Independent contractor – When you contract with a hospital, health care entity, etc. to provide medical services. Typically, this term applies when you serve as Medical Director of a Rehab Unit or a Rehab Hospital. The word independent comes from the fact that you are a private practitioner who is independent from the entity (the rehab unit or hospital) with whom you are contracting. The word independent is critical to the Stark regulations (federal regulations) that require the health care entity to not have any influence over a physician’s referral patterns.
Salary guarantee – This means the same thing as a salary usually. Please note that any of these terms should be defined in the contract and the contract therefore is the absolute determination of the definition of these terms. Different people use these terms differently sometimes so there is not one exact definition.
Income guarantee – A guarantee is a means to ensure a minimum rate of compensation for a stated period of time. It’s meant to be a pillow, a financial cushion for you in the early months of a new practice when you’re gearing up and aren’t to capacity in seeing patients and receiving receipts. The entity that provides the guarantee usually sets it at a conservative amount because it does not want to incur a financial liability if you don’t make the guarantee.
Typically, the compensation realized under the basic method of compensation will be set off periodically against any advancements toward the agreed-upon guarantee. The entity providing the guarantee wants to ensure that the guarantee amount is consistent with reimbursement policies of third-party payers so that it can avoid or reduce any nonallowance of the guarantee for reimbursement purposes.
It may have one or more of the following forms:
*funds advanced by the entity to the physician
*the entity acting as cosigner for a loan made by a bank to the physician
*a guarantee against monthly billings made by the physician
*a guarantee against monthly collections made by the physician
A guarantee, as in the last two items above, involves a monthly payment of a variable sum determined by subtracting either the monthly billings or monthly collections, whichever is applicable, from a fixed, predetermined amount for a period of time. The period of time can be expressed either in months or until the physician reaches a certain level of billing or collections.
The guarantee on its face creates a dollar exposure equal to the fixed monthly amount less zero billings or collections. Billings are defined as the amount of fees for all services rendered by the physician in any one month, whether or not he actually receives payment. Collections are defined as the amount of cash actually collected by the physician for all services rendered in any one month.
Collection Guarantee Schedule
Month Billing Cash Collection Cash Advances
1 $1,500 $ 500 $3,500
2 2,500 1,500 2,500
3 3,500 2,000 2,000
4 4,000 2,500 1,500
5 4,500 3,500 500
6 5,000 4,500 ___
7 5,500 5,000 ___
8 6,000 5,000 ___
9 6,500 5,500 ___
10 7,000 5,500 ___
11 7,500 6,000 ___
12 8,000 7,500 ___
$61,500 $49,000 $10,000
Total Exposure: $48,000
*Guaranteeed Amount = $48,000 for 12 months or $4,000 per month against collections
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