I ran across this sample practice administrator bonus plan in one of the numerous listservs I subscribe to; I thought it was a pretty good one and thought you’d like to see it:
Part 1 – 1% of total practice collected revenue above the revenue target. The revenue target is approximately 90% of what we agreed would be a good year. The target is adjusted if necessary for special circumstances (such as physicians joining or leaving the practice). If collected revenue is below the target, a negative bonus is possible (assuming I would even be employed).
Part 2 – 20% of the average partner’s compensation above the revenue target. Again, the target is 90% of what the physician’s agreed would be a good year for them. A negative bonus is possible.
Part 3 – a sliding scale based upon my annual review done by the Executive Committee. The maximum is equivalent to 9% of my salary. My review is done on a 1 to 5 scale. There is no bonus if the rating is below 3. At 3 I receive 60% of the maximum. The percentage then increases by 2% for each 10th of a point above 3. In the event that they do not complete a review the percentage is assumed to be 75% (this has not happened since we went to the bonus plan, but it happened at least every other year before that).
NOTE: An important part of setting up the plan is establishing what a good year looks like. It should be based on realistic expectations for your practice.