How Dental Associates are Paid

As a dental associate, you love your work. But you also need to know how you’ll be compensated for the work you enjoy so much!

Far too many associates – especially those who are just starting out – don’t really understand how their pay is calculated. Surprisingly, many practice owners haven’t considered how much an associate’s pay can vary, depending on the formulas used. Very often, dental associates in clinical practice are not earning straight salaries the way that those working in public health, academia or government agencies generally are, and they need to know what compensation to expect.

When pay is based on productivity

For associates whose pay reflects a percentage of their office productivity, pay calculations can be complicated. This is a common scenario for dentists working in private practice or in DSOs, where pay is often based on total production, billable production, or total collections.

To see how associate pay is calculated in these settings (and how widely it can vary),  let’s begin with a few key terms.

Total production: This is the total amount the office can be paid for a procedure, based on their established fee schedule.

Billable (or adjusted) production: This is what the office can collect for the procedure, which is generally dictated by an outside party.

Collections: The amount the office actually collects for the procedure.

Collection percentage: This is a formula – Collections/Production x 100. Be sure to ask if the collections percentage is based on production or adjusted production.

Looking at pay within a dental practice

If the practice you’re working for accepts many discounted insurance plans (like many PPOs or DMOs), total production will likely be different from the billable production. Sometimes the variance is negligible, but if they are very different, you will want to ask a few questions to better understand how your paycheck will be affected.

• Will newer associates see all PPO or DMO patients while more senior dentists see mainly fee-for-service patients?
• What are the reimbursement rates for the various plans?
• Does the practice struggle to collect from some of these plans?
• Is there an opportunity to renegotiate reimbursement rates, or even consider dropping the lower-paying plans?

An example shows how the numbers might play out

A real-life scenario is helpful in seeing how these factors might affect the associate’s take-home pay for a specific procedure. In this case, let’s say it’s a crown for a patient named Jackie.

The practice’s fee schedule for this procedure is $1,500 (production). The patient’s PPO allows a maximum of $1,000 for a crown, and the practice contractually cannot collect the difference from the patient, so the billable (or adjusted) production equals $1,000.

Per the plan, the payor remits $500 and the practice bills Jackie for $500, who ultimately pays $450. The practice writes off the final $50, so the total collection for this treatment was $950.

In this case, the associate’s pay might be based on a percentage of total production, billable production or collection. Notice how significantly these numbers vary – and imagine how they can affect take-home pay!

It’s worth pointing out that dental offices treating a large share of Medicaid patients often pay a salary, plus bonuses based on productivity metrics other than income from collections or production. This helps associates earn pay that’s competitive with what they might receive in practices with a larger share of traditionally insured or private-pay patients.

When associates are paid on collections

Many practices want to pay their associates based on collections. This makes sense on a cash-flow basis, since the practice is in a stronger position to pay staff members if they’ve already been reimbursed. But this method does raise some key questions.

What is the practice’s collection rate? If it’s greater than 98% of adjusted production, the practice has good success in collecting from third-party payors and patients – so there will be minimal difference in the associate’s pay whether adjusted production or collections are the basis. In this case, it is often much simpler to use adjusted production as the basis for paying the associate, since it will decrease the amount of staff time necessary to track the money as it comes in. Just be sure to understand whether or not the collections percentage is based on adjusted production or total production.

Is the collection rate low? If the practice uses billable production as the denominator AND the collections percentage is low (under 94%), the practice has room to improve its collections policies. To offer competitive pay, the practice might offer an associate a daily guarantee, payments based on production instead of collection, or a straight salary.

Will the associate have any authority or influence over collections outcomes? If pay is based on collections, it makes sense to give associates an active role in establishing and evaluating collections policies and procedures. The potential associate should ask themselves if they are comfortable taking on that responsibility.

Another example shows wide variations in compensation

Let’s return to our example of Jackie’s $1,500 crown to see how an associate’s take-home pay could play out in two different dental practices.

Both practices have a 95% collection rate. Practice A is entirely fee-for-service (note that in this scenario, billable production will be equal to total production). Practice B. relies on 3rd-party payors and a reduced-fee schedule.

Notice how widely take-home pay varies between the two practices. Now consider how different an associate’s compensation might look over an average month – or a year!

Fair, competitive compensation matters

Whether you’re negotiating for yourself or crafting an offer for a potential new associate, make sure you engage in an open conversation about pay. The basis for compensation must be transparent so both of you are aligned, with fewer surprises or conflicts later on.

Associates should also consider what else is on the table. For example, practices might offer  retirement savings options, CE allowances, malpractice insurance, health care coverage, paid time off and other benefits as part of a total compensation package. Lower take-home pay might be offset by generous benefits. Non-financial benefits can count, too: for example, associates may value a flexible schedule that allows them to handle personal and family needs more comfortably.

The bottom line: practices and associates must align on compensation issues. An open discussion, with tangible examples, can help assure that everyone knows what to expect – and open the door for negotiations that leave both parties feeling satisfied and empowered.

More resources for you

Explore the Real Talk series

Check out this article on dental salaries and compensation

Ready to find your next associateship – or add a new associate to your existing dental team? Create your free ADA Practice Transitions profile now to get started.