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Negotiating a Contract

Have you ever wondered how to negotiate a contract? Or ever wondered who needs a contract? How do I figure out what I'm making for the practice?
Most NP's, will ask how much is the salary and what are the benefits? That is the extent of their negotiations. Experienced NP's , newly graduated NP's, full time and part time all need contracts. The contract protects you and the employer and leaves nothing up in the air that might later be disputed. It will force you to be knowledgeable about just how much you are making for the practice. Of course the 1st contract with the practice will be less and should only be for a year. If you sign it for a longer commitment you won't have the dollar figures of what you are making for the practice to take to the negotiation table. So, it never hurts to go lower that first contract while you learn and are less profitable. But then it also gives them the time to see how valuable you are to the practice, which translates into more dollars for you in the next contract.

According to Buppert, NP's are being paid the following ways:

1. Base Salary-NP is paid a set amount to perform according to a job description.
2. Percentage of net receipts-What the NP bills minus Accounts Receivable and the NP's portion of practice expenses.
3. Base salary plus percentage- guaranteed set salary but then an additional salary, if the NP generates practice income over some set amount, they will receive a percentage of that amount as a bonus.
4. Hourly Rate - Paid only for the hours worked.

Benefits to be negotiated:

1. Life insurance (usually equal to annual salary).
2. Retirement plan Paid time off including vacation, sick & holidays (4 weeks).
3. Education, Seminars, Prof. Org.($1200/yr. and 1 week off to attend conferences)
4. Health Insurance($2500.00)
5. Malpractice Insurance (paid by practice).

How to negotiate:

1. The more you know about the practice and its financial stability the better off you'll be to negotiate.

2. What is the collection rate of the practice? (90% is good)

3. Know how much you have brought to the practice in the last year. You do this by keeping a record of all the patients you have seen and then turn that in to a dollar amount

4. Usually if you are seeing between 13-20 patients a day you are bringing money into the practice (Buppert, 2002).

5. An experienced NP seeing 15 patients per day at CPT code level 99213 or higher should be making at least 50,000 per year. (Buppert, 2002).

Remember to check that there is not a non-compete clause in your contract. Come to the table with all you want, but then be willing to give up some things. Also, spell out how bonus will be paid. (Quarterly, monthly, or yearly).

Average of what you are bringing in to the practice:

20 patients/day - $234,000
25 patients/day - $293,000

Using office visits only calculations.

From this you must substract office expenses.

Solo practice-43% income goes to office expenses.

10-20 Doctor practice - 23% of income goes to office expenses.

Sample Compensation with a bonus plan:

Base Salary 50-55,000/yr

Bonus to be paid on accounts over $150,000/yr.

Your percentage 20-35% figured on the amount over $150,000.

Judy Head, ARNP

Buppert, Carolyn, Nurse Practitioner's Business Practice & Legal Guide (Maryland: Aspen Production, 1999)