ProSal: A method to pay doctors
ProSal is my veterinarian compensation method thats I developed years ago. Its one way of wrapping your head around recognizing the power of strong associate recommendations as well as proving that good business is good medicine.
ProSal: A compensation system so easy this Pomeranian has it on lock, and, frankly, this pom has a REALLY short attention span. Editor's note: A young associate recently came to us with questions about her practice owner's compensation methods for her. We forwarded them on to veterinary practice management consultant Mark Opperman, CVPM, for answers. Why? She said her boss was using ProSal, Opperman's own method of calculating a guaranteed base veterinarian salary that also includes compensation for products and services that a doctor has a hand in delivering to clients. Because of this, we thought it was about time to give Opperman a chance to talk about ProSal and explain how it's not like some other compensation plans.
Many veterinary practice owners believe they're paying associates using the ProSal method of compensation when they're not. Do you use ProSal? If so, do you do any any of the following?
- Carrying forward a deficit from one month to the next if your associate doesn't produce enough to cover their guaranteed base
- Paying your associate 26 times a year instead of 24 times a year
- Paying for your associate's vacation or PTO in addition to the guaranteed base
- Using a guaranteed base intentionally less than what you expect your associate will produce
If you're doing any of these things, you're not paying your associate using ProSal. Although ProSal is a popular method of compensation (and for good reason), it's also the method that is most often misunderstood and misquoted. So, as the “father” of ProSal, let me try to clarify true ProSal and how it should be applied if you intend to use this method of compensation.
ProSal is a combination of a guaranteed base of compensation in which your associate is paid based on a percentage of their production. But it's not base plus production-that's something else. Before you get confused, let's start from the beginning.
I believe associate veterinarians should be paid between 18 to 25 percent of their production. Production is defined as fees generated and collected for services where the doctor is formally involved in the delivery of that service. Thus, a veterinarian must actually be involved in a service to receive credit for the service.
Our team at VMC normally recommends that fees are entered into the computer daily or at the time the service is rendered. To make sure everyone is clear on who gets production credit, I suggest you complete a “Credit for Work Done” document. (Click here to download a sample Word document.) This form lists all the potential situations under which an associate might or might not receive production credit.
I always complete this form and review it with the associate as well as make it part of his or her employment contract. Whenever there's a question of production, always go back to the definition: Was the doctor involved in the delivery of service? If the answer is yes, they get credit; if the answer is no, they don't.
Let's take an outpatient office visit, for example. The patient received a physical exam, vaccinations, heartworm test, fecal and went home with six months of flea and heartworm preventives. Since all of this occurred during the office visit and the doctor was involved, the doctor would receive production credit for all of these products and services. But if the client came back six months later and purchased more flea or heartworm preventives at the front desk, the doctor wouldn't receive credit for that transaction, because he or she was not involved in the delivery of that service.
Here's another example: A patient is hospitalized for several days, and one doctor oversees the case on the first day, but on the following day, another doctor takes over the case. Each doctor would receive production credit for the day he or she was overseeing the case.
I think this promotes good medicine and customer service. For instance, if the doctor talks to a client to evaluate how the pet is doing prior to refilling a prescription, then they receive production credit on that medication. If they just did an automatic refill and didn't review the record or talk to the client, the doctor wouldn't receive credit because he or she was not involved in the delivery of this service.
I quoted you 18 to 25 percent for base salary. That's a big difference that comes from that associate's costs of employment.
Costs of employment are such expenses as the doctor's health insurance, dues, licenses, continuing education, retirement plan contributions, etc. Any incremental employment costs incurred due to the hiring of the associate veterinarian need to be determined. Those costs along with the guaranteed base of compensation should never exceed 25 percent of the doctor's production. So, you can pay your associate 18 percent and provide them with substantial benefits, or you can pay them 25 percent with fewer benefits. What's important is that the total cost of employment does not exceed 25 percent of production.
If you exceed 25 percent, you would be eating into the very small profit margin you're making on your associate's production.
This number is written in stone and is based on the other costs of doing business within your practice, things you might not think about every day. If you exceed 25 percent, you would be eating into the very small profit margin you're making on your associate's production. This is why even a board-certified veterinarian shouldn't be paid more that 25 percent of their production, including all costs of employment. A board-certified individual would hopefully be paid more because they charge more for their services, not because they're paid at a greater percentage.
To make sure you determine this number correctly, we always use a “Year-End Total Compensation Statement.” (You can download a PDF sample of one here.) This document lists all those costs of employment, so it's clear to both the practice and the associate what the practice is paying for and the cost of those benefits.
As I stated, ProSal is a guaranteed base of compensation, but the associate is paid based on a percentage of their production. The guaranteed base should be a realistic number, not a “low ball” number. If the associate has worked for you in the past, the guaranteed base should be close to their W-2 gross wages from the previous year. So, if an associate received total compensation of $98,000 last year, I would place them on a ProSal contract of $98,000 or $99,000 for the next year. If you don't have W-2 wages from the previous year, you need to either estimate production and take a percentage of that or use published industry averages for determining what the base should be.
When they're paid
Under ProSal, associates are paid twice each month. If you pay your other employees every other week, then you're paying them 26 times a year. But you won't need different payroll periods for your associates. Instead, you simply pay doctors their first paycheck when your other employees get their first payroll of the month. Your doctors will then receive their second check on the last payroll of the month. This means that, for the two months each year when there are three payroll periods, your associates will still only receive two paychecks.
The second paycheck isn't guaranteed. It might be $10, or it might be $10,000-that all depends on the previous month's production.
The first paycheck of the month, under ProSal, is a fixed payment. This payment is simple to calculate-just divide the guaranteed base amount by 24. Let's say an associate's guaranteed base is $90,000. Divide $90,000 by 24, and the result of $3,750 would be the associate's first paycheck of the month, less routine payroll deductions.
The manager's job
As the practice owner or manager, it's your responsibility to make sure your associates are professional and effective and that they offer a full-service approach. For this reason, an effective manager will keep an eye on associates' second paycheck every month. Ideally, the second paycheck is more than the first one of the month. Our goal is to pay associates more than their guaranteed base. This is where exam room coaching might come into play, or reviewing of medical records and setting clearer standards of care inside the practice. If you have to make up a deficit at the end of the year, you need to take a hard look at why: Is the associate not productive? Do you have too many veterinarians? Do you need to adjust your fee schedule or how you charge for services? Your associate should make more than their guaranteed base, and this is a win for the associate and for the practice.
The second and final paycheck of the month needs you to calculate the associate's production for the previous month. Let's assume the associate produced $39,000 last month and you're paying them 21 percent of their production. Multiply $39,000 by 21 percent to get $8,190. But wait-the associate was already paid $3,750 for the first payroll of the month, so you subtract that amount already paid ($3,750) from $8,190, and the difference of $4,440 would be the associate's second and final paycheck of the month, less routine payroll deductions. The second paycheck is not a guaranteed check. It might be $10, or it might be $10,000-that all depends on the previous month's production. At the end of the year, if the associate wasn't paid an amount equal to their guaranteed base or more, you would owe them the difference. The guarantee comes in at the end of the year, not on a monthly or quarterly basis.
Why ProSal can work
This is the beauty of ProSal: The associate cannot make less than the guaranteed base-they can only make more. So, why would any associate not want to accept ProSal? If they're paid a salary of $90,000, then that would be all they could make. But with ProSal, it's guaranteed that the associate will make the base, yet they have the ability to make so much more. This is also a win for the practice, because, if the associate makes more, then so does the practice.
To those who say ProSal causes a veterinarian to oversell or cherry-pick cases that will generate more revenue, I disagree. What ProSal will do is make it obvious if an associate is behaving in an unscrupulous manner and bring to light the lack of maturity and professionalism within that individual, indicating that maybe they're not the right choice to be an associate in your hospital.
ProSal can make such personality flaws more obvious, but it's not the cause of the problem. A veterinarian should offer and render services because it's the right thing to do for the patient, not because they're going to get paid more. I have run into very few veterinarians who purposely oversell or overcharge for services. On the contrary, I normally have a harder time getting doctors to charge effectively for what they do. But, if a veterinarian does indeed take the time to offer and educate clients about the necessary products and services their pet needs, then they should get paid for doing that. It's good medicine and good business.
Mark Opperman, BS, CVPM, is a founder of the national practice management firm VMC in Lawrence, Kansas. He is also the co-author, with Sheila Grosdidier, BS, RVT, PHR, of the dvm360 book The Art of Veterinary Practice Management, in its second edition.