric. And you are not 100% certain that the volume is there for you. You need to be very careful about taking that job.
Ensure Guaranteed Salary
A daily rate or a base salary, especially in the first year or two, insulates the associate dentists from just getting completely screwed by an employer. Someone unwilling to make an income guarantee and bring in a dentist. But in that circumstance, only compensate them based upon volume metric. Suppose a dentist starts and their compensation is based purely on production, and the production is entirely out of their hands. They’re not doing the marketing. It is on the employer to drive the business. It’s a problem.
So, for anyone new, maybe just out of training, it’s important to have a guaranteed salary or daily rate. Once you’re there, maybe you’ve been there a year or two, and you see that the volume is there. Potentially you can make more under the collections model. Well then, talk to the owner about switching. But at the very beginning, I find that most places try to lure dental associates in with big numbers. It rarely shakes out that way.
Dental Employment Contract and Non-Competes
Another big red flag in dentistry is the non-compete. This is one thing that varies from state to state. Each state has its view on what’s a reasonable non-compete. Non-competes are enforceable in almost every state. California, New Mexico, and Massachusetts are three of the few states where they’re completely unenforceable. But for most states, it must be a reasonable length, usually about 12 months. Sometimes they’ll try to do two years and then some reasonable geographic restrictions, usually somewhere between 5 to 15 miles. If you have a five-year, 50-mile non-compete, that’s crazy! You don’t want to sign something like that. You want it to be no more than a year. And no more than that, I would prefer 10 miles from your primary practice location.
Many of these big corporate dental offices have multiple locations in the area. They will state it’s 10 miles or whatever the geographic restriction is from every place they own, even if the associate didn’t provide care or work in that location. No, you can’t agree with that. It needs to state that it will only apply to the areas where the dentist provided care. And even then, try to limit it to no more than two locations. In big cities, corporate dental conglomerates continue to gobble up some dentist-owned practices.
If someone is 10 locations in a city and it’s 10 miles from 10 locations. It’ll knock you out of your city. So, what’s in the non-compete is certainly important. And last, I’ll touch on the benefits briefly. The employer should arrange for your license, DEA registration, and continuing education if an associate is an employee. If you’re moving from out of state, reasonable moving expenses and reimbursement are normal things an employer should pay for. So, think about that as well.
Dental Contract Questions?
Contract Review, Termination Issues and more!