Provider Compensation Margin
This KPI determines the percentage of the provider’s compensation compared to the revenue generated.
Why is This KPI Important?
Pediatricians need to be mindful that, if they are not covering their salary, bonus and benefit costs, it is likely that the employer will be unable to do so for long. The only obvious exception is for providers who have recently joined the group and are ramping up their practices.
When combined with the practice, department or provider overhead rate, it should not exceed 100%. For example, if the overhead rate for a Pediatrician is 54% and the percentage of provider compensation is over 46%, the Pediatrician’s salary is being subsidized by the practice. In this situation, the Pediatrician should be prepared for a renegotiation of their salary.
Conversely, if the overhead rate is 54% and the total compensation is 30%, the Pediatrician may generate profits for the employer or to subsidize other providers. In this scenario, the Pediatrician would be advised to take into consideration previous periods of time where their compensation may have been subsidized in some fashion.
PMI Recommended Frequency to Run This KPI:
(Total Salary + Total Bonuses + Total Benefits) / Total Revenue Generated
Show the Math:
($175,000 + $20,000 + $15,000) / $600,000 = 35%
How Should I Track It?
This KPI can be tracked using an Excel spreadsheet by Practice and/or Department if you categorize expenses properly.