Whenever I am consulted by a clinic that is new to the challenges of hiring a chiropractic associate, one of the first questions I get is how to structure the compensation. There are many great ways to set up the pay and bonus structures so that it will optimally motivate your new chiropractic associate. In this article I will attempt to discuss some of the best compensation arrangements I have encountered and setup over the years.
However, before we jump into those payment structure scenarios specifically, let’s spend some time reviewing some of the obstacles and mindsets encountered so that you are well up to speed on the realities of working with associates.
Reality Checks
I first want to address an issue that I see so often on blog posts, forums and so on concerning the hiring of chiropractic associates. We have all heard it before “…chiropractors eat their own…”
Now I realize that in chiropractic, as in all professions and all areas of life, there are doctors that will take advantage of a chiropractic associate and visa versa. Nevertheless, upon further reflection it must be remembered that this is a free society. No one is forced to work anywhere and hence always has the ability to seek a better paying position elsewhere. In addition, supply and demand most often dictates what a chiropractic associate doctor is paid. This is out of our individual control. These are market forces at work, not the greediness of every chiropractic business owner.
If the average chiropractic associate’s base salary in a certain area is 4 thousand a month should I pay 6 thousand because I am a good guy? Not if I am a good business man I wouldn’t. Now, of course this does not take into account a myriad of mitigating circumstances. What is this particular doctor’s experience? Does he bring a patient base with him? Has he in some way demonstrated or do you have some assurance that the candidate can build up and manage a large patient base on his own – verses just wanting to show up and treat whoever is placed on his schedule?
A common scenario that I have seen arise occurs when a chiropractic associate has been working for a clinic for a good period of time, usually a few years, and they know the numbers that they bring in and the collections that result from their efforts, yet they do not feel their pay has grown relative to those numbers. In fact, in most situations where I see a disgruntled chiropractic associate this is usually the case. The underlying cause of this is often poor communication on the part of the owner (or fear of honestly communicating) and a lack of understanding on the part of the associate.
It is common for an owner to feel that “I Am The Owner” because well, he is after all, but because of that, the owner often feels that the employee shouldn’t concern him or herself with the business matters of the clinic. And, in many, but not all cases this may be correct. However, the associate is really not ‘just another employee’ and as such should not just be treated like one.
Failing to adequately communicate from the start often creates problems; especially as it relates to pay structures. There obviously are reasons for why the pay and bonuses are valued at what they are. One reason could be because the owner ‘carried’ the chiropractic associate for quite a number of months (or years) while the associate built a practice. And when the success of the chiropractic associate finally comes the owner may now feel he is entitled to reap the rewards of taking on those risks and extending those early efforts. In reality, that is a valid standpoint on the side of the owner; however, the chiropractic associate needs to realize that from the beginning of employment.
Another observation regarding chiropractic associates is how often they will come up with a number in their head that they think the owner should make off them. I will often hear an associate say something like “… I can understand the clinic making about 5K per month, but I’m bringing in 20K, it’s not fair!…” The issue here is not the deal, the issue again is communication.
When a chiropractic associate starts bringing in a substantial amount of income (keep in mind, these are patients he has fostered over time, not those that were handed over to him when he first started at the clinic) in many instances he becomes more like a partner; regardless of ‘ownership’. And, when the associate is really good, and he is making the clinic a good deal of profit, then perhaps a partnership of some sort should be considered at that time. After all, you don’t want to lose someone who makes you money – this is where greed or ego can ruin a good thing!
One solution to help get the chiropractic associate’s skewed view back into focus is for you to somewhat ‘open the books’ to him. Especially when hiring a new graduate as an associate, they will often have no concept of what it takes and what it costs to run a busy practice. That chiropractic associate may think very differently about his $20K contribution when he finds out that the clinic costs $80K per month to operate. I have found that sometimes you actually have to show the chiropractic associate the numbers, show them the bills, the payroll, etc. It is way too common for them to overlook all that it takes to run a practice and incorrectly assume that the money they are bringing in just goes right into your pocket.
Another common scenario also concerns the new graduate. As is true with most of us when we first graduate, it is common to think you can do better than the establishment, or the perceived status quo attitude of the ‘older’ doctors. A new chiropractic associate/graduate with this mindset will see that $20K per month and think, “I could open my own practice for $3-5K per month overhead and start pocketing $15K per month!” A good owner will recognize this green attitude and over time educate the chiropractic associate on the realities, the risks and often the hardships of owning a business.
So…now that I have laid the groundwork for some serious considerations regarding the realities of working with chiropractic associates, let me discuss a few specific compensation scenarios.
Compensation Scenarios
Treating Associate
The first consideration when it comes to what to pay a chiropractic associate revolves around what the position entails. If you have a very established clinic, with a steady and self-perpetuating new patient funnel and you are looking for just a treating doctor then you are in the best of all hiring situations. Typically in this scenario you as the clinic owner will not be working in the clinic, and this doctor will take over most if not all of the patient treatment. This is what most chiropractic associates really want. Most, don’t really inherently want to do tons of new patient talks, health fairs on weekends, and every other type of self-promotion often required of a new doctor. If they really had a burning desire to do all that then that chiropractor would probably be opening their own clinic.
Find a principled chiropractor that just wants to adjust and pay him a salary just above whatever else he could get paid in your area. If you want the cream of the crop then you have to pay more than the guy next door; how much more should be dependent upon what the security of that new doctor will mean to you. For me it is worth a premium to have a chiropractic associate who shows up all the time, never complains, does his job and is very appreciative of the position he has. Up to 125% of the going wage is reasonable to me.
On top of that though, I am a big fan of the monthly bonus. In this situation however I caution against doing a bonus based on collections. A chiropractic associate in this position should not necessarily be privy to the figures the clinic produces; in addition, collections can often be very cyclical and not representative of the work done on the part of the doctor – especially in his eyes. A simple system that I use is based solely on the patient visits (PV).
Whatever the average PV (over the last 12 months) was per month before the doctor came to the clinic, plus 10% should be the base. Should the chiropractic associate do a much better than average job then he should be compensated appropriately. So, if the clinic routinely has seen about 600PV/month then the doctor’s bases would be 660. Anything above that will yield the doctor $_____ per PV. That figure of course depends upon how much revenue your clinic generates per PV. I would not have a problem paying a good chiropractic associate about 20% of that number, so if you brought in an average of $100/PV then the doctor would receive a bonus of $20/PV for every patient visit over 660.
Having a bonus structure based on PV not only sets a good goal but is also very easy for everyone to track. When I have organized pay structures in this manner there are many months where the chiropractic associate makes more money in bonus than in salary. I am perfectly fine with that because he is making money by that fact that he is making me money verses say a fluke higher than normal collections month that he inappropriately reaps the benefit of.
Hybrid Associate
The next chiropractic associate compensation type is more of what I call a ‘hybrid’ position. In this situation you, as the owner/chiropractor, will often be treating alongside this doctor (at least for a while). You desire to hire this chiropractic associate to help you out with your patient load but also to build his own practice so you can create another income stream from within your practice.
In my experience, of the 3 types of chiropractic associates that I discuss in this article, this is the most difficult to find and manage. Reason being, you are looking for someone that is hungry; someone that is willing to work hard for perhaps little pay in the form of salary but with good incentives to build. If you can find such an associate who is wanting to grow like this, yet truly doesn’t have the ability and/or the desire to actually go out and do it all himself and just needs your guidance, then you may have found a diamond in the rough.
The risks are perhaps obvious. This can easily turn out to be the type of chiropractic associate that I described above, the one who will see his numbers, think he can do so much better down the street on his own, and use your practice as a launching pad. This is the most common fear of any clinic looking to hire a new chiropractic associate.
To find a good associate of this type you truly have to do your due diligence in making sure you hire just the right person. This is one of many very good reasons to consider using a placement agency to do the ‘filtering’ for you. The other side of the coin in this scenario is hiring the doctor who shows all the promise in the world but overtime proves unable or unwilling to perform. This is the doctor that sold you on being ‘highly motivated’ when in reality they just want to be a treating doctor. In the last article in this series we will discuss how to severe ties when this unfortunate situation arises.
Compensation of a chiropractic associate in this position should be generous enough to attempt to ensure long-term loyalty, yet produce a good and fair profit to you. I have consulted with clinics, as well as put into place associates just like this in my clinics. The chiropractic associate made a very small base, say $2,000 to $3,000 per month; however, anything they bring in above a certain amount – often I use the figure of double their base – is then split on a percentage basis.
The reason I like to use ‘double their base’ is that it sets it up like a 50/50 partnership wherein they are paid the first base amount and hence I take the risk in the beginning and then the next equal base amount is paid to me. That way I am back to ‘even’ before any percentage is paid out to the chiropractic associate.
The percentage split should be arranged based on the expense structure of the clinic. In a very expensive to run clinic, a 50/50 split (on gross revenue) might be unreasonable to you the owner. If your overhead is 80% of your total revenue, and you are keeping only 50% of the chiropractic associate’s gross income, then you are potentially only profiting 10% while he is profiting 50% (above the base). That is not a fair arrangement for the owner. However, a smaller satellite or otherwise less expensive to operate clinic might allow you to profit just fine on the 50/50 arrangement. For just that reason, I love to manage chiropractic associates in small clinics; we can both make a good and fair profit and the long-term relationship is more secure!
Independent Contractor Associate
The third type of chiropractic associate compensation structure is really more of a partnership, although you most likely will not be handing over any ownership. This is the independent contractor chiropractic associate who starts out with zero income (or maybe a fee paid to him per PV for each patient of yours he treats) and then just receives a percentage of his gross revenue. Again, depending on many factors, this percentage is usually somewhere between 40-60%.
If you are desiring this situation to be long-term you may want to operate more in an open-book environment – especially after a year of two of proving himself – and be willing to alter that percentage in the chiropractic associate’s favor as he reaches higher levels of gross income. Again, this is not the time to be greedy. I would have no problem with a chiropractic associate taking home $20K per month if he was creating $12-15K per month additional income for me that I otherwise would not have received would he not have joined my practice. As a motivating schedule, something like the following would not be unreasonable:
50% of gross revenue paid to clinic from 0-10K
40% of gross revenue paid to clinic from 10K-20K
30% of gross revenue paid to clinic from 20-30K
20% of gross revenue paid to clinic on all collections >30K
Keep in mind given this schedule that the percentage paid to the owner only lowers for the gross revenue that fits into that new tier. In other words, the first $10K is still at 50% and then any gross revenue between $10,001 and $20,000 is subject to the 40% and so on.
Also, as a disclaimer, the numbers just provided would work well in a clinic that already does somewhere around 50K/month in gross revenue. A chiropractic associate that adds another 30K to that will essentially be paying the clinic 12K, which may be a number you consider fair if he truly ads little to no greater expense to your overall structure while at the same time helping you reduce your patient load.
As you can see, there is an unlimited number of ways to structure how you compensate your new chiropractic associate. Often times a combination of the scenarios provided in this article will prove to work good for your individual situation. Whatever route you take, don’t be hesitant when it comes to consulting with an expert who can help guide you through the process. Whatever you do, make sure to think through all the possible options in order to avoid having to clean up and deal with a painful and costly mistake down the road.
