Joining a Naturopathic Practice Part 2 – Fee Split vs. Rent
Fee Split Arrangement
A fee split arrangement is when a naturopath pays a percentage of billings to the owner/management of the clinic in exchange for certain services. This percentage may just be for clinical billings or may include additional revenue streams such as supplement sales and lab tests. Many naturopaths consider 60% of the billings for the practitioner and 40% for the clinic to be a standard or fair split percentage. I’m strongly of the opinion that very few situations or contracts ever fit a “standard” model because there are so many factors to consider when looking at fee split arrangements or joining a practice in general. If you’ve been offered a position, I can provide you with a complimentary consultation and assessment.
For a naturopath with fewer patients or only practicing a day or two per week fee splitting usually will mean that you will end up with a higher percentage of your income compared with a rental arrangement. This allows you to be able to build up your practice without assuming much risk, knowing that you will never be in a position where you will have to pay anything to the clinic at the end of the month.
Additionally, when the clinic is sharing in the success of your practice there is a financial incentive for the clinic if you are doing well. Because of this, most clinics that use fee split arrangements provide some advertising or referrals for their practitioners.
Clinics that operate with a fee split arrangement also usually cover all the essential aspects of running the clinic (reception, appointment booking, billing and collection, supplement sales, book-keeping) so the practitioner can just focus on treating patients.
Renting space within a clinic is where a naturopath pays a monthly fee to the clinic usually for use of a treatment room (either for exclusive use or for certain set times and days of the week). The rental fee includes use of the space and possible some ancillary services (this widely varies between clinics and contract agreements). Naturopaths that work at a clinic with a rental agreement often have many similarities to those operating their own clinics. The main difference is that a clinic owner is responsible for all the extra services where a naturopath renting space at a clinic pays for some of those services in their monthly rent.
Renting space can be an advantage over a fee split for practitioners that have many patients or willing to take on a higher amount of risk for more income in the long-term. When looking at space rental there a few quick calculations that can be done to get a sense of whether or not it is a good fit:
Break-even point: What billing amount will you need per month to pay your rent? What does this work out to per day working at the clinic?
50% Profit Margin: Take the break-even and double it to get your monthly or daily billings to be keeping the same percentage of your billings as the clinic. How does that compare with your current patient numbers and billing? Triple the break-even number for 67% margin, or quadruple it for a 75% margin.
Growth is also an important consideration for a space rental arrangement. The revenue from every additional patient that you can bring in is all yours. If you expect your patient numbers to grow quickly a rental agreement is often more advantageous. ND Business Solutions published a supply and demand study in December 2014 that compares regional demand for naturopathic medicine. This can be a useful tool for predicting the growth speed for your practice. Looking for information on a specific town or neighborhood? We can probably provide it – just fill out our contact form and we’ll be back to you shortly.
Regardless of whether a clinic offers a fee split or a space rental agreement it is important to look at the other services the clinic provides. Is there a receptionist there full-time? If so, do they handle all typical reception services? Specific things to look for:
- Answering phone calls 5 or 6 days per week
- Welcoming patients to the clinic and walking them through intake and consent forms
- Booking appointments for your schedule
- Billing patients for clinical services and lab fees
- Collecting payment (including accounts receivable)
- Supplement Sales
Does the clinic have an existing patient base or will you be the primary source of your patients?
What marketing efforts do they provide?
Are you required to fill roles other than being a clinical practitioner? For example, some clinics require all practitioners to perform some reception-like services.
Before you sign any agreement, make sure that everything the clinic is providing is in writing as part of the contract. ND Business Solutions can provide a complimentary review of your contract, and we may be able to help you negotiate a better deal.
Look for more on contract negotiation in Part three of the Joining a Naturopathic Practice.