Ep. 10: How Should You Be Paying Your Associate?
Bringing on an associate can be a great thing for practice growth. But it can also become a disaster if you haven’t structured it properly. So, in this episode, Jeff Blumberg dives into the most common associate models and some guidelines for structuring the compensation plans for each.
Topics:
1:51 – Three common models for utilizing an associate
3:31 – The Traditional Associate Model
5:20 – The Production Doctor Model
15:41 – The Autonomous Operation Model
24:17 – Structuring the compensation package so it works for both the associate doctor and the owner
Links:
Associate compensation article - https://www.mgeonline.com/2021/associate-compensation-which-plan-is-right-for-your-practice/
Learn more about MGE - https://www.mgeonline.com
Listen to full episode :
Questions From This Episode
What are the three basic ways a practice can actually use an associate doctor, and how does that affect their pay?
The traditional model, where the associate picks up procedures the owner doesn't want, the production doctor model, where the owner sells nearly all the treatment and the associate performs it, and the autonomous model, where an associate runs a second location largely on their own. Each carries a distinct compensation structure, since the associate's actual role and risk differ enormously between them.
What's the typical pay range for a traditional associate, and why should it be tied to collections rather than production?
Roughly 30 to 35 percent of collections, sometimes split with a base and other incentives, and often with a lab fee split factored in. Tying pay to collections rather than raw production avoids paying someone for work the practice hasn't actually been paid for yet, since production isn't guaranteed money until it's collected.
Why does a production doctor associate get paid a lower percentage, 20 to 25 percent, even though it can be a genuinely attractive role?
The associate isn't selling the treatment, building their own schedule, or taking calls, the owner presents and closes every case and simply hands off the clinical work. Once a doctor actually compares the real dollar numbers, 20 to 25 percent of a much larger volume the owner is generating for them often outproduces a 30 to 35 percent cut of a smaller, self-generated schedule.
What conditions need to be in place before a production doctor model can actually work?
Enough patient volume to keep multiple doctors genuinely busy, generally at least two full-time hygienists and 50 or more new patients a month, an associate with real clinical experience and speed, and a well-structured office with a skilled office manager and treatment coordinators, since the owner is no longer personally producing and has to actively monitor clinical quality instead.
What is a viability level, and why does every associate pay plan need one?
The specific collection number at which an associate's guaranteed base pay equals the percentage they're supposed to be earning, the break-even point between what they're paid and what they're producing. Knowing that number in advance shows exactly when an override should kick in, and flags immediately if an associate is being overpaid relative to their actual production, rather than discovering it only after months of losses.
Episode Transcript
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How much should you be paying an associate doctor? I get this question a lot from MGE clients, and whether you're looking at getting an associate now, or you already have one, or you're thinking about one down the road, this is something you should be considering. Compensation is a genuine deal breaker, and that's what we're going to talk about in this week's episode of Dental Business Rx. My name is Jeff Blumberg, and I'm your host.
Before I get into compensation, I want to point out that there are obviously other considerations when bringing on an associate beyond how you pay them, clinical excellence, how quickly they move through procedures, whether their philosophy matches yours, whether partnership is on the table, what their long-term career plans actually are, and whether your practice can genuinely support an associate in the first place. I won't get into all of that in this episode, that alone could turn this into an audiobook. If you have questions about any of those other subjects, feel free to email me directly at jeffb@mgeonline.com, and if there's enough interest, we may make it the subject of a future episode. For now, let's stick to compensation.
So how should you pay your associate? The short answer is that it depends heavily on how you actually plan to use that associate. There are obviously a lot of possible variations, but generally speaking, it breaks down into three basic categories: the traditional associate model, the production doctor associate model, and what we call the autonomous operation model, essentially an associate running a second location on their own.
Each of these models gets compensated differently, and I'll walk through general compensation percentages for each as we go. Just a quick note before I dive in: when I say something like the traditional model pays around 30 percent of collections, that 30 percent might be structured as a straight percentage plan, an override once certain production levels are hit, or a base salary plus incentives. I'll get into that blending toward the end of the episode. For now, let's cover each model individually and how you'd pay an associate under each one.
Let's start with the traditional associate model. This is exactly what it sounds like, the setup we've seen for the last thirty or forty years. You're practicing, and you bring in a doctor to pick up the procedures you no longer want to do yourself, maybe molar endo, maybe you don't want to see kids anymore, maybe you don't want emergencies or being on call, maybe you don't want to work Saturdays. You might have them see new patients, or expect them to bring in their own, you might have them do recall exams, or not. This could be an experienced doctor, or it could be someone straight out of school looking for a mentorship arrangement.
Compensation in this model usually lands around 30 to 35 percent of collectible production, in other words, not adjusted or written-off production, actual collections. There's typically a lab fee split involved too. If I weren't splitting lab fees, I'd lean toward the lower end of that range, closer to 30 percent. I'm generally a bigger fan of tying pay to collections rather than raw production, since collections represent actual money received. Production as a benchmark gets tricky, since you don't actually know you'll get paid for it unless the patient has prepaid. Collections is always the safer bet.
Now let's move to model number two: the production doctor model. This one may genuinely be new to you, it's a more recent development, and we've seen quite a few MGE clients adopt it, really gaining traction from the mid-2000s onward, especially from around 2005. Here's the basic idea: the owner doctor, usually the one who interfaces best with patients, presents and closes treatment, essentially sells it, and associates perform most or all of the actual procedures.
Picture it this way: as the owner doctor, you're presenting treatment plans, the patient accepts and pays, and an associate delivers the entire treatment plan. This can be a hybrid too, the owner might keep certain procedures for themselves, implant placement, high-end cosmetic cases, veneers, and so on, while the majority of the practice's actual production is handled by associates. All diagnosis and treatment planning flows through the owner, and the bulk of production is performed by the associate doctors.
This might sound intriguing if you haven't heard of it before, and there are a few things worth understanding about it. There are certainly cases where this would be a genuine disaster, and cases where it could work extremely well. A few conditions have to be in place first. The practice needs adequate patient volume to justify this setup, which, to be fair, you need for any associate hire, but especially here. At minimum, I'd want to see at least two full-time hygienists and roughly 50 or more new patients a month, otherwise there simply isn't enough happening to keep both the owner doctor and the production doctors genuinely busy.
The associates in this setup need genuinely strong clinical skills, which should be true of any associate, but this person should ideally have some real experience. You don't necessarily want someone who just passed their boards, unless they happen to be a strong fit regardless, generally someone seven or eight years out of school who's comfortable in a moderate to high volume environment is going to move considerably faster than someone brand new to the profession. You'll also need a well-structured organization, since the more productive the practice becomes, the more any weak points in the office get magnified. That means a well-trained, skilled office manager and strong treatment coordinators, exactly the kind of infrastructure MGE clients build out through the Power Program.
Assuming that's all in place, here's the core logic behind why this model actually works. Imagine you're genuinely skilled at case presentation and acceptance. As the owner doctor primarily presenting treatment plans, think about how long it actually takes to present a larger case, say seven crowns and three root canals. Presenting that case to a patient and working out financial arrangements with your treatment coordinator might take the doctor 20 to 40 minutes, an hour at most if the patient has a lot of questions. That's a $10,000 to $15,000 case, maybe more depending on your fees. Now compare that to how long it actually takes to perform that case clinically, hours and hours of chair time.
So assuming adequate patient volume, say six to eight new patients a day plus recall patients, you could theoretically keep two to three doctors busy in production off of one doctor spending 20 to 40 minutes presenting treatment. That's what makes this model genuinely intriguing on its own.
A couple things to think through when building compensation for this model: you're not doing much, if any, of the production yourself anymore, so the traditional 30 to 35 percent pay plan simply doesn't work here, there isn't enough profitability left in the practice to support that level of associate pay. But from the associate's perspective, this can be something close to a dream job. Think about it, you sell a case of seven crowns and four root canals for them, and the associate walks in, puts their gloves on, and does high-end dentistry, no selling, no Saturdays, no on-call, just clinical work. That's meaningfully less overall responsibility, and the work itself tends to be more advanced and interesting.
With all of that in mind, in the production doctor model, associate pay typically runs 20 to 25 percent of collections at most, with the associate not covering lab fees. That might sound low at first, and I've seen this play out with clients directly: they present this model to a prospective associate, who pushes back saying another office offered them 30-something percent instead. Once you actually run the numbers with them, the picture usually changes.
Say that other office offered a base salary plus a 30 percent override once certain production targets were hit, a traditional associate setup, on a practice producing maybe $30,000 to $35,000 a month, and the associate would still be responsible for presenting and diagnosing treatment themselves. Compare that to your production doctor offer: you're expecting them to produce $60,000 to $100,000 a month purely because you're handing them fully closed treatment plans. At 30 to 35 percent of $35,000, that's roughly $10,500. At 20 percent of $60,000 to $100,000, that's $12,000 to $20,000, plus they get to spend their day doing exactly the kind of dentistry they enjoy without ever having to sell it themselves. Once you lay that out clearly, most associates start to see the real appeal.
We've had a number of clients run this model successfully. One key requirement, since you're not doing all the clinical work yourself, you have to actively keep an eye on quality. Check lab cases, look at some preps directly, pop in as the friendly owner doctor and compliment the associate's work in front of the patient, that lets you catch anything before it becomes a real problem. If an associate genuinely bristles at you checking in and talking with your patients, that's worth taking seriously as a red flag.
Because you're the one selling treatment they'll be performing, you also need a basic clinical alignment with this associate. One thing I'd recommend, and this can apply to any associate, though it's less meaningful with a very new grad, is handing them a set of existing patient records, x-rays, charting, without your own treatment plan attached, and asking how they'd treatment plan that case themselves. There's real subjectivity in dentistry, and you don't want a scenario where you've presented and sold procedure X to a patient, and your associate walks in and starts telling them something entirely different, that looks bad organizationally and undermines trust.
A last note on this model: as with any associate arrangement, even done correctly, your profit percentage as the owner will drop compared to running solo, but your total profit dollars and personal freedom should go up. Say you're a solo doctor running 45 percent profit on $90,000 a month in collections, that's $36,000 a month, or about $432,000 a year. Now say you build out a multi-provider practice doing $400,000 a month at a lower 25 percent profit margin, that's $100,000 a month, or $1.2 million a year. Your percentage is lower, but you're taking home a considerably larger total, and you also gain real freedom, if you want to take a week or two off, the practice doesn't grind to a halt without you. You're getting a smaller slice of a much bigger pie.
One last comment on the production doctor model: done right, it can be genuinely great, done wrong, inadequate patient volume, or an associate who's simply a poor fit, it can cost you tens or even hundreds of thousands of dollars. I've seen it happen. If you have any doubts about whether this model fits your practice, we offer a free consultation here at MGE, you can call us at (800) 640-1140 or visit mgeonline.com to request one.
Which brings us to the third model: the autonomous operation, typically an associate running your second location. With this model, the doctor is essentially operating on their own, the only thing missing is actual ownership. They diagnose, present, and perform all the clinical work themselves.
One thing worth mentioning here: if you're opening multiple locations, I'd generally recommend eventually giving associates in those roles some real skin in the game. Setting up multiple offices with associates who have zero ownership stake can be genuinely risky, I've seen this play out repeatedly, an owner opens a second or third location, staffs it with an associate, and that associate eventually quits, leaving the owner scrambling to personally cover that location just to keep it from closing entirely, which then drags down productivity at their primary office too.
Ideally you want to bring in someone who could eventually develop into a genuine partner. If you're considering that path, I'd recommend working out the full agreement structure from day one, not necessarily making them a partner immediately, since the working relationship still needs to prove out, but having the terms and any benchmarks they'd need to hit clearly established before you ever start working together.
Say you've gone through the interview process, you genuinely like this person, you have good rapport, and their long-term goal is practice ownership themselves. If you think this could be a real long-term fit, I'd put together an agreement covering three things: first, a standard associate agreement covering what each of you agrees to do, second, a buy-in agreement laying out what benchmarks need to be hit before they're eligible to buy in, and third, if you're eventually planning to exit the practice, a buyout provision as well, less critical up front, but your corporate paperwork should always address what happens if a partner wants to leave, otherwise that can become a genuine mess later.
Whatever qualifies someone for partnership should be spelled out clearly from day one. That doesn't mean they're guaranteed it, maybe you need to work together for six months and hit certain production targets first, but that should be established up front. I've seen this go wrong so many times: an associate believes the conditions for partnership have already been met, while the owner doctor disagrees, simply because nothing was ever clearly defined, leading to entirely avoidable frustration on both sides. Figure this out before you start working together. That way, if it turns out a month in that the arrangement isn't working, it's clear the benchmarks, production targets, longevity, whatever they were, simply weren't met.
Back to the autonomous model itself: with a second location, overhead control requires even more oversight than usual, and there are a lot of variables at play, how the practice was financed, its location, its size, staffing costs. If you've just put $500,000 into the purchase, plus another $150,000 into updated equipment, all of that has to factor into your compensation plan. A flat percentage simply doesn't work cleanly here.
Before buying or opening a second location, I'd recommend conservatively estimating projected revenue, running that against projected costs, and using those figures to work out what you could realistically pay an associate while still maintaining real profitability. Say you're eyeing an office about thirty minutes away, a retiring doctor's practice currently doing $35,000 a month. Looking through the charts, you might reasonably estimate it could grow to $40,000 under new management, don't get overly optimistic here. Take that conservative figure and weigh it against your actual costs and debt service. This tells you both what you could realistically pay a doctor while staying profitable, and whether the deal is even worth doing in the first place, if you can't make it profitable using a conservative estimate, that's a strong signal not to buy it, otherwise it's really just a real estate bet, not a good investment.
For this autonomous model, compensation is typically structured as a guaranteed base plus a percentage override once certain collection targets are hit. Here's an example: say your conservative estimate for this practice is $40,000 a month, and the going per diem rate for an associate in your area is $500 a day. That figure will vary by region, but let's keep the math simple. If the office is open an average of 16 days a month, that's $8,000 a month in guaranteed compensation.
Now, how do you build in a real incentive so the associate is motivated to grow beyond that $40,000 baseline? Go back to that traditional model's 30 percent figure and blend it in. You might guarantee $8,000 a month for those 16 days, then pay 30 percent of everything collected above $40,000 to $45,000, splitting lab fees. The percentage itself isn't dramatic, but there's real upside, plus the doctor gets more autonomy, and this kind of arrangement can eventually lead toward a partnership conversation, as I mentioned earlier. Generally speaking, I wouldn't want to exceed roughly 30 percent of collections in total compensation for an associate under any of these models, however it's structured. In this scenario specifically, you simply can't pay 30 percent of the full $40,000 baseline and stay profitable, so you guarantee $8,000 and layer the 30 percent on everything above that threshold instead.
So those are the three basic models: traditional, production doctor, and autonomous. Now let's talk briefly about blending a guaranteed base with incentive pay, and introduce a concept I call the viability level. Viable simply means capable of sustaining life, so think of this as the specific collection point where an associate's pay plan actually holds together financially.
Say you're guaranteeing an associate a base of $10,000 a month, or $120,000 a year, under a traditional associate model paying 30 percent of collections. The first thing I'd calculate is what collection figure that $10,000 actually represents at 30 percent, in this case, $33,333. That's their viability level. You wouldn't add any additional incentive until that associate is producing beyond $33,333 a month, that's simply where their guaranteed base already equals what 30 percent would pay them.
This works in reverse too. If you're paying that same associate $10,000 a month but they're only producing $20,000 to $25,000, you're actually paying them closer to 40 or even 50 percent of their production, well beyond what the model was designed to support. Their viability level tells you exactly where that pay plan starts breaking down financially, and it's worth tracking closely, not discovering months later that you've been steadily losing money on the arrangement.
I've seen doctors respond to a struggling associate in a way I'd genuinely caution against: rather than addressing the underlying issue, they start pulling productive work off their own schedule and handing it to the associate just to keep them busy, essentially subsidizing the associate's low production with the owner's own patients, while the owner sits idle. If your associate is busy and you're not, ask yourself honestly why you have an associate in the first place, something is fundamentally off with that setup.
Here's one more nuance worth mentioning, even if it's a bit more complex for a podcast format: the incentive structure you build should relate directly to how much base salary you're guaranteeing. Say you're guaranteeing a relatively low base, $6,000 a month for a full-time associate, in a 30 percent traditional or autonomous setup. That $6,000 works out to 30 percent of $20,000. In that case, I'd start paying the override right at that $20,000 viability point, since the associate accepted a genuinely modest guaranteed base, they're taking on some of the shared risk themselves rather than transferring it all to you.
Now flip it: say instead you're guaranteeing that same associate $12,000 a month, or $144,000 a year, under that same 30 percent model. That $12,000 represents 30 percent of $40,000. Here, the associate is taking on very little risk, you're carrying nearly all of it. In this case, I wouldn't start the 30 percent override until they hit $50,000 rather than $40,000, since you've taken on considerably more risk by guaranteeing that higher base. So the $6,000 associate starts earning their override at their $20,000 viability point, since they're sharing the risk with you, while the $12,000 associate, where you're absorbing nearly all the risk, doesn't see that override kick in until $50,000. That structure can also help smooth over an occasional slower month for the higher-guaranteed associate, though there's real pressure built in too, if someone guaranteed $12,000 a month isn't hitting $50,000 for two or three months running, that's a real problem worth addressing.
I hope you're still with me here, especially if you're listening while driving, that was a lot of numbers to cover. We do have a companion blog post on the MGE blog walking through these same figures, and I'll also put all of these numbers on the episode webpage so you can follow along and see exactly how each scenario lays out.
A couple of final thoughts. Once you've determined you actually need an associate, and you should start thinking about this well before you're actively hiring, I'd recommend having your full pay plan worked out and tested against your actual numbers before bringing anyone on. I'd also strongly recommend working with an attorney to make sure your associate contract is properly in place, so there are no surprises once someone's actually been working with you for a while. Bringing on another provider is genuinely exciting, it's a real sign of expansion, so keep that experience positive and rewarding for everyone involved long term. And as I mentioned, especially with some of the more complex models we covered here, it genuinely helps to know exactly what you're doing, which is exactly where real training and guidance comes in.
If you'd like a practice consultation to talk through any of this and see how it might work for your specific situation, you can reach us here at MGE at (800) 640-1140, or visit us online at mgeonline.com. I hope this helped, and we'll see you at the next episode.