As Instinct's new chief financial officer, I’ve been constantly impressed by the rigor and thoroughness of our team’s approach to the financial and reporting systems in our new full veterinary practice management system, Instinct EMR.
In my new role, I work with veterinary accounting experts and consultants, using my domain knowledge to ensure our financial workflow, tools, and reports are accurate and follow generally accepted accounting principles (GAAP), while growing our tools for hospitals over time.
How our hospitals pay veterinarians via production (ie, systems such as Pro-sal) is one of those workflows we think about frequently.
As many know, the method hospitals use to pay associates (using gross production vs. collected production1) is a hotly debated topic among practice managers and on industry message boards. No matter how you do this, accurate reporting is a top priority.
At Instinct, our goal is to help hospitals run better and make more streamlined decisions—whatever your process.
We get a lot of questions on the recommended workflow around provider commissions. Because you have enough to worry about these days, we wanted to share a quick guide on how to use these reports in Instinct.
Before we start, know that Instinct offers reports that help you pay associates in one of two ways: on gross production or collected invoicing production.
Here’s the summary: Our recommendation for most centers is to pay using our gross production workflow, effectively getting the best of both worlds while offering a simplified overall reporting and accounting workflow.
Let’s lay out the two ways to pay/account using Instinct reports.
🚨 A crucial point up front 🚨
Your practice must use ONE of the two below methods (not both) to ensure accurate provider commission reporting.
Workflow Option 1: Paying Providers Using Gross Invoicing Reports
In many PIMS, gross invoicing reporting is the only way to get provider reports—short of combining a bunch of reports or jumping through accounting and reconciliation hoops.
If you use our gross invoicing provider report, you’ll pay associates as they produce sales for the practice. You’ll only pay on closed invoices (we recommend keeping invoices open only if they are still being reviewed). Once the invoice is closed, the close date is used to determine the month of production reported for the invoice and associated providers.
This is clean and simple. Once you get the report, you’ll pay a percentage of the number of sales to your associates month by month (or quarter by quarter). Invoice close dates are not flexible (you can’t reopen invoices in Instinct), so you close the period automatically and never have to worry about modifications in past reports as time goes on.
How to Handle Unpaid Invoices
If a client doesn’t pay an invoice and you send them to collections or write it off, you’ll create an adjustment invoice at that later time (a new invoice with negative quantity line items for what was never collected).
If you choose to take these unpaid invoice charges out of the provider’s commissions (because you only pay on collected invoices), you put the negative line items under the provider on the adjustment invoice. If not, you can set the negative line item under a generic hospital provider. Admittedly, this is more of a practice management consideration and one of the hotly debated aspects of this topic!
Either way, once this invoice is closed, it will show up in the collections report for the next month (or quarter), effectively resulting in a “true-up,” so everything will align over time.
As an extra layer to protect practice cash flow in times of higher accounts receivables, you can set up employment agreements where a percentage of commissions each month (or quarter) are held and paid out in Q4 as a true-up.
For example, some centers calculate and report quarterly commissions to associates but pay out 75% each quarter. The other 25% is held and true-uped in Q4 every year. While this results in a lot of accounting work, it gives you time to write off invoices that go unpaid. Either way, this is again a practice management decision more than anything.
Financial nerd alert: What we’re calling gross here is technically “net” provider reporting because it reports on line items post-discount (if discounts are on an invoice). Since we don’t think you’d ever pay commissions pre-discount, we refer to this as gross at Instinct.
Bottom line: This is the reporting and commission structure we strongly recommend for most practices.
Workflow Option 2: Paying Providers Using Collected Invoicing Reports
This is an alternative way to pay your providers using real-time invoice collection reporting, combining sales and payments by invoice and provider. It is a nuanced report that introduces many complexities, but we offer it because some practices with advanced accounting systems have requested it.
Note: This report should never be used to compare totals in other reports in Instinct. The best practice is to avoid comparing these because of the many nuances, including the multiple reporting date ranges at work for this report (see below).
Like the gross report, this report shows sales by providers on closed invoices. However, it only reports on invoice items with payments applied to them. That works well when an invoice is fully paid off but introduces several complexities when invoices are partially paid.
Some of the complexities of this method include:
- Invoices can have multiple providers.
- Invoices are often partially paid over time.
- Tracking payments and refunds on line items over time is necessary.
- Payments/refunds can be taken/applied before and after an invoice is closed.
- Payments/refunds can be moved if misapplied.
- Invoice status can change from open to closed across reporting periods.
- Reports have several dates to consider and reconcile (invoice close date, invoice line item date, payment/refund date), and these dates can conflict and span multiple reporting periods.
If you choose to use this method for paying your providers, you will spend more time dealing with these complexities and must be careful not to interpret the report for other purposes.
Finally and very important: If you’re using this report because you are paying providers based only on real-time collections, you need to adjust invoices that are not paid using a method that deducts them from the generic hospital provider (not the actual provider). If you put negative items under the actual provider, you will effectively be taking money away from providers that you never paid out in commissions, as you are only paying on paid invoice line items in the first place.
Bottom line: We only recommend using this report and workflow if you work with an advanced accounting team who fully understands the nuances of this type of accounting and has the time to devote to it. Full disclosure: Even then, we’ve consulted advanced veterinary accountants who would not recommend this due to the complexities!
We're just getting started with Instinct EMR, and we have big plans to expand our provider reporting to include automatic calculations, real-time visibility for associates, and more.
For now, if you want additional assistance, including training and help switching how you pay providers, we’re here for you and can help!
Just reach out any time to our friendly support team.
- Wilson JF, Nemoy JD, Fishman AJ. Contracts, Benefits, and Practice Management for the Veterinary Profession. Indianapolis, IN: Priority Press (2000).