Compensation arrangements for non-physician clinicians

Management in Practice

William Brady

William Brady is the AAD's associate director of practice management resources and policy. 

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As dermatology practices increasingly recruit non-physician clinicians (NPCs) — either a physician assistant (PA) or a nurse practitioner (NP) — they should consider in advance a number of key factors before proceeding, all of which are crucial to determining a compensation arrangement for the NPC. The practice will need to assess some basic questions before addressing how to structure salary, bonus, and benefits to attract candidates. Determining salary and compensation requires careful market research, understanding and complying with applicable state and federal laws, assessing the practice’s financial health and budget, and developing sound employment policies and procedures. The following guidelines will help you determine these policies and have procedures in place when salary issues become important.

Step 1: Assess practice need

Before hiring an NPC, it’s critical for the practice to develop a business case that accurately reflects current practice needs. This step will help the practice establish a clear need and purpose for a prospective NPC, as well as clarify their intended roles and responsibilities. Is the practice contemplating adding an NPC to meet increasing patient demand? To extend the range of dermatologic services? To be able to attract new patients? Consider profiling your patient demand in terms of wait time (number of weeks out for scheduling patients), caseloads (types of visits), and even top payers (so you can determine each of their payment policies to see how it will impact your prospective NPC’s role and function). Define the desired future state that hiring an NPC should make possible — wait times reduced, patient satisfaction improved, dermatologists who are able to spend more time with complex patients.

This systematic pre-hiring approach will help you develop a business case for the new NPC: the need the NPC will fill, the types of services the NPC will provide, and the projected revenue he or she will generate. Another worthwhile strategic step to consider is to review your local market in terms of number of competitors, which will help you differentiate your practice with any future marketing plan. A practice assessment can even help you in the longer run should you consider expanding the practice, forming or joining a group, and/or pursuing other alignment options that are emerging in health care.[pagebreak]

Step 2: Address compliance requirements

Understanding the compliance requirements of your state’s applicable laws and regulations governing the appropriate use of NPCs is another key factor. Knowing what level of physician supervision and collaboration is required will help you determine whether a PA or an NP is the better choice for your needs and provide you with a clear understanding of what the practice will need to do to maintain full compliance with state laws. Depending on where you are, the dermatologist will need to comply with specific state laws requiring a collaborative or supervisory agreement, which outlines the NPC scope of medical practice and spells out the duties and responsibilities of the supervising physician. Typically the collaborative or supervisory agreement is a supplemental document to the employment contract, and will need to be updated as compliance requirements change from time to time. Read more information on state laws governing scope of practice for PAs and for NPs.

Step 3: Define payer requirements

Find out from your top payers what their billing and reimbursement policies mean for NPCs. For Medicare, this means enrolling and credentialing your NPC, as well as understanding the “direct” vs. “incident-to” billing requirements. This research should be undertaken before hiring the new NPC so the practice can determine a realistic revenue target for a new NPC as well as the timeline to credential an NPC. While Medicare has more transparent billing policies, many private payers have either vague or non-existent rules, or have policies that are altogether different from Medicare. Create a table showing what each of your top private payers require and how they will process claims involving your NPC. For example, a comparative fact-finding chart can include clarification on billing policies, reimbursement rates, and payment guidelines addressing NPC billing. This exercise will also help inform the NPC’s prospective revenue generation, which will help you to determine a fair and competitive compensation offer.

Step 4: Determine a competitive package

To keep the practice’s pay grades and salary ranges competitive, it is important to gather data for comparable jobs. External salary resources help to confirm that the practice’s pay structure is competitive while assuring employees that it is fair and appropriate. There are multiple sources available to gauge current competitive compensation. Start by looking at salary surveys published by compensation organizations and by the state or federal government. Industry surveys are often effective benchmarking tools since they are conducted by experts and include data from a large number of participants, resulting in a more accurate analysis. The following resources provide information on NPC compensation:

These industry compensation benchmarks are for reference purposes, and should be a factor that helps you determine whether or not an NPC is affordable and how you intend to optimize their roles in your practice.

Using this outside data and the practice’s budget, develop a target range. It may make sense to combine some of the compensation approaches described in the sidebar “Potential components of a compensation package” to create a package that fits the practice’s budget and appropriately incentivizes the NPC’s productivity.

To learn more about NPCs and their integration into dermatology practices, the Academy has developed a new e-book on this topic. Adding a Non-Physician Clinician (NPC) to a Dermatology Practice is available to members online and offers extensive guidance on how to prepare when expanding their clinical team to meet growing patient demand. It includes extensive information on compensation arrangements, including salary guidelines, salary survey data, and a hypothetical cost-revenue model.

Potential components of a compensation package

See the table below for a breakdown of compensation types.


PAs and NPs in dermatology

The number of dermatology practices that employ physician assistants and/or nurse practitioners continues to rise. In the AAD’s 2014 Dermatology Practice Profile Survey, 46 percent of respondents reported that they work in a practice that employs a PA and/or NP. Employment was most common in academic settings, where 57 percent of respondents said they employ a PA and/or NP, compared to 54 percent in dermatology groups, 48 percent in multispecialty groups, and 34 percent in solo practice.


AAD DermCare Team offers educational opportunities for clinical staff

Dermatologists with PAs, NPs, nurses, or medical assistants may enroll them in the AAD DermCare Team. Participants receive electronic access to JAAD and Dermatology World, discounted meeting registration and product pricing, and access to additional content on, including complimentary access to the AAD CME Transcript Program.

Learn more at



Potential components of a compensation package
PAs and NPs in dermatology
AAD DermCare Team offers educational opportunities for clinical staff