Have you ever wondered how much a nurse practitioner is worth? How much revenue do they generate every year, and how does this compare with their salary? The purpose of this post is to discuss the monetary value of nurse practitioners and what it means for hospitals and clinics who hire them.
Because most nurse practitioners specialize and practice in primary care, we’ll focus on this specialty. Today, about 75 percent of nurse practitioners practice in primary care, compared with about 33 percent of physicians. The most recent compensation survey conducted by the American Association of Nurse Practitioners (AANP) found that the average total income for a primary care nurse practitioner was around $108,000. In contrast, the average primary care physician earns $160,000, which is 48 percent more.
Let’s Figure It Out
To calculate the amount of revenue a primary care nurse practitioner can generate, I used the formula provided by Dr. Carolyn Buppert in Chapter 10 of her textbook, Nurse Practitioner’s Business Practice and Legal Guide, Fifth Edition:
According to Dr. Buppert, primary care nurse practitioners see an average of 24 patients per day and are reimbursed an average of $70 per patient. In this scenario using Dr. Buppert’s formula, the nurse practitioner brings in $1,680 per day. Assuming a 90 percent collection rate and six weeks of time off, the primary care nurse practitioner brings in $347,760 per year.
To calculate the nurse practitioner’s deserved salary, Dr. Buppert deducts the following amounts from nurse practitioner–generated revenue:
The cost of practice expenses or hospital overhead per nurse practitioner varies widely, from 20 percent in large practices to 50 percent in very small practices. These expenses include rent, benefits, continuing education stipend, supplies, malpractice insurance, and depreciation of medical equipment. If the nurse practitioner does not receive health insurance benefits or paid time off, which may be the case for NPs working in some part-time or locum tenens roles, this percentage would be lower.
Physician consultation costs refer to the supervisory agreements that some states require. In her book, Dr. Buppert explains that employers often displace this cost, which is usually around 15 percent of their generated revenue, onto nurse practitioners. Furthermore, practice profit is the amount the employer wishes to keep for themselves, which is usually around 10 percent.
Deducting these percentages from the primary care nurse practitioner who generates $347,760 per year leads to a salary of $159,621. In a state without mandated physician consultation requirements, this same nurse practitioner would ideally earn a 15 percent higher salary (i.e., $177,357).
Dr. Karen Van Leuven offers a similar analysis in Chapter 6 of Financial and Business Management for the Doctor of Nursing Practice. Dr. Van Leuven assumes that the primary care nurse practitioner sees 20 patients per day at an average reimbursement of $56.50 per visit. She allots only four weeks of time off, resulting in annual revenue of $216,960. In this scenario, nurse practitioners share in the company profits, and none of the revenue is given to a supervising physician. With 40 percent overhead, this leaves the primary care nurse practitioner with a salary of around $130,000.
Using these formulas, the revenue generated by a primary care nurse practitioner ranges from around $217,000 to $350,000. And, using those numbers, the nurse practitioner’s annual salary should be anywhere from $130,000 to $160,000. So interesting!
Accounting for Situational Variables
Are these calculations accurate? That was the first thing that popped into my head, too. Each part of this formula could easily change. Maybe a nurse practitioner only sees 15 patients in one day because four patients no-show. Maybe the average reimbursement rate is $75 per patient rather than $70. Maybe only 80 percent of patients at a given clinic pay their bills. Maybe the practice owner wants to collect a 15 percent profit rather than 10 percent. Also, this formula is based on a fee-for-service model, which is slowly being phased out by the Affordable Care Act.
That’s why it’s important to do your own calculations based on your individual situation, or the situation you expect at the hospital or practice at which you’re interviewing. Both Dr. Buppert and Dr. Van Leuven encourage nurse practitioners to use this information when they are negotiating their salary and benefits. Nurse practitioners who are knowledgeable about billing transactions, company profits, and financial transactions can become better partners in healthcare practices.
This article would not be possible without two of my favorite nurse practitioner textbooks:
- Carolyn Buppert’s Nurse Practitioner’s Business Practice and Legal Guide, Fifth Edition.
- KT Waxman’s Financial and Business Management for the Doctor of Nursing Practice.