I've heard some are getting as high as 40% of production and others as low as 25%.
I've been offered 30% production where I pay half the lab bill. X-rays and exams are not included as production. It seems fairly reasonable any thoughts?
The "typical" ranges I see are:
25-30% of PRODUCTION
30-40% of COLLECTIONS
If the owner wants the associate to be responsible for lab fees or a portion thereof, then the %'s noted above will be at the higher end of the ranges.
If the owner is NOT concerned about making the associate responsible for lab fees, the %'s used are closer to the lower end of the ranges noted above.
More and more I'm suggesting that owners keep it simple and pay 100% of the lab and simply offer a % of revenue to their associate without a lab cost charge.
The owner should monitor the associate's lab use to make sure the usage is kept in line with their "standards" and if need be, add some language that enables the owner to adjust associate compensation in the future IF lab gets outside specified norms.
For example, if the practice history shows that lab costs as a % of doctors production runs 12%, the owner can "charge" the associate for lab costs that exceed say 15% of their production.
I think you need to allow some cushion.
If this is written into the associate’s employment agreement than both are completely aware of the need to control the lab, and more importantly, it keeps the math simple and avoids errors that result in the associates believing they were cheated.
This post first appeared on DentalTown.
Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com
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