Claims Data Outcomes Analysis

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Understanding “Proxy” Measurements

Brent Metfessel MD

By Brent A. Metfessel MD, MS, CMP™ (Hon)

Medical claims data has clear limitations for outcomes analysis and quality reportage.

Such data only deals with the process of care and does not have information directly pertaining to outcomes except where specified in the ICD-9 codes. 

Thus, one must rely in many cases on proxy measures for outcomes. Proxy measures are process of care metrics that can imply certain outcomes, such as length of an illness episode.

The following are some ways to ascertain outcomes of care using claims data:

·         Complications of care:  The ICD-9 codes directly contain language for denoting outcomes.  There exist codes for wound infection and dehiscence, miscarriage in pregnancy, and general surgical complications.  The coding of a major infection in a cancer patient on chemotherapy is another example of complications-based outcomes obtainable through claims data.

·         Procedure re-performances:  Two coronary artery stent procedures within a six month to a year period may imply failure of the first stent.  However, a medical record check may ultimately be needed since it could also be a stent placed in a new vessel.  Returns to the operating room within a few days of a surgical operation, or an outpatient procedure that turns into an inpatient stay within a few days also implies poor outcomes.

·         Readmission rates:  Two or more hospitalizations for the same episode of care within 30 to 60 days also imply poor outcomes.

·         Episode length analysis:  The length that an episode of care lasts can be compared between providers.  Shorter episodes for acute illnesses imply better outcomes unless it is due to the expiration of a patient or poor access to care.

·         Medication prescribing patterns:  In some conditions the drugs prescribed may imply certain outcomes.  A rheumatoid arthritis patient that needs Remicade® probably has a more severe form of the illness.  Frequent antibiotic switching for an infectious disease such as pneumonia either implies a resistant organism or difficulties in quality of care.

·       Emergency room and hospital utilization:  Frequent ER use or hospitalizations for chronic conditions such as asthma or congestive heart failure imply a poor outcome from outpatient treatment.

Assessment

How reliable are these proxy measures in evaluating medical outcomes?  

Conclusion

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Value-Driven [IT] Healthcare

Leavitt Pitches Financial Transparency

Staff Reporters

According to Diana Manor, Senior Editor for Healthcare Finance News, the Department of Health and Human Services [HHS] Secretary Michael Leavitt was reported to say that he has no intention of slacking off in efforts to drive transparency into the US healthcare system, despite the winding down of the Bush Administration.  

World Health Care Congress

At the Fifth Annual World Health Care Congress, held last week in Washington, DC, Leavitt reported that in his 272 days left as HHS secretary, he has “a continued sense of urgency” and plans on picking up the pace to drive much-needed change. “I am among those who believe our unbridled healthcare costs will bring our economic system to its knees.”

Among initiatives in the works, Leavitt said HHS is consolidating all healthcare quality standards used across its agencies and will publish them in an effort to boost their market-wide use.

Competitive Bidding

HHS is also experimenting with competitive bidding for bundled services, beginning with a Medicaid demo that HHS officials hope to expand in the future.

The Bush value-driven healthcare plan relies on healthcare IT adoption to record quality measures and aggregate and provide cost and quality information to consumers, but adoption by small physician practices remains at, or below, 10 percent. HHS plans in June to push Congress to tie physician Medicare payment incentives to the use of healthcare IT.

Assessment

Apparently, many HIT standards have been developed over the past few years, but are not being developed fast enough. Leavitt pushed for these HIT initiative back in December 2008, without success.

Conclusion

And so, do you think the next HIT push will be successful or not; and please comment why?

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Hospital Employee Benefits

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Tax-Deferred Benefits

[By LaVerne L. Dotson; JD, CPA]

As all readers of the Medical Executive-Post know, there are three categories of benefits that hospitals, healthcare systems, clinics and related medical employers typically provide to their employees, nurses, hospitalists, etc:

  1. Those that are totally income tax-free; some are still taxable for FICA (Social Security and Medicare).
  2. Those that are not taxed at their full economic value; or are taxed at a special preferential rate.
  3. Those in which a tax liability is not incurred until after benefits received.

Tax Deferred Benefits

There are several types of arrangements that allow employees to receive economic benefits currently without having to pay taxes until a later taxable year. Furthermore, some of these arrangements may even provide for a lower taxation rate at that time. These types of benefits are not totally excludable from income forever, however. Rather, they primarily provide deferral of taxable income.

Retirement Plans

The classic example is a retirement plan.  Employers may establish pension, profit sharing, stock-bonus, or annuity plans, as well as 401(k) and 403(b) plans. The tax consequences and most of the formal requirements of these plans are similar. These plans are often referred to as “qualified retirement plans.”

The hospital employer makes contributions on behalf of participating employees. The contributions are placed in a trust fund, custodial account, or annuity contract. The funds are held and accumulated for the benefit of plan participants.

The distribution of the funds to a participant normally occurs no sooner than the participant’s termination of service with the employer, and, no later than attainment of normal retirement age, as defined in the plan. The method of distribution may be a lump-sum payment of all of the employee’s benefits, an installment payment over a number of years (usually 10 to 15), or as an annuity that provides payments over the employee’s and/or spouse’s lifetime.  

The extremely favorable tax consequences of qualified retirement plans are the reason for their popularity. When the hospital makes a contribution on the employee’s behalf to the qualified plan, the employer receives a deduction for the amount contributed; however, the employee will not have to report the contribution as income until the funds are finally distributed.

Contributions to the trust or other qualified fund are accumulated tax-free. Distributions are taxable, but the recipient is generally in a lower marginal tax bracket during retirement than when contributions to the retirement plan were made. This treatment is a truly startling departure from the normal practice under the Code.

Employee FSAs

Assessment

The tax-free accumulation of income (contributions and interest) offers the hospital, clinic or other medical employee great advantage, even if his or her tax rates are the same at the time of deferral as at the time of distribution.

Conclusion

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Hospital Compare Advocacy

CMS, HHS and HQA Team-Up for New Website Tool

[By Staff Writers] 

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In the next initiative of the consumer empowerment and/or patient advocacy movement, it seems that the CMS, HHS and the HQA have just teamed-up to produce a new online tool to help patients compare inpatient services for selected procedures and populations. 

Direct from the Website

Welcome to Hospital Compare. This tool provides you with information on how well the hospitals care for all their adult patients with certain conditions or procedures. This information will help you compare the quality of care hospitals provide. Talk to your doctor about this information to help you, your family and your friends make your best hospital care decisions.

Hospital Compare was created through the efforts of the Centers for Medicare & Medicaid Services (CMS), the Department of Health and Human Services (HSS), and other members of the Hospital Quality Alliance: Improving Care through Information (HQA). The information on this website has been provided primarily by hospitals that have agreed to submit quality information for Hospital Compare to make public.

Assessment

The site is still a work-in-progress, but here is the latest direct link:

http://www.hospitalcompare.hhs.gov

Hopefully, conditions and procedures will be added, and subspecialties like pediatrics will be included going forward.

Conclusion

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Quality Profiling in Medicine

Practice Patterns and Outcomes Reporting

By Brent A. Metfessel MD, MS, CMP™ (Hon)

Quality Profiling

Quality medical profiling and healthcare delivery metrics and outcomes analysis look beyond mere healthcare finances and costs. As readers of the Executive-Post are aware, pure financial analysis is the stuff of physician economic profiling; an emerging science to be sure.

Typically, good quality medical care leads to improved costs since stable patients have fewer unplanned visits, less emergency room usage, and a reduced frequency of hospital admissions, all of which save money. 

HEIDIS® Data

The Health Plan Employer Data and Information Set (HEDIS®) contains measures obtainable from claims, survey, provider, membership, and medical record data.

HEDIS® was developed in conjunction with the National Center for Quality Assurance (NCQA) and is a widely accepted specification for quality measures. 

Consumers, managed care organizations, and accrediting bodies have a high level of interest in the evolving HEDIS® metrics, to date.

These measures are divided up into a number of categories:

  • Preventive services:  Includes childhood and adolescent immunization status, breast and cervical cancer screening rates, chlamydia screening in women, assistance with smoking cessation, and well-child visits.
  • Access to care:  Includes access to preventive, primary care, prenatal and postnatal care services.
  • Utilization:  Contains measures of frequency of selected procedures, inpatient utilization such as average lengths of stay for maternity and mental health patients, C-section and VBAC rates, and other measures of inpatient and outpatient utilization.
  • Acute and chronic illness care: Examples are rates of beta-blocker use post-MI, comprehensive diabetes care (such as annual retinal exams), control of high blood pressure, appropriate medications for asthma patients, and follow-up within 30 days after hospitalization for mental illness.
  • Provider data and statistics:  Includes residency completion information, board certification, and provider turnover.
  • Membership statistics:  These measures deal with member demographics and total membership in the health plan.
  • Survey data:  Includes member satisfaction survey results.

Assessment

The NCQA is continually revising its measures in the HEDIS® product and provides new versions annually. But, although HEDIS® contains many measures of quality of care; it provides few measures of actual clinical outcomes.

Conclusion

Have you experienced, or been reviewed, using any of these measures in your own hospitals or healthcare institution; please comment?

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Options and Derivatives Glossary

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Important Terms for Physician-Executives and Investors

[By Staff Writers}

Text BooksAmerican-style option: An option that can be exercised at any time prior to expiration.

Ask price: The price at which a seller is offering to sell an option or stock.

Assignment:  Notification by the Options Clearing Corporation to the writer (seller) of an option that the holder has exercised the option and the terms of the settlement must now be met. The Options Clearing Corporation makes assignments on a random basis.

At-the-money: A term that describes an option with an exercise price that is equal to the current market price of the underlying stock.

Bearish: An adjective describing the belief that a stock (or the market in general) will decline in price.

Bid price: The price at which a buyer is willing to buy an option or stock.

Break-even point: A stock price at option expiration at which an option strategy results in neither a profit nor a loss.

Bullish: An adjective describing the belief that a stock (or the market in general) will rise in price.

Call option: A contract that gives the physician investor or holder the right (but not the obligation) to purchase the underlying stock at some predetermined price. In the case of American-style call options, this right can be exercised at any time until the expiration date. In the case of European-style call options, this right can only be exercised on the expiration date. For the writer (or grantor) of a call option, the contract represents an obligation to sell stock to the holder if the option is exercised.

Carrying cost: The interest expense on money borrowed to finance a stock or option position.

Cash settlement: The process by which the terms of an option contract are fulfilled through the payment or receipt in dollars of the amount at which the option is in-the-money, as opposed to delivering or receiving the underlying stock.

Closing price: The final price at which a transaction was made, but not necessarily the settlement price.

Closing transaction: A reduction or an elimination of an open position by the appropriate offsetting purchase or sale. An existing long option position is closed out by a selling transaction. An existing short option position is closed out by a purchase transaction.

Collateral: Securities or cash against which loans are made.

Contract size: The amount of the underlying asset covered by an options contract. This is 100 shares for one equity option, unless adjusted for a special event such as a stock split or a stock dividend. For index options, the contract size is the index level times the index multiplier.

Cover: To close out an open position. This term is used most frequently to describe the purchase of an option to close out an existing short position for either a profit or a loss.

Covered call: An option strategy in which a call option is written against a long stock (stock held in a client’s portfolio).

Covered option: An open short option position that is fully collateralized. If the holder of the option exercises, the writer of the option will not have a problem fulfilling the delivery requirements.

Covered put: An option strategy in which a put option is written against a sufficient amount of cash (or T-bills) to pay for the stock purchase if the short position is assigned.

Credit: Money received in an account from either a deposit or a transaction that results in increasing the account’s cash balance.

Cycle: The expiration dates applicable to the different series of options. Traditionally, there were three cycles:

• January/April/July/October

• February/May/August/November

• March/June/September/December

Today, equity options expire on a sequential cycle that involves a total of four option series: two near-term months and two far-term months. For example, on January 1, a stock traditionally in the January cycle will be trading options expiring in January, February, April, and July. Index options, however, expire on a consecutive cycle that involves the four near-term months. For example, on January 1, index options will be trading options expiring in January, February, March, and April.

Delivery: The process of meeting the terms of a written option when notification of assignment has been received. In the case of a short call, the writer must deliver stock and in return receives cash for the stock sold. In the case of a short put, the writer pays cash and in return receives the stock purchased.

Early exercise: A feature of American-style options that allows the holder to exercise an option at any time prior to the expiration date.

Equity: In a margin account, this is the difference between the securities owned and the margin loans owed. It is the amount the investor would keep after all positions have closed out and all margin loans are paid off.

Equity option: An option on a common stock.

European option: An option that can be exercised only on the expiration date.

Exercise: To invoke the rights granted to the holder of an option contract. In the case of a call, the option holder buys the underlying stock from the option writer. In the case of a put, the option holder sells the underlying stock to the option writer.

Exercise price: The price at which the holder of an option can either purchase (call) the underlying stock from or sell (put) it to the option writer.

Expiration date: The date on which an option and the right to exercise cease to exist.

Futures contract: A contract calling for the delivery of a specific quantity of a physical good or a financial instrument (or the cash value) at some specific date in the future. There are exchange-traded futures contracts with standardized terms, and there are over-the-counter futures contracts with negotiated terms.

Hedge: A position established with the specific intent of protecting an existing position.

Hypothecation agreement: A document giving a broker the right to pledge securities to a bank in order to provide for lending capacity.

Index: A compilation of several stock prices into a single number. Example: the S&P Index.

Index option: An option whose underlying entity is an index. Generally, index options are cash-settled.

In-the-money:  A term used to describe an option with intrinsic value. A call option is “in-the-money” if the stock price is above the strike price. A put option is “in-the-money” if the stock price is below the strike price.

Intrinsic value: The in-the-money portion of an option’s price.

Leg: A term describing one side of a position that has two or more sides.

Leverage: The ability to borrow against a position to increase the investor’s purchasing power. A term describing the greater percentage of profit or loss potential when a given amount of money controls a security with a much larger face value. For example, a call option enables the physician investor or holder to assume the upside potential of 100 shares of stock by investing a much smaller amount than required to buy the stock. If, for example, the stock increases by 10%, the option can double in value. Conversely, a 10% stock price decline can result in the total loss of the purchase price of the option.

Limit order: A trading order placed with a broker to buy or sell a security at a specific price.

Listed option: A put or call traded on a national option exchange with standardized terms. In contrast, over-the-counter options usually have non-standard or negotiated terms.

Long position: A term used to describe either an open position that is expected to benefit from a rise in the price of the underlying stock (such as long call, short put, or long stock) or an open position resulting from an opening purchase transaction such as long call, long put, or long stock.

Margin: The minimum equity required to support an investment position. To buy on margin refers to borrowing part of the purchase price of a security from a brokerage firm.

Market maker: An exchange member on the trading floor who buys and sells for his own account and who is responsible for making bids and offers and maintaining a fair and orderly market.

Market order: A trading instruction from an investor to a broker to immediately buy or sell a security at the best available price.

Mark to market: An accounting process by which the price of securities held in an account is valued each day to reflect the last sale price or market quote if the last sale is outside of the market quote. The result of this process is that the equity in an account is updated daily to properly reflect current security prices.

Married put strategy: The simultaneous purchase of stock and the corresponding number of put options. This is a limited-risk strategy during the life of the puts, because the stock can be sold at the strike price of the puts.

Monetization: A strategy that allows an investor to generate cash from a position without realizing a sale of the underlying position.

Non-equity options: Any option that does not have common stock as its underlying asset. Non-equity options include options on futures, indexes, interest rate composites, and physicals.

Opening transaction: An addition to or creation of a trading position. An opening purchase transaction adds long options (or long securities) to an investor’s total position, and an opening sell transaction adds short options (or short securities).

Option writer: The seller of an option contract who is obligated to meet the terms of delivery if the option holder exercises his or her right.

Out-of-the-money: A term used to describe an option that has no intrinsic value, i.e., all of its value consists of time value. A call option is “out-of-the-money” if the stock price is below the strike price. A put option is “out-of-the-money” if the stock price is above the strike price.

Over-the-counter (OTC) option: An option that is traded in the over-the-counter market. OTC options are not usually listed on an options exchange and generally do not have standardized terms.

Parity: The difference between the stock price and the strike price of an in-the-money option. When an option is trading at its intrinsic value, it is said to be trading at parity.

Position limits: The maximum number of open option contracts that an investor can hold in one account or in a group of related accounts. Some exchanges express the limit in terms of option contracts on the same side of the market, and others express it in terms of total long or short delta.

Premium: The total price of an option, which equals its intrinsic value plus its time value. Often this word is used to mean the same as time value.

Put option: A contract that gives the buyer the right (but not the obligation) to sell the underlying stock at some predetermined price. For the writer (or grantor) of a put option, the contract represents an obligation to buy stock from the buyer if the option is assigned.

Settlement price: The official price at the end of a trading session. This price is established by the Option Clearing Corporation, and it is used to determine changes in account equity or margin requirements, and for other purposes.

Short option position: The position of an option writer that represents an obligation to meet the terms of the option if it is assigned.

Short position: Any open position that is expected to benefit from a decline in the price of the underlying stock such as long put, short call, or short stock.

Short sale: The sale of a security (i.e., stocks and bonds) before it has been acquired.

Spread: A position consisting of two parts, each of which alone would profit from opposite directional price moves. These opposite parts are entered simultaneously in the hope of limiting risk or benefiting from change or price relationship between the two.

Stock index futures: A futures contract that has as its underlying entity a stock market index. Such futures contracts are generally subject to cash settlement.

Stop limit order: A type of contingency order, placed with a broker that becomes a limit order when the security trades, is bid, or is offered at a specific price.

Straddle: A trading position involving puts and calls on a one-to-one basis in which the puts and calls have the same strike price, expiration, and underlying entity. A long straddle is when both options are owned and a short straddle is when both options are written.

Street name: Securities held in a street name are simply held for a customer’s account in the name of the brokerage house.

Synthetic position: A strategy involving two or more instruments that has the same risk/reward profile as a strategy involving only one instrument. The following list summarizes the six primary synthetic positions.

• Synthetic long call—A long stock position combined with a long put.

• Synthetic long put—A short stock position combined with a long call.

• Synthetic long stock—A long call position combined with a short put.

• Synthetic short call—A short stock position combined with a short put.

• Synthetic short put—A long stock position combined with a short call.

• Synthetic short stock—A short call position combined with a long put.

Tick: The smallest unit price change allowed in trading a security. For a common stock, this is generally 1/8 point. For an option under $3 in price, this is generally 1/16 point. For an option over $3, this is generally 1/8 point.

Time value: The difference between the call price and the intrinsic value.  It reflects what traders are willing to pay for the uncertainty (volatility) of a stock.

Uncovered option: A short option position that is not fully collateralized if notification of assignment should be received. A short call position is uncovered if the writer does not have a long stock position to deliver. A short put position is uncovered if the writer does not have the financial resources available in his or her account to buy the stock.

Volatility: The volatility of an asset is a measure of the variability of its returns. Conventionally, volatility is defined as the annualized standard deviation of the logarithms of the asset’s returns. An important aspect of volatility is that it measures the variability of returns and not the deviation.

Write: To sell an option. A physician-investor who sells an option is called the writer, regardless of whether the option is covered or uncovered.

 

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Conclusion

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Calculating Historic Asset Returns

Single versus Multi-Period Returns

By Mary A. Lauritano; CFA, MBA

The total return on a financial asset over a single time period is broken down into the income return (dividend or interest) plus the capital change or the change in the market price of the asset (negative or positive). This rate of return is called the holding period return.

Holding period return = Change in asset price (+ or –) plus cash received / Beginning value            

Example:

An investment was purchased by a physician at the beginning of the time period for $150,000. The investor received $20,000 of income from the investment during the period, and the investment was worth $175,000 at the end of the period. The holding period return was:

Holding period return = ($175,000 – $150,000) + $20,000 / $150,000 = 30%                        

Measuring one-period rates of return becomes more difficult when investments are considered over a period of time.

The average return can be computed over a multi-period time span using three methods: dollar-weighted (internal) rate of return, time-weighted (geometric) rate of return, and time-weighted (average method) rate of return.

Each method has its particular use and interpretation.

Dollar-weighted rate of return

The dollar-weighted rate of return measures the performance of the manager and the timing of the external cash flows initiated by the client.

From the physician investor’s viewpoint, this is the best measure of the overall performance of the portfolio because it includes the timing of when funds were added or subtracted. The primary drawback of this measure is that it mixes the timing of the client’s cash flow with the portfolio manager’s performance.

Time-weighted rates of return

Geometric mean vs. arithmetic mean

Put simply, the geometric mean is the compound rate of return and the arithmetic mean is the average rate of return. Geometric returns never exceed arithmetic returns. Geometric return measures past performance; it is the constant rate of return needed in each year to match actual performance over a time period.

Arithmetic return is an unbiased estimate of expected return, assuming the past is equal to the future. Therefore, arithmetic return is a better indicator of future performance.

When it is necessary to measure only that portion of performance due to the investor/manager, the time-weighted (geometric), or annual compound, rate of return is the best measure of the actual historical performance of the manager, because it indicates the annual average return for each dollar given to the account manager.

Assessment

The performance standards of the Association for Investment Management and Research (AIMR), now CMA Institute, require managers to use this geometric method when they report performance.

The time-weighted (arithmetic method) rate of return is the return that occurred in a “typical year” for the account manager. It is the simple arithmetic average of the period-to-period returns produced by the manager, excluding the effects of external cash flows.

The geometric mean return indicates the rate at which wealth grows; the arithmetic mean return indicates the annual average return from investing. The geometric mean is preferred to the arithmetic mean because investors want to know the rate at which wealth grows over time.

Conclusion

What are your thoughts on the above, and how do you determine asset return? Please comment.

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SEIU Economics

Challenging Medicare Economics Rule Changes

Staff Writers

According to Modern Physician, a union representing 12,000 medical interns and residents is the latest organization to get behind a lawsuit seeking to stop a Medicaid economics rule change that would crimp the flow of enhanced payments to safety net hospitals.

Amicus Brief*

In a friend-of-the-court brief filed in U.S. District Court in Washington, the SEIU Healthcare-affiliated Committee of Interns and Residents argues that “the ability to collect above-cost Medicaid payments allows governmental healthcare providers to fulfill Medicaid’s mission by making it possible for safety net hospitals and the medical residents that work in them to provide quality healthcare to the nation’s poorest and most vulnerable citizens.”

Assessment

The lawsuit was filed in March by a coalition led by the National Association of Public Hospitals and Health Systems and including the American Hospital Association and the parties are seeking a preliminary injunction to block the rule from taking effect.

Conclusion

Your comments are appreciated.  

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*Amicus Curiae briefs, a Latin term meaning “friend of the court”, is the name for a brief filed with the court by someone who is not a party to the case.

 

Hospital Employee Auto Benefits

Autos not Taxed at Full Economic Value

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

Dr. DEM

As readers of the Medical Executive-Post are aware, there are three categories of benefits that clinics and hospital employers typically provide to their employees, nurses, hospitalists, etc:

  1. Those that are totally income tax-free; some are still taxable for FICA (Social Security and Medicare).
  2. Those that are not taxed at their full economic value; or are taxed at a special preferential rate.
  3. Those in which a tax liability is not incurred until after benefits received.

Taxable Benefits

When a benefit does not qualify for exclusion under a specific statute or regulation, the benefit is considered taxable to the recipient.  It is included in wages for withholding and employment-tax purposes, at the excess of its fair market value over any amount paid by the employee for the benefit.

For example, hospitals often provide automobiles for use by hospitalists, and employees, etc. Treasury regulations exclude from income the value of the following types of vehicles’ use by an employee:

  • Vehicles not available for the personal use of an employee by reason of a written policy statement of the employer
  • Vehicles not available to an employee for personal use other than commuting (although in this case commuting is includable)
  • Vehicles used in connection with the business of farming [in which case the exclusion is equal to the value of an arbitrary 75% of the total availability for use, and the value of the balance may be includable or excludable, depending upon the facts (Treas. Regs. § 1.132-5(g)) involved)]
  • Certain vehicles identified in the regulations as “qualified non-personal-use vehicles,” which by reason of their design do not lend themselves to more than a de minimus amount of personal use by an employee [examples are ambulances and hearses]
  • Vehicles provided for qualified automobile demonstration use
  • Vehicles provided for product testing and evaluation by an employee outside the employer’s work place.

Assessment

If the hospital employer-provided vehicle does not fall into one of the excluded categories, then the employee is required to report his personal use as a taxable benefit. The value of the availability for personal use may be determined under one of several approaches. Under any of the approaches, the after-tax cost to the employee is substantially less than if the hospital employee used his or her own dollars deducted a portion of the cost as a business expense.

Conclusion

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Margin Exchange Regulations

Government, Brokerage and Margin Exchange Requirements

By William H. Mears, CPA, JD 

Under the securities laws (the Securities & Exchange Act of 1934), the Federal Reserve Board is authorized to allow brokerage firms to lend against securities positions and charge interest, up to a legal limit, as outlined in Regulation T of the 1934 Act.

Regulation “T”

Under Regulation T, physicians and clients can borrow from a brokerage firm up to 50% of the long position value of their brokerage account. Under Regulation T, only securities listed on a registered stock exchange, the NASDAQ system, or certain approved over-the-counter stocks may be used in a margin account.

A physician investor who transacts in a margin account will be responsible for maintaining the equity in the account at the legal limit, i.e., the 50% level against a stock portfolio.

For example, if a physician investor has a margin loan of $500,000 against a $1 million stock account, and the value of the stock portfolio decreases to $500,000, the doctor-client will need to immediately repay $250,000 of the loan value, because the account no longer can support a $500,000 margin loan.

If the doctor-client is holding bonds in a margin account, the client may borrow under Regulation T up to 80% of the current market value of the securities. U.S. government and municipal bonds have even higher borrowing power.

Example:

Jim Hojo MD, owns a private healthcare equipment company that his father built into a $10 million business, would like to sell some of the equity of the company to long-time employees.

Jim is advised to sell 30% of his privately held company to an Employee Stock Ownership Plan. Jim was told that under Internal Revenue Code §1042, he will be afforded a tax deferral opportunity on the sale of a portion of the stock of the company to the employees. The delay in the recognition of the capital gains on the sale of a portion of the company to the employees is contingent upon compliance with certain criteria outlined in Code §1042.

Jim takes advantage of this transaction and, as advised, purchases domestic-issue floating rate bonds. He then borrows against the floating rate bonds in a margin account.

Because the bonds have a higher Reg T lending capacity, Jim is allowed to borrow 80% of the market value of the bonds. He takes his loan proceeds and invests in a diversified portfolio of equities.

If he had invested initially in stocks, his borrowing capacity against the stock position would have been limited to 50% of the market value of the account.

Failure to Maintain Regulation T Equity

If a doctor-client fails to maintain the Regulation T-required equity in an account, the client will get a “Reg T call” or a “margin call” from the brokerage firm. The Reg T call will require the doctor to meet the margin requirement through a deposit of cash or securities.

However, if the amount of the margin call is immaterial ($500 or less), the brokerage firm is not required to collect the additional margin requirement. Each brokerage firm will have house rules that further restrict the use and/or the availability of margin accounts.

Since securities in a margin account are held in a street name, a brokerage firm has the right to sell the securities if a Reg T or margin call is not met. Securities held in a street name are simply held for a customer’s account in the name of the brokerage house. If a margin call is not met, a customer will lose the securities in the account that are on margin.

Brokerage Credit Agreements

When opening a margin account, the physician investor must sign a credit agreement, which is not very different from any loan documentation, and a hypothecation agreement, giving the stock-broker the right to pledge the securities to a bank in order to provide for lending capacity. The loan consent agreement allows a brokerage firm to lend securities in a stock loan transaction.

Borrowing Capacity

To determine how much a physician-client can borrow, a series of complicated calculations must be made, and a number of key terms must be identified.

First, the doctor client’s equity in the account must be determined. The equity in the account will be the market value of the account less the debit balance (any outstanding debt). The long market value is the current market price of the securities in the account. The amount available for borrow will be limited by the Reg T restrictions, for example, 50% for securities. Whenever the market value of the securities in a margin account increases, the client will have increased borrowing capacity.

Next and conversely, whenever the value of the securities in a margin account decreases, the client will have a margin call. Excess cash in an account (cash from dividends, interest, or proceeds of sale of securities) will be included in the calculation of the margin call. An account holding cash will have increased buying power that cannot be reduced because of decreases in the market value of the account.

Finally, accounts that fall below the Federal Reserve Board requirements will be restricted in the execution of transactions. Stock exchanges also promulgate rules and regulations that must be complied with. The New York Stock Exchange and the National Association of Securities Dealers require an initial minimum equity of $2,000, or 100% of long market value, and a minimum maintenance requirement of 25% of the long market value [minimums may change without notice].

Assessment

The rules outlined above are for a long [owned securities] margin account. The rules for a short account [borrowed securities] are similar in that an uncovered (or naked) short margin requirement is still 50%, but a covered short sale has a Regulation T limit of 95%.

Conclusion

Have you, or a physician-client, ever been caught in one of these regulatory traps or “margin-calls”, and what was the outcome?

***

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

Global Healthcare Models

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A New Competitive Threat -or- Next-Gen Boon?

By Dr. David E. Marcinko; MBA, CMP™

[Publisher-in-Chief]

Dr. Marcinko

Did you know that some American businesses are extending their cost-cutting initiatives to include offshore employee medical benefits?

And, facilities like the Bumrungrad Hospital in Bangkok, Thailand (cosmetic surgery), the Apollo Hospital in New Delhi, India (cardiac and orthopedic surgery) are premier examples for surgical care.

Recognized Medical Institutions

It’s true!  Both medical facilities are internationally recognized institutions that resemble five-star hotels equipped with the latest medical technology. Countries such as Finland, England and Canada are also catering to the English-speaking crowd, while dentistry is especially popular in Mexico and Costa Rica.

Medical Tourism

Although this medical business model is still considered “medical tourism,” Mercer Health and Benefits was recently retained by three Fortune 500 companies interested in contracting with offshore hospitals and JCAHO has accredited 88 foreign hospitals through a joint international commission.

Assessment

To be sure, when India can discount costs up to 80%, the effects on domestic hospital reimbursement and physician compensation may be assumed to increase downward compensation pressures.

Conclusion

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Margin Call Models

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Characteristics of the Physician-Investor

[By William H. Mears, CPA, JD]

Generally, a brokerage firm will regulate the use of a margin account by managing the physician client’s risk, and by studying the doctor’s assets and credit history. Margin accounts at brokerage firms are watched carefully to make certain that the brokerage firm does not lose money on the individual. But, when investing on a leveraged basis, physician clients should be aware of the magnification of the market impact on their account, whether favorable or unfavorable.

Margin Investor Awareness

The physician or executive margin-investor should:

• Be sophisticated

• Be of high net worth

• Be aware of the risks

• Be told the horror stories involving leverage, and

• Be aware of the increased returns and liquidity created by margin

Model Tax Rules on Margin Transactions

Investment interest expense can be deducted as an itemized deduction by an individual physician investor only to the extent that the individual has investment income defined as taxable interest, dividends, and short-term capital gains.

Long-term capital gains cannot offset investment interest expense. To the extent that a physician-investor has excess investment interest expenses for a year, these expenses can be carried forward to future years.

If the proceeds of a loan are used to invest in tax-exempt debt, the interest expense incurred to carry that debt will not be deductible for tax purposes.

If the proceeds of a loan are used to invest in tax-exempt debt, such as municipal bonds, the interest expense incurred to carry the debt will not be deductible for tax purposes.

Assessment:

Where you aware of these tax implications on margin before reading this post?

What has been your experience with margin calls, and did you originally fit the criteria above? Please opine and comment?

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Conclusion

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Margin Accounts for Physicians

What They Are – How They Work

By William H. Mears; CPA, JD

Margin is defined as the capacity to purchase securities with a loan against an existing position.

A Method of Leverage

Using margin, a physician-investor can increase exposure to potential gains and increase returns.

Conversely, by leveraging current investments, a physician investor can increase exposure to market risk.

Where an investor can reinvest margin proceeds and earn a return in excess of the borrowing cost, the investor has increased total return.

Assessment

However, if a physician investor borrows against a position to invest in securities that decline in value, that investor’s loss is in effect doubled (if the investor had margin up to the legal 50% limit).

Example:

Dr. Prince Price, a dentist who has a $1 million portfolio of low-cost basis securities, would like to invest in a new initial public offering (IPO). He feels certain that the stock of this new initial public offering company will skyrocket.

Prince asks his wife if he can take a home equity line of credit against their house to purchase the stock, but his wife, a financial planner, advises against this strategy. She recommends that Prince take a margin loan against his stock portfolio if he really must invest in the IPO. The margin limit on his account is $500,000, or 50% of the current market value of the portfolio.

Prince decides to invest $500,000 in the new IPO. He purchases 50,000 shares of the $10 stock on the offering.

The new stock closes the first day at $20. In 90 days, the stock is worth $50 a share. Prince sells his stock for $50 a share, taking a short-term capital gain of $40 a share. His financing cost on the margin loan, the 7% for 90 days on a loan principal of $500,000, is his opportunity cost and reduces his net economic gain.

Assessment

At the end of the transaction, Prince calculated his net profit as follows:

Gross proceeds:  $2,500,000

Cost basis:            $500,000

Cost of capital:          $8,749

Net profit:            $1,991,251

Conclusion

What has been your personal experience using, or recommending, margin accounts; please comment?

***

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

Physician Income Maximization

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Next-Gen Rules for Success

Dr. David E. Marcinko; MBA, CMP™

[Publisher-in-Chief]


Money, received by medical professionals as salary in the present, can earn money over a period of time (making the amount ultimately larger than if the same initial sum were received later). And, both the amount of investment return and the length of time it takes to receive that return affect the rate of return (i.e., the value of the return).

This principle, known as the time-value of money (TVM), is a vital compensation issue regarding ultimate wealth accumulation.

Retirement Corpus Estimates

For example, as noted by our firm and according to the March 31, 2005 issue of Physician’s Money Digest, a 47-year-old doctor with $184,000 in annual income would need about $5.5 million dollars for retirement at age 65.

This should serve as a wake-up call that physicians may need to cut personal consumption and professional expenses, and to save more aggressively to harvest the TVM to finance the retirement they’re working toward. Remember, compensation is not the sole arbiter of success. To run your own numbers: http://www3.troweprice.com/ric/RIC/

Therefore, according to Eugene Schmuckler, PhD of the Institute of Medical Business Advisors, Atlanta, GA www.MedicalBusinessAdvisors.com it is not too difficult to imagine the following rules for those innovative doctors wishing to maximize compensation.

Practice Strategies and Wealth Building Rules for Doctors

Rule No. 1: A great idea or competitive advantage can earn generous compensation while still serving the public. It’s a unit-of-one healthcare economy where “Me Inc.” is the standard and physicians must maneuver for advantages that boost credibility among patients and payers.  You must also realize the power of networking, vertical integration and the establishment of prn “medical practices,” which physically or virtually come together to treat a patient or cohort, and then disband when a successful outcome is achieved. 

Rule No. 2:Differentiate yourself among your medical peers. Do or learn something new and unknown by your competitors. Market your accomplishments and let the world know. Be a non-conformist. Doctors should create and innovate; do not blindly follow leaders into oblivion.

Rule No. 3:Challenge conventional wisdom, think outside the box, recapture your dreams and ambitions, and work harder than you have ever worked before. Remember the old saying, “if everyone is thinking alike, then nobody is thinking.” 

Rule No 4:Realize that the present is not necessarily the future. Attempt to see the future and discern your place in it. Master the art of the quick change, and fast but informed decision making. Do what you love, disregard what you don’t, and let the fates have their way with you. Then, decide for yourself if you should be an employer or employee, or adhere to the traditional compensation models.

Assessment

Stay tuned for more on this topic!

We will post some examples of next-generation physicians who are making it under these new rules for success in the modern era.

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Concierge Medicine and Anti-Aging Enthusiasts

A Few Wrinkles in a New Medical Specialty

Staff Writers

For thousands of years, magicians, alchemists, even a few fringe medical practitioners have fueled an unbounded optimism that we can blunt the ravages of time, stay younger for longer, maybe even defeat death itself.

Their pitches have usually hinged on some drug, food or device — everything from electricity to yogurt to surgically installing the gonads of animals into our own bodies — that will slow or reverse the aging process.

And, every decade or so, “anti-aging” promoters grasp onto news coming out of research labs and trumpet those developments as the answer we have all been awaiting.

Conclusion

And so, mainstream docs are joining the concierge anti-aging bandwagon in droves. But, with MD endorsements, is the field really a medical specialty at all, and is it more credible or just more risky? Please decide, opine and comment?

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Bad Medical Debt Expense Crunch

More Patients Fiscally Solvent?

[By Staff Writers]

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First there was the housing and credit crunch for us all, and now there is the bad medical debt expense [BMDE] crunch for the healthcare industry.

As a medical professional, if you are struggling to manage your personal, or practice bad debt load – you’re not alone. But, some of the pain may not be necessary.

The Telagent Study

According to a new study, a good percentage of the self-pay accounts receivable [ARs] write-offs, of hospitals and/or private concierge medical practices could have possibly been collected if those entities tightened their initial financial screening procedures.

The study, which was done by Nashville, TN-based vendor Telagent, analyzed receivables between 90 and 180 days old from January 2007 to January 2008. They drew the records from 40 providers, some of which were existing clients.

Researcher Findings

Researchers found that 30 percent of the self-pay accounts were written off as bad medical debt expenses [BMDEs] because patient’s incomes and net worths weren’t obtained or verified.

However, when Telagent did the research, it found that more than 16 percent of the patients being studied could be classified as having high income and/or high net worth, while another 33 percent had moderate household income or net worth.

And so, Telagent suggested that all of these accounts could have been re-billed or outsourced to collections. Meanwhile, another 17 percent of written-off accounts might have qualified for government assistance or charity care programs, the vendor reported.

Assessment

And so, please contact a credit repair specialist, financial advisor or medical practice management expert if you experience this type of personal, practice or corporate credit crunch. Of course, we always encourage you to seek counsel as lack of retaining same may mitigate against you when pursuing legal patient claims in your court of judiciary venue.

Conclusion

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Locum Tenens Physicians

Alternative Employment Opportunities for Physicians

By Dr. David E. Marcinko; MBA, CMP™

[Publisher-in-Chief]

Dr. Marcinko in New YorkLocum Tenens (LT) is an alternative to full-time employment for most specialties.

Some younger physicians enjoy the travel, while mature physicians like to practice at their leisure. Employment factors to consider include: firm reputation, malpractice insurance, credentialing, travel and relocation expenses (which are all negotiable).

However, a Locum Tenens firm typically will not cover taxes. 

Locum Tenens Compensation

[per 8 hour specialty shift]

 

CRNA

$720 to $880

Family Practice

$400 to $450

Internal Medicine

$400 to $450

Pediatrics

$400 to $430

OB/GYN

$600 to $800

Hospitalist

$520 to $760

General Surgeon

$650 to $750

Orthopedic Surgeon

$800 to $900

Neurosurgeon

$1,300 to $1,400

Anesthesiologist

$1,000 to $1,500

Psychiatrist

$500 to $600

Radiologist

$1,200 to $1,500

Cardiologist

$600 to $750

Source: LocumTenens.com

 

Conclusion

Has anyone used this medical practice employment model; please comment and opine?

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Events-Planner: May 2008

May 2008

Staff Writers

“Keeping track of important health industry meetings, conferences, summits and events”

  • April 27-May 2: InterOp Conference, Health and Business IT; Mandalay Bay Convention Center, Las Vegas, NV.
  • 7-10: Medicaid Rebates, Annual Meeting; Center for Business Intelligence, Orlando, Fla.
  • 13: Optimization of Network Contracts; World Research Group, Chicago, Illinois. 
  • 14: American College of Healthcare Administrators [ACHA]; Annual Convention, Cincinnati, Ohio.
  • 15: Leadership Summit on Medicare; World Annual Conference, Washington, DC.
  • 19: Medicaid Managed Care Conference; World Research Group, Washington, DC.
  • 19: Medicare Advantage Summit; Financial Research Associates, Alexandria, VA.

Please send in your meetings and dates for listing in the next issue of our Events-Planner.

MarcinkoAdvisors@msn.com

 

 

Estate Planning Glossary for Doctors

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Understanding Terms and Definitions

[Staff Writers]

Text BooksAbsolute assignment: A policy assignment under which the assignee receives full control over the policy and full rights to its benefits. 

Administration: The process of handling the affairs of a deceased person’s estate or a trust.

Administrator: The person or financial institution that is appointed to take care of the estate of a deceased person who died without a will; may be known as a “personal representative

Alternate valuation: With certain exceptions, the value of all property includable in the decedent’s gross estate six months after the decedent’s date of death. If an asset is sold or distributed, its sale price or value on the date of distribution is the alternate value. In either case, the sale or distribution must occur within six months of death.

Alternate valuation date: Six months from the date of death.

Ancillary administration: Probate proceedings in another state.

Attorney in fact: The person holding power to act for another under a Power of Attorney document.

Basis: The value subtracted from the net sales price to calculate gain or loss for capital gains tax purposes.

Beneficial interest: A financial or other valuable interest arising from an insurance policy between owners and key employees.

Beneficiary: Usually refers to a person or entity that is entitled to receive something, for example, a beneficiary of an estate or trust, or a beneficiary of life insurance or retirement benefits.

Bypass trust: An estate planning device (also called a credit shelter trust, family trust, or B trust in “AB” plans where the A trust funds for the marital deduction) used to minimize the combined estate taxes payable by spouses whereby, at the death of the first spouse, the estate is divided into two parts and one part is placed in trust usually to benefit the surviving spouse without being taxed at the surviving spouse’s death, while the other part passes outright to the surviving spouse or is placed in a marital deduction trust. A by-pass trust permits a maximum of from $1.5 million in 2005 to $3.5 million in 2009, to transfer to heirs of the spouses on an estate tax free basis under the unified gift and estate tax. The estate tax disappears completely in 2010

Charitable gift annuity: An arrangement whereby the donor makes a gift to charity and receives back a guaranteed lifetime (or joint lifetime) income based on the age(s) of the annuitant(s).

Charitable lead trust: An arrangement whereby the charity receives an income from a trust for a period of years, then the remainder is paid to non-charitable beneficiaries (generally either the donor or his or her heirs).

Charitable remainder annuity trust: A charitable trust arrangement whereby the donor or other beneficiary is paid annually an income of a fixed amount of at least 5% but not more than 50% of the initial fair market value of property placed in the trust, for life or for a period of up to 20 years; one or more qualified charitable organizations must be named to receive the remainder interest upon the death of the donor or other income beneficiaries, and the value of the charitable remainder interest must be at least 10% of the net fair market value of all property transferred to the trust, as determined at the time of the transfer.

Charitable remainder trust: An arrangement wherein the remainder interest goes to a legal charity upon the termination or failure of a prior interest.

Charitable remainder unitrust: A charitable trust arrangement whereby the donor or other beneficiary is paid annually an income of a fixed percentage of at least 5% but not more than 50% of the annually revalued trust assets, for life or for a period of up to 20 years; one or more qualified charitable organizations must be named to receive the remainder interest upon the death of the donor or other income beneficiaries, and the value of the charitable remainder interest must be at least 10% of the net fair market value of all property transferred to the trust, as determined at the time of the transfer.

Claim: Usually refers to funeral expenses, the debts of a deceased person, and expenses of administration.

Codicil: A legal document, which supplements and changes an existing will; generally used to make minor changes to the original will.

Collateral assignment: When a life insurance contract is transferred to an individual or other party as security for a debt. 

Community property: Ten states (Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin) use some form of the community property system to determine the interest of a husband and wife in property acquired during marriage.

Conservator:  An adult person or financial institution appointed by a court, who is responsible for a minor child’s or legally incapacitated person’s property until that minor child becomes an adult or the legally incapacitated person becomes competent to be responsible for his or her own property; may be know as “guardian of the estate.”

Crummy trust: A trust established granting a beneficiary a limited power to withdraw income or principal or both. This power is exercisable during a limited period of time each year and is non-cumulative. The power of withdrawal is generally limited to the amount excludable from gift tax liability under the annual gift tax exclusion or to the greater of $5,000 or 5 percent of the trust property.

Declarations: Statements in an insurance contract that provide information about the property or life to be insured and used for underwriting and rating purposes and identification of the property or life to be insured.

Devise:  Refers to an inheritance of real or personal property under a will, or may mean to dispose of real or personal property by will.

Devisee:  A person or entity designated in a will to receive a devise.

Disclaimant: One who makes a disclaimer.

Domicile: One’s home or permanent residence where the laws of the state of a person’s domicile determine what happens to property at death.

Donee: The recipient of a gift.

Donor: A person who makes a gift; may refer to a person who establishes a living trust.

Dower: The life estate of a widow in the property of her husband.

Durable power of attorney: A legal document appointing another person (the Attorney in Fact) to act on behalf of another, even if that person becomes disabled or incapacitated.

Durable power of attorney for healthcare: A legal document that gives another person the power to make certain decisions regarding healthcare.

ERISA: The acronym for the Employee Retirement Income Security Act of 1974, a federal law that established minimum standards for certain employee benefit plans, especially qualified employer retirement plans.

Escheat: Assigning property to the state when a one dies with no known beneficiaries or heirs.

Estate:  All of one’s assets included in an estate for tax purposes; also used to refer to those items of property that are subject to administration in the probate court.

Estate planning: The process of arranging one’s personal and financial affairs.

Executor: The person or financial institution that is appointed to administer the estate of a deceased person who died with a will; also known as a “personal representative.”

Family Limited Partnership: A form of holding property combining some of the advantages of holding property as a corporation with some of the advantages of owning property in a partnership.

Fiduciary:  From the Latin word meaning trust and confidence and used to refer to a person (or entity) that serves in a representative capacity; personal representatives, trustees, guardians, conservators, and agents under powers of attorney are all fiduciaries; to stand in a position of confidence and trust with respect to each heir, devisee, and/or beneficiary.

Formal Probate: A proceeding before a probate judge to determine whether a decedent left a valid will.

Future interest: An ownership interest in property in which unlimited possession or enjoyment of property is delayed until some future time

Generation skipping transfer: A transfer of property, usually in trust, that is designed to provide benefits for beneficiaries who are two or more generations younger than the generation of the grantor.

Generation skipping transfer tax: A transfer tax generally assessed on transfers to grandchildren, great grandchildren and others who are at least two generations younger than the donor.

Generation skipping transfer tax exemption: An exemption from generation-skipping tax for transfers by an individual either during life or at death.

Generation skipping trust: Any trust having beneficiaries who belong to two or more generations younger than the grantor.

Grantor: A person that established a living trust. It is also used to refer to one who is transferring real estate in a deed.

Gross estate: The total property or assets held by a person as defined for federal estate tax purposes.

Guardian: An adult person appointed by a surviving parent in his or her will or by a court, who is responsible for a minor child or legally incapacitated person’s personal care and nurturing.

Heir: Person, who inherits property from the estate of a deceased person who died without a will.

Holographic will: A will entirely in the handwriting of the signer. Although valid in some states in some circumstances, most lawyers advise strongly against such wills

Incapacitated person: A person who is impaired by reason of mental illness, mental deficiency, physical illness or disability, advanced age, chronic use of drugs, chronic intoxication, or other cause (except minority) to the extent of lacking sufficient understanding or capacity to make or communicate responsible decisions.

Inter vivos trust: A living trust.

Intestate:  Refers to dying without a will.

Irrevocable trust: A trust that can no longer be amended or revoked by anyone; most revocable trusts become irrevocable at some time, for example, when the person who established the trust dies.

Joint and survivor insurance: A policy underwritten on the life of two persons, usually husband and wife or business partners.

Joint tenancy with right of survivorship: A form for holding undivided title to property among more than one person. When one of the co-owners dies, the other becomes the sole owner of the property.

Legally incapacitated person: One determined by a court as not capable of handling personal and/or financial affairs

Living trust: A trust that one establishes during one’s lifetime which is not part of one’s will, but is usually established by a separate written trust agreement; an “inter vivos trust” also sometimes referred to as a revocable living trust.

Living will: A legal document stating that the signer does want to be kept alive by artificial or extraordinary means, when there is no expectation of recovery from a physical or mental disability. The enforceability of such documents is unclear in absence of applicable legislation.

Marital deduction: A deduction allowing for the unlimited transfer of any or all property from one spouse to the other generally free from estate or gift tax.

Per stirpes: A way of distributing an estate so that the surviving descendants will receive only what their immediate ancestor would have received if he or she had been alive at the time of death; state laws vary.

Personal representative: The person or financial institution appointed by the probate register or the court to administer a deceased person’s estate

Pour over will: This is a will used to transfer (pour over) into a trust any property that is left in a person’s estate after death.

Power of appointment: A right given to another in a written instrument, such as a will or trust that allows the other to decide how to distribute your property. The power of appointment is “general” if it places no restrictions on who the distributees may be. A power is “limited” or “special” if it limits the eventual distributee.

Power of attorney: A written legal document that gives an individual the authority to act for another. If the authority is to act for the principal in all matters, it is a general power of attorney. If the authority granted is limited to certain specified things, it is a special power of attorney. If the authority granted survives the disability of the principal it is a durable power of attorney.

Primary beneficiary: Beneficiary of a life insurance policy who is first entitled to receive the policy proceeds on the insured’s death.

Probate:  The process of determining if the deceased person left a valid will and admitting that will to probate. When a will is “admitted to probate” it means that the probate register or the probate judge has signed a paper that says the will is admitted to probate. The paper the probate register signs is called a “register’s statement” and the paper that the judge signs is called an “order.”

Probate register: An employee of the probate court authorized to perform certain acts such as the admission of a will to probate in an informal proceeding.

Proceeding:  Involves the court in some type of activity such as the admission of a will to probate in an informal proceeding conducted by the probate register (this may be done by mail and does not involve a court hearing) or in a formal proceeding conducted by the judge in a hearing in the courtroom after proper notice to interested persons.

Qualified disclaimer: A written refusal to accept property from a decedent (by will, by the laws of descent and distribution, by contractual provision, or by beneficiary designation), made within nine months of the decedent’s date of death and delivered to the holder of legal title in such property. This is a common way to transfer property without paying a gift tax.

Qualified domestic trust: A trust arrangement which allows property transferred to a surviving spouse who is not a U.S. citizen to qualify for a special exclusion in lieu of the regular marital deduction; and which ensures that, at the death of the surviving spouse who is not a United States citizen, the assets placed in such a trust will incur federal estate taxation since the tax was avoided at the first spouse’s death

Qualified plan: Plans that qualify for favorable tax treatment under the Internal Revenue Code, and are subject to restrictive rules and extensive regulations. Qualified plans are secured by a trust, as opposed to a nonqualified plan.

Qualified terminable interest property: Property that, were it not “qualified,” would not qualify for the marital deduction in the decedent’s estate.  Because the qualified interest left to the surviving spouse terminates at his or her death (and there are no other rights that would result in inclusion of that property in the surviving spouse’s gross estate). QTIP does qualify for the marital deduction in the decedent’s estate and will be included in the surviving spouse’s gross estate, provided the proper election is made by the decedent’s personal representative.

Rabbi Trust: A trust, owned by the company that holds assets to help meet non-qualified benefit payments. Rabbi trusts are taxable trusts, and trust assets must be available to corporate creditors in the event of a bankruptcy.

Revocable living trust:  A living trust or inter vivos trust that can be amended and revoked, usually by the person who established the trust; the trust may become irrevocable when the one who can amend or revoke the trust dies or becomes incompetent.

Settlor: A person who established a living trust.

Special-use valuation: Pursuant to Code Section 2032A, special-use valuation provides that the “highest and best use” value may be reduced to an appraised “special use” in the gross estate up to $900,000.  This applies to real property used in a farming operation or a trade or business that meets certain requirements, and where certain pre-death qualifications are met and post-death commitments are made.

Sound mind: The testator possesses sound mind for the purposes of making a will if he or she: (1) understands the nature of the act of making a will or codicil thereto, (2) knows the extent and character of the property subject to the will, (3) knows and understands the proposed disposition of that property, and (4) knows the natural objects of his or her bounty (i.e. his or her heirs). Whether the testator was of sound mind is tested (determined) by the state of the testator’s mind at the time the will or codicil is executed (written and signed) and varies by state.

Supervised probate:  A proceeding for the administration of a deceased estate in which there is considerable court involvement; papers that have to be filed with the court and various types of hearings before the probate judge

Tenants in common: A form of asset ownership in which two or more persons have an undivided interest in the asset and the ownership shares are not required to be equal

Testamentary trust: A trust that is part of a person’s will.

Testate:  Refers to dying with a will.

Testator: A person who makes a will.

Trust:  An arrangement, usually established by a written document, to provide for the management and disposition of assets. It normally involves three parties: the person who establishes the trust (sometimes called a donor, grantor, settlor, or trustor), a trustee, and one or more beneficiaries.

Trust declaration [trust instrument]: A document defining the nature and duration of the trust.

Trustee:  An adult individual or financial institution that is designated to be responsible for the administration of a trust. There may be more than one trustee (co-trustees), and an individual and a financial institution may serve as co-trustees.

Trustor: A settlor.

Uniform gifts [Transfers] to minors act [UGMA or UTMA]: A method to hold property for the benefit of a minor, which is similar to a trust but the rules are governed by state law.

Will: A written document which disposes of one’s property at death. The will also is used to nominate personal representatives. It may also be used to express burial and funeral instructions, make anatomical gifts, and designate a guardian and conservator for a minor child or a legally incapacitated adult. 

Conclusion

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AIM Report on LOS

Briefer Hospital Stays not Always Better

Staff Writers

Briefer hospitalizations are not always best, according to a recent new study published in the Archives of Internal Medicine [AIM].

The PHCCC Study

A study of 15,531 patient medical charts, using hospital billing data from the Pennsylvania Health Care Cost Containment Council [PHCCCC], found that patients diagnosed with a pulmonary embolism [PE] who were discharged after four or fewer days in the hospital, were significantly more likely to die than those who remained in the hospital for five, six or more days. The study was also reported in the Philadelphia Inquirer newspaper.

Assessment

The study sought to determine whether new guidelines that recommend patients identified as being at low-risk for complications be discharged more quickly, were working as intended?

Conclusion

Unfortunately, they apparently weren’t as more than half of those discharged after four days or less had more severe cases.

Now, can this be described as the “ultimate policy in medical cost-containment?” Please comment.

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Disease Management Economics

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The Medicare Health Support Program

[By Staff Writer]

Doctor

The Medicare Health Support Program [MHSP] is a three-year experiment to determine if disease management [DM] can limit pathology and reduce expensive hospital visits for patients with chronic conditions. These typically include congestive heart failure, asthma and diabetes.

But, a new report suggests that this once highly-touted program may actually cost more than it saves.

Preliminary Outcomes

Since 2005, the Centers for Medicare and Medicaid Services [CMS] paid eight outside companies about $360 million to deliver DM services from nurses who periodically called patients to check on their diets, drug use, blood sugars, exercise patters and doctor appointments, etc.

Now, Medicare is still trying to figure out whether the program was able to keep folks healthier. Unfortunately, the New York Times reported that preliminary data indicates DM is unlikely to save money.

Mixed Opinions

Of course, at least two companies that specialize in disease management, Healthways and Health Dialog, are pressing Medicare to continue the project beyond the end of it term, saying the government mishandled the experiment.

But, CMS says the program so far has not reduced medical bills enough to offset the fees the companies are charging the government [about $2,000 per patient/per year].

Assessment

Final MHSP accounting is likely to come next year. And so, it seems that in this case, education and DM might not be “the best prescription.”

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Conclusion

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The Sheffield Group

Candidates for Hire

By Amy Kilcoyne
Director of Placement Services

Sheffield Group                                                  

 

Candidate 1

Siebel Maintenance Release and Support

Experienced in Siebel Sales, Call Center, eCommunication and eFinance modules. Experienced in Siebel integration with external and legacy applications. Successfully undertaken Siebel eFinance 7.5.3 implementation for Siebel Professional Services. Siebel Batch Integration (EIM) team. Expertise in Data Migration between Siebel 7.5 and Siebel 7.8. Experience in ETL tool like Informatica 7.1 and DTS. Participated in Siebel TAM reviews.

Candidate 2

JD Edwards EnterpriseOne

Technical experience in JD Edwards EnterpriseOne products including product versions including 8.10, 8.9, B7334, B7333 (Xe), B7332 and B733 technologies. Application design experience in JD Edwards World product (VersionA7.3 Cum 12) software with project management experience in Electronic Data Interchange (EDI) configuration and a technical knowledge with the Gentran Server NT, Gentran Integration Suite, Gentran Director, Inovis (Harbinger) TLE, GE Information System. Experience primarily focused in the areas of Design, Development, Implementation, Migration, Maintenance and Production support.

Candidate 3

Lawson ERP Analyst

Conduct discovery sessions of HR and Payroll processes; analyze user functions and publish recommendations for process improvements. Provide documentation and lead training sessions on improved processes. Improvements focused on hiring process, benefits automation rules and job and position audit. Assist organization in cyclical upgrade of Lawson applications 8.02 to 8.03.

Candidate 4

PeopleSoft Financials / SCM / HRMS

PEOPLESOFT: PeopleTools 6.X/7.X/8.X, PeopleCode, SQR, Query/Crystal, nVision, Data Mover, Application Engine, Upgrade assistant, Change assistant, Work flow, EDI, App Messaging, Integration Broker, HRMS (HR, Payroll, Base Benefits, Ben Admin, Time and Labor, e-Applications), Financials (AP, GL, AM), SCM (Purchasing, Inventory).

Candidate 5

Senior Lawson Specialist

Successfully led the technical team for the PeopleSoft to Lawson Human Resources/Payroll (7.2.4) conversion for a large Corporation; Successfully developed numerous in-depth Technical Designs for Lawson Interfaces, Batch Reports, Conversions, and Online programs; Interfaced information between the Technical team and Client department personnel.

 

The Sheffield Group, 1 Westbrook Corporate Center, Suite 910, Westchester, IL  60154 or 866-539-9497.

 

Six-Sigma in Healthcare

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Brief History of a Process Improvement Methodology

[By Daniel L. Gee; MD]

The concepts of process improvement [PI] and total quality management [TQM] emerged after WW-II, when the Japanese auto and electronics industries, in a quest to capture the US marketplace, virtually re-coined the term “Made in Japan” from a trademark of inferiority, to a worldwide stigmata of quality and endurance.

First Used in the Automobile Industry

Toyota Motor Company soon became the ideal model to emulate by US companies such as Ford, Motorola and later, General Electric. The Deming model and subsequent Total Quality Improvement/Continuous Improvement [TQI/CI] management initiatives, copied from Japan, evolved with a passion when brought to America. The search for best practices led to the popularity of accolades such as The Malcolm Baldridge Quality Award; an award that became Olympic gold to a company’s marketing campaign.

The quality envelope was pushed further in the 80’s when Motorola Corporation augmented traditional improvement tools with a systematic problem solving method [think problem orientated medical record] based on rigorous statistical analysis. This evolution of a process-oriented problem solving approach soon became the genesis of what is now known as the Six Sigma Methodology.

Goals

The ultimate goal of the Six Sigma model is to find the root causes of variation in a business process, such as healthcare delivery, find the problems that created the variations, determine ways to measure them, and control (or eliminate) the process variations; with the intent of process improvement that has long-term sustainability. The achievement of quality to its greatest extent would be a measured in a quantifiable metric of “sigma”. The greater the sigma level reached, the more efficient the process. 

Six-Sigma Possibilities in Healthcare Delivery

In reaching the six-sigma level, there is almost no variation from the most desired efficient way of doing things. Is this ultimate goal of perfection too ambitious a goal for healthcare? Perhaps!

For service industries in general, and the healthcare industry, specifically, the goal of virtual perfection may be impossible by virtue of the significant number of variables involved.

But, one must consider the implications of a less than almost perfect system.

Mathematical Definition

The term “sigma” is from the 18th letter of the Greek alphabet and represents the statistical symbol for standard deviation. In statistics, a standard bell shaped normal population distribution, one sigma represents a percentage variation from the mean, and two- sigma represents an even greater variance, and so on.

Variations of Virtual Perfection

In Six Sigma vernacular, the bell shaped curve becomes a representation of variation itself; in other words, achieving a “six sigma” process means virtual perfection in the upper standard limits of being 99.99966% good.

Assessment

And, so is the ideal of six-sigma possible in medicine today; or are there just too many variables in the delivery process? How does your perspective change as a physician, CEO, insurance company or patient?  

In other words: Is medicine really different?

Conclusion

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Doctor Economic Profiling

Q: What is physician economic profiling?

My hospital is considering this investigational methodology and many of us are naturally suspect. Can anyone shed some insight on the matter? Is it for real; punitive, instructional, collegial or are we all just paranoid; and/or any or all of the above! Thanks in advance. 

Dr. Joseph Martin Battalion                                                                             South-East Alabama

 

Medicare Part D Electronic Prescribing

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New Four Part Standards

[By Staff Writers]

The Centers for Medicare & Medicaid Services [CMS] finally published regulations which establish Part D electronic prescribing standards for four types of information: 

  • formulary and benefits,
  • medication history,
  • fill status notification, and
  • identification of individual health care providers.

All Need Not Comply

Drug prescribers, dispensers and plan sponsors are not required to implement e­-prescribing under Part D.

But, those who do must comply with the new Medicare standards when using e-prescribing to send prescriptions and prescription related information for covered drugs prescribed for Part D eligible individuals.

Assessment

These new standards supplement the 2006 “foundation” standards that first addressed the exchange of Part D information related to eligibility inquiries and responses; new prescriptions; and changes, renewals, and cancellations of existing prescriptions; according to the Health Industry Watch, in Washington, DC.

Conclusion

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On Physician Peer Review

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New Era Risks

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]insurance-book

The Center for Peer Review Justice is a group of physicians, podiatrists, dentists and osteopaths who have witnessed the perversion of medical peer review by malice and bad faith.

Raison D’etre

Like the American Association of Neurological Surgeons [AANS], they have seen the statutory immunity, which is provided to “peers” for the purposes of quality assurance and credentialing, used as cover to allow those “peers” to ruin careers and reputations to further their own, usually monetary agenda of destroying the competition.

Cause and Goals

Therefore, the group is dedicated to the exposure, conviction, and sanction of doctors, and affiliated hospitals, HMOs, medical boards, and other such institutions, that would use peer review as a weapon to unfairly destroy other professionals.

Assessment

www.PeerReview.org is a rallying point and resource center for any medical professional that finds himself in the midst of an unfair and bad faith attack by unethical, malicious “peers”.

Conclusion

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Expert Witness Risks

A New Emerging Modern Peril

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

insurance-bookIn the past, a physician expert witness for the plaintiff was merely an opposing opinion by a learned and/or like colleague. Today, it is becoming a risk management minefield as the AMA and other groups are urging state medical licensing boards to police expert witnesses, which might require expert testimony be considered the practice of medicine.

The AANS

This seems especially true with the Rolling Meadows Illinois based American Association of Neurological Surgeons (AANS).

Feuding Members

Currently, a member of the AANS can file a complaint against any fellow member for testimony as either an expert witness for the plaintiff, or defense witness for the doctor. A committee of four then reviews the court records and requires the accuser to face the accused in a formal review. Sanctions range form three months to a year, to complete expulsion from the association. In the past twenty years, the program has reviewed 27 cases all involving plaintiff testimony. One led to expulsion and ten to suspension.

Assessment

Since 2001, the courts are beginning to take the AANS process seriously. After years of operations without strong legal backing, the program was upheld by the 7th Circuit Court of Appeals, in Chicago by a neurosurgeon whom the group suspended in 1997. So always remember, if you testify falsely, or too far from the norm, you may be at risk.

Conclusion

And so your thoughts, opinions and comments are appreciated?

Speaker: If you need a moderator or a speaker for an upcoming event, Dr. David Edward Marcinko; MBA – Editor and Publisher-in-Chief – is available for speaking engagements. Contact him at: MarcinkoAdvisors@msn.com

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Failure 2 Rescue

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Attention “Condition H” 

[Staff Reporters]

For the fifth straight year, an analysis of errors in our nation’s hospitals found that the most reported patient safety risk is a little-known, but always-fatal, problem called “failure to rescue.”

Definition

The term Failure-To-Rescue [FTR] refers to cases where hospital doctors, nurses or caregivers fail to notice symptoms, or respond adequately or swiftly enough to clinical signs, when a patient is dying of preventable complications in a hospital.

The situation is not new. The term “failure to rescue” was first coined in the early 1990s by Dr. Jeffrey H. Silber, director of the Center for Health Outcomes and Policy Research [CHOPR]. He was looking for a way to characterize the matrix of institutional and individual errors that contribute to patient deaths.

Call ‘Condition H’

Today, to help mitigate the FTR problem, a growing numbers of hospitals across the country allow patients to speak up by activating ‘Condition H,’ a code that summons immediate help.

Assessment

In a Condition “H “alert, patients call the same emergency number that doctors and nurses use.

MORE: Before Code Blue: Who’s minding the patient? [Little-known ‘failure to rescue’ is most common hospital safety mistake.  www.msnbc.msn.com/id/24002334

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Doctor Debtor’s [Brazen Few Increasing?]

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Education and Other Debt-Load Risks

[By Staff Writers]biz-book

Managed care is a prospective payment method where medical care is delivered regardless of the quantity or frequency of service, for a fixed payment, in the aggregate. 

Desperate Students Doctor’s and Healthcare Professionals

Among the many reasons why doctors are financially unhappy, some might even say desperate today, is because a staggering medical student loan debt burden of $100,000-$250,000 is not unusual for new practitioners. For example, the federal Health Education Assistance Loan (HEAL) program reported that for the Year 2002-03, student numbers and default totals include*: 

  • Allopathic Medicine 194, $20,495,446
  • Chiropractic 926, $74,781,238
  • Clinical Psychology 40, $3,051,546
  • Dentistry 342, $40,158,139
  • Health Administration 4, $285,543
  • Optometry 29, $2,481,808
  • Osteopathy 39, $4,988,389
  • Pharmacy 33, $1,320,457
  • Podiatry 127, $17,797,564
  • Public Health 7, $569,733
  • Veterinary Medicine 1, $32,602

Total for all disciplines: 1742, $165,962,465

And, the totals are even higher in 2008

Source: www.defaulteddocs@hrsa.gov

Other Debts

Significant miscellaneous debts incurred by doctors usually include “excessive-wants” more than “actual-needs”. Such extravagances include automobiles, homes, vacations, clothes and depreciating assets or “toys.”

Often, doctors even reckon they are immune from typical small claims debts, or court collection actions, by virtual of their education and career. For example, alleged non-payment of the following de-minimus private debts have allegedly been freely admitted by these doctors for illustrative purposes, despite prior threats of credit agency reporting and other perfectly legal fair debt collection tactics:

Public Non-Payment Rebuke:

  • Mark Hill, MD; Pulaski, New York
  • Tom Pfennigwerth, DPM; Seneca, PA

Assessment

Of course, one wonders, perhaps ironically, about the billing and AR collection practices of such miscreants in their own medical offices; ethics, legality, morality?

Conclusion

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Emergency Room and On-Call Risks

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Next-Gen Doctors Opting-Out

Dr. David E. Marcinko MBA - MSLBy Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

Of course, it’s getting more expensive these days to take hospital call as physicians are electing not to take this responsibility because of decreased reimbursement rates. Others opt-out because of a desire to spend more time with family, and/or scheduling conflicts. And, let’s not forget the liability concerns.

Historical Review

But, back in the old days, I recall eagerly signing up for call to make a few extra bucks [it was a very competitive proposition back then], as I started my fledgling practice.  About a decade later, I didn’t make much on-call money any more, but continued my rotation and chalked it all up to societal “pro-bona care”. And, the increased service visibility still garnered me a few lucrative patient referrals. Then, it became a financial and out of office-time loss, and ultimately a great liability headache. Fortunately, I could afford not to do it any more; and quit. Let the younger guys and gals “pay their dues”, I reasoned.

Legal Issues

Now today, there is a growing revolt of specialists against hospital on-call duties that threatens to violate Federal law and lose status as trauma centers. Specialties most likely to refuse include plastic surgery, ENT, psychiatry, neuro-surgery, ophthalmology and orthopedics. And, refusing to respond to assigned call is a violation of Federal law and carries fines as much as $50,000 per case.

Opting –Out

In contrast, refusing to sign up for call does not violate the law, and more physicians are taking this option. The problem opting-out problem is especially acute in California where hospitals are combating the issues with compensation, reporting the miscreant docs to the authorities, or threatening to remove them from staff completely.

Assessment

In turn, doctors are fighting back with lawsuits.

Other Supporting Opinions

Essayist Jeff Goldsmith,President of Health Futures Inc, and Associate Professor of Public Health Sciences at the University of Virginia*recentlyopined that:

“We can expect intensified conflict with private physicians over the hospital’s 24-hour mission and service obligation, specifically providing physician coverage after hours and on weekends. Younger physicians have shown decreased willingness to trade their personal time to cover hospital call in exchange for hospital admitting privileges as their elders did. Those admitting privileges are either less essential or completely unnecessary in an increasingly ambulatory practice environment. The present solution is for hospitals to pay stipends to independent practitioners for call coverage or to contract with single specialty groups large enough to rotate call internally.” 

NOTE: * Goldsmith, Jeff: The Long Baby Boom, by Johns Hopkins University Press, May 2008.

Conclusion

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National Health Insurance [NHI] Survey

MDs Now Favor Reform – According to AIM

Staff Reporters

According to a study just released in the Annals of Internal Medicine [AIM], a majority of doctors now favor national health insurance [NHI] which represents a thought shift over the past five years.

Survey Results

The study conducted last year found that 59 percent of surveyed physicians supported “government legislation to establish national health insurance,” while 32 percent opposed it, and 9 percent remained neutral. In 2002, a similar survey found that 49 percent of physicians supported the concept, while 40 percent opposed it, reported the Washington Post.

Support Varies Among Specialists

The strongest support for NHI was among psychiatrists (83 percent), pediatric sub-specialists (71 percent), emergency room physicians (69 percent), pediatricians (65 percent), internists (64 percent) and family physicians (60 percent). About 55 percent of general surgeons support NIH or double the level of support in 2002.

NIH Definition

Typically, national health insurance plans involve a single, federally administered social insurance fund that guarantees health coverage for everyone, while in most cases these plans eliminate or substantially reduce the role of private insurance companies.

Conclusion

And so, your thoughts and comments on the above report are appreciated.

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Hospital IRS Form 990 Tax Burden

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New Schedules – H and K – for Non-Profits

[By Dr. David Edward Marcinko; MBA, CMP™]dem21

As quarterly premium print-subscribers to Healthcare Organizations [Financial Management Strategies] know, the IRS redesigned Form 990 last year.

Form 990 Burden

The new Form 990 is controversial among not-for-profit hospitals (Schedule H) and tax-exempt bond issuers (Schedule K). Schedule H requires hospitals to provide new information on operations, including community benefit levels, charity care, aggregate bad debt expense, Medicare shortfall information and more.

Input Request

Now, the IRS is asking for healthcare sector input to promote uniform reporting, and make sure the form is simple enough for public use. So, through June 1 of this year, Uncle Sam is accepting comments on Form 990 draft instructions. And, the agency will post all comments on its website.

Hospital

FORM: IRS Form 990

Conclusion

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Top Ten Brand-Name Elder Drugs

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Top 10 Brand-Name Drugs Ranked by Prescriptions Filled in PACE*

Mature Woman

Rank

Drug Name

Type of Drug

Median Negotiated Monthly Price

1

Lipitor

Cholesterol

$79.12

2

Plavix

Cardiovascular

$125.91

3

Protonix

PPI

$117.67

4

Nexium

PPI

$145.09

5

Fosamax

Osteoporosis

$79.15

6

Diovan

Cardiovascular

$57.54

7

Aricept

Dementia

$158.49

8

Zetia

Cholesterol

$87.06

9

Actonel

Osteoporosis

$83.60

10

Prevacid

PPI

$146.41

*PACE = Pennsylvania’s Pharmaceutical Assistance Contract for the Elderly (PACE) program

Data Source: PACE utilization data and Hargrave et al. analysis of data on pricing from the CMS Medicare Prescription Drug Plan Finder on Medicare.gov, for the Kaiser Family Foundation.

Publication: Medicare Part D 2008 Data Spotlight: Ten Most Common Brand-Name Drugs, Kaiser Family Foundation, April 2008. http://www.kff.org/medicare/7749.cfm

Assessment

The above is self-explanatory.

Conclusion

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“Executive-Post” Nominations Sought

Seeking Exceptional Advisors and Consultants  

Has your personal financial planner, or corporate financial management advisor, been invaluable to you, your family, medical practice, clinic or healthcare entity? How about that special practice management consultant or health economics business expert? Would you like to give your expert-of-choice the recognition he or she deserves?

The “Executive-Post” is now seeking nominations for our annual list of the best advisors serving physicians, nurses, hospital administrators, medical executives and all stakeholders in the healthcare industrial complex; whether serving needs of a personal, business or corporate nature. We highlight the best minds in areas ranging from physician focused planning, health economics and business management, to enterprise-wide financial management. All are to be listed in a future feature-package on the “Executive-Post!”

CLIENTS who wish to recommend a financial advisor or management consultant for consideration are asked to submit a nomination by December 31, 2008.

ADVISORS who wish to be considered must complete an application form by December 31, 2008.

INFO: Additional information is available MarcinkoAdvisors@msn.com

 

 

Physicians-as-Employees [The Benefits]

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On Tax Free Benefits

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

There are three categories of benefits that hospitals typically provide to their physician [hospitalists], medical, nursing or technical employees; or clinics, office and medical practices provide to their employed staff:

Those that are totally income tax-free; some are still taxable for FICA (Social Security and Medicare).

Those that are not taxed at their full economic value, or are taxed at a special preferential rate.

Those where a tax liability is not incurred until sometime after the employee receives the benefit.

1. Tax-free Benefits

The following are benefits typically provided that are tax-free to physicians and hospital employees:

  • Group term life insurance
  • Accident and health benefits
  • Moving expense reimbursement
  • Dependent care expenses
  • Meals and lodging
  • Adoption expense assistance
  • Use of athletic facilities
  • Employee awards
  • Educational assistance
  • Qualified employee discounts
  • No additional cost services
  • Retirement planning service
  • De minimus benefits
  • Qualified transportation benefits
  • Working condition benefits
  • General fringe benefits
  • Miscellaneous specialized provisions

All tax-free benefits have varying conditions, which can include:

  • What constitutes a benefit to qualify (as defined by the IRS)
  • What constitutes an employee to qualify; the most commonly restricted employee types are S corporation employees who owned greater than 2% of the corporation’s stock in the taxable year, highly compensated employees and key employees.
  • Which employees are excluded
  • Monetary caps
  • IRS reporting requirements
  • Exclusion from what type of taxes (income, FICA and FUTA)

Assessment

And so, what has been your experience with the above; is the tax-free benefits package increasing or shrinking, please comment and opine?

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Conclusion

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Section 83(B) Elections

Considerations for Hospital Employees

Staff Writers 

Internal Revenue Code § 83(b) allows a hospital or other employee who receives employer stock on a tax-deferred basis to be taxed immediately in the year the stock is transferred, regardless of the presence of a substantial risk of forfeiture.

If the employee makes such an election, any subsequent appreciation is not taxable as compensation. Once made, the IRS must approve any change you may want to make.

Indications

There are several reasons why a taxpayer might want to make such an election.

  • First, absent a Section 83(b) election, any appreciation in the value of the stock that occurs after transfer will then be subject to ordinary income taxation at the time of vesting for the full amount by which the then-appreciated fair market value exceeds the amount paid, if any.
  • If a Section 83(b) election is made, any post-transfer appreciation will not be taxed until the stock is sold and will only be subject to capital gain taxation on its ultimate sale.
  • If one expects the restricted property to appreciate substantially before vesting and one plans to hold the property for a long time after it vests, such delay in taxation of the appreciated amount may be a significant benefit.
  • If the taxpayer holds the property until death, any post-transfer appreciation will escape income taxation entirely.

Contra-Indications

  • The main disadvantage of the Section 83(b) election is the triggering of current taxation for the excess of fair market value (without regard to any restrictions or risk of forfeiture) over the amount paid.
  • In addition, the Code provides that, if a Section 83(b) election is made before the lapse of the restrictions and such property is subsequently forfeited due to the failure to meet the conditions, no deduction can be made.
  • Furthermore, if a Section 83(b) election is made and the property later declines in value; only a capital loss is allowed.
  • Finally, the employer receives no deduction for any later appreciation before vesting, nor will the hospital or company be able to take a deduction in the case of transferred stock on any dividends after the transfer that are paid to the employee.

Assessment

The election consists of a written statement, mailed to IRS center where you file your return, within 30 days of the triggering transaction.  It must include everything about the transaction.

Conclusion

Your comments, experiences and opinions on this election are appreciated.

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Physicians, Nurses and Healthcare Executives Only

WHERE KINETIC OPPORTUNITIES AND POTENTIAL ENERGY CONVERGE

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Has your medical practice, clinic or healthcare career plateaued? Are you looking for the path to economic freedom or corporate advancement in the healthcare industrial complex, your own medical practice or professional medical specialty?

Finding the right combination of career success and monetary rewards can be challenging in the increasingly competitive healthcare sector!

www.HealthcareFinancials.wordpress.com may be the solution! Read, review, rant, rave, learn and opine about the converging medical practice, financial and management industries at home, the hospital, clinic or office. With more than fifty different categories, and hundreds of informative posts and follow-up comments by leading national experts, there is sure to be something of vital interest to all stakeholders. Public and private threads are available. All by just signing up for a free online subscription!

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www.HealthcareFinancials.wordpress.com offers solutions. Connect with health management consultants, accountants and financial advisors. Post your opportunities and needs in public or private. Read comments, post advertisements, make inquires and connect with like minded physicians, executives, nurses, advisors, financial planners and consultants. All by just signing up for a free online subscription!

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WHERE KINETIC OPPORTUNITIES AND POTENTIAL ENERGY CONVERGE

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Has your financial advisory or accounting practice, RIA or other financial services career plateaued? Are you looking for the path to economic freedom or corporate advancement in the financial services and medical management industry?

Finding the right combination of career success and monetary rewards can be challenging in these increasingly competitive sectors!

www.HealthcareFinancials.wordpress.com may be the solution! Read, review, rave, rant, learn and opine about the converging medical management and physician-focused financial planning industries at home, or in the office. With more than fifty different categories, and hundreds of informative posts and follow-up comments by leading national experts, there is sure to be something of vital interest to all stakeholders. Public and private threads are available. All by just signing up for a free online subscription!

ßßß Rainmakers

Physicians, medical and healthcare executive are looking for personal financial planning and medical management advice to help take them to the next level? Do these desperate doctors, nurses, medical administrators and healthcare executives know how, and where, to find you? 

www.HealthcareFinancials.wordpress.com offers solutions. Connect with medical professionals, nurses, physicians and other advisors. Post your questions, concerns, opportunities and needs in public or private. Read comments, post advertisements, make inquires and connect with like minded doctors, healthcare executives and medical client prospects. All by just signing up for a free online subscription!

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Of Hospitals and Airlines

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An Opposing Fixed-Cost Structure Argument

Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

As regular readers of the Medical Executive Post know, I am a big fan of hospitalist extraordinaire Robert Wachter MD, from UCSF. I have referenced Bob in several of my own publications and books on www.MedicalBusinessAdvisors.com and print periodicals, etc. In fact, Bob is the guy who coined the very term, hospitalist, and helped launch the movement; or hospital based revolution. 

Fixed-Cost Structure

Now, here’s my take on the oft-used airline analogy – and Bob is pretty much correct on this point. A hospital is different than an airplane. It is very different regarding its cost structure and business model.

For example, Bob states in this post:

Link: www.thehealthcareblog.com/the_health_care_blog/2008/03/average-time-of.html

 “Let’s start by appreciating where this [airline analogy] comes from. Many hospitals, including mine, tend to run full – given the huge fixed costs of operating a modern hospital, being full is probably the only way you can be profitable, just like the airlines.”

And, he also says:

“Queuing theory (don’t tell me you’ve forgotten your queuing theory!) tells us that, when you’re full, you should look for fundamental choke points and do your best to relieve them.”

Well, true enough, but there is more to it than just queuing theory and capacity, it’s also about human psychology and behavioral theory, as well. So let’s examine the airline analogy, relative to hospital under/over capacity and health plan contracts and Medicare reimbursements for a moment. And then, let’s examine the human condition.

Why?

Because most hospitals ought not [should not] be operating at full capacity, and maybe the best patient care is driven by demand (needs) – and not the supply driven (wants) of administrators, stockholders and private [physician owned] hospitals and/or other stakeholders (i.e. hospitalists?).

Of course, a pragmatic caveat worth noting is that that even not-for-profit entities are affected by similar funding and capacity issues relative to foundations, grants, donative intent, giving; etc. And, I am certainly a humane capitalist at heart.

The Faux Airline Scenario

Still, here is my take on the ailing airline industry model.

If an airplane has a single remaining seat, it can be sold at a last-minute discount, and still make a profit, since the fixed costs are covered and the plane will fly regardless of under capacity.  Therefore, hospital administrators and MBAs argue that they should strive to fill every bed, all the time – right? This might be called the fix-cost scenario. But, it is a faux one.

Again … Why?

It’s because MBAs have a cost-volume-profit-analysis (CPVA) or merchandising / manufacturing bias from B-school that is not so easily transferable to the medical services sector. Bob rightfully illustrates this with his everyday examples as a patient-discharging hospitalist.

Now, further appreciate that the less than full airplane may make a return flight at full business fare to recoup the discount loss in our example.

The Healthcare Difference

Not so – in the services or healthcare sector, however! Once locked into a managed care plan, Medicare RRG payment schedule or new MS-DRG reimbursement scheme, no similar upward pricing pressure is available. Competition is not free. Thus, the airplane scenario is wrong; ceteris paribus.

Still, traditional healthcare administrators, management gurus or job-security seeking hospitalists counter that a discounted patient in a hospital bed is better than no patient at all. The reason? Again, it’s because more services can be supplied for additional profit? This is the stuff of CVPA, marginal costs and marginal revenues.

For example, I recently retrospectively reviewed a case where a lovely, but unsophisticated patient, was hospitalized two weeks for an uneventful and solitary pinky toe amputation; under general anesthesia.

Of course, she also had bilateral prophylactic mammograms “just in case” – and – hyperbaric oxygenation therapy despite great circulation and pedal profusion. Throw in some respiratory and physical therapy to assist her breathing and ambulation. Oh, don’t forget the blood transfusion for the mild anemia of chronic disease that her longtime GP knew of and was heretofore unconcerned.  

Pre-Disease Fear Factor

But, here it comes – the supply-side pitch – “we better check it all out because you sure don’t want to loose your leg – do you?”  She was over-treated because she was a middle-aged stable diabetic patient who happened to have health insurance. She is doing fine to the best of my understanding and retrospective utilization review, five years later [Ah! That retro-spectroscope is always correct, isn’t it?].

So, supply {legal and/or misplaced caution?} side economics does rule in some instances; and beyond appropriate [demand] care. And, more care is not necessarily better medical care, as oft iterated.

Back to Capacity

Now, extending our airline analogy back to the business of medicine; suppose your empty hospital bed, my medical treatment room or office time-slot was occupied by a non-compliant and litigation prone patient? Economic considerations aside, don’t the potential medical, legal and emotional entanglements of these situations exceed their marginal benefit? I submit that they sometimes do, indeed.

My Philosophy

Philosophically, one could argue that these possibilities also exist in full fee-for-service environment [full business class plane ticket price] and be quite correct.

Therefore, rest assured that I don’t advocate the wholesale non-treatment of patients in real need. I am noting the dual and conflicting capitalistic and very demoralizing human feelings of “why bother.”

Or – shall we doctors and medical providers accept the socialistic epistemology of laborers who “pretend to work, while the government, insurers, third-parties pretend to pay?”

Indeed – Bob is right when he says – a hospital is not a Hilton Hotel. And, allow me to add … the healthcare industry is not the airline industry (thank goodness).

The New Paradigm

At the same time, medical professionals are struggling to maintain adequate incomes and a certain level of real or perceived “success.” While some specialties flourish, others like primary care barely moved forward, not even incrementally keeping up with inflation.

In the words of Atul Gawande, MD, a surgical resident at Brigham and Women’s Hospital in Boston, and one of the best young medical writers in America, “Doctors quickly learn that how much they make has little to do with how good they are. It largely depends on how they handle the business side of their practice”.

And so, perhaps different definition should emerges which entails a very unusual concept of medical practice “success.”  Here is the linguistic rub on that “patient-centric” business model of healthcare.

Under my new paradigm as king-of-the-word, the efficient hospital or medical practice is not necessarily the one that makes the most profit – it is the one that produces the most profit at the most appropriate level of patient care and service.”

Assessment

In other words, the futuristic highly efficient physician – or hospital – may be deemed prosperous and “successful” if only 90% of the prior year’s profit is made. Yet, has an office face time – or has a hospital bed capacity – of only 70%.

Then, perhaps we can afford appropriate healthcare for more of our citizenry, and those doctors so-inclined [not me], will have more time for the golf course? 

Candor, intelligence and goodwill to all!

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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Retail Medical Clinics and IT

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Competitive HIT Issues Emerging by Default

[By Dr. David Edward Marcinko; MBA CMP™]

Publisher-in-Chief

dem2

Health entities of the Physician Practice Management Corporation [PPMC] era might be termed the originators of corporate medicine despite contentious legal policies and prohibitions. Since then, there have been other modifications to the business model, as those PPMCs left for dead by the year 1999 made a modest comeback thru 2003-04.

They did so by evolving from first generation multi-specialty national concerns, to second generation regional single specialty groups, to third generation regional concerns, and finally to fourth generation Internet enabled service companies, providing both business-to-business [B2B] solutions to affiliated medical practices, as well as business-to-consumer [B2C] health solutions to plan members.  

Prior machinations were ambulatory surgery centers [ASCs] and out-patient treatment centers [OPTCs], while the newer twists are specialty owned hospitals.

Social Transformation of Medicine 

And so, I believe that Paul Starr, author of the Pulitzer-prize-winning book “The Social Transformation of American Medicine” who first predicted healthcare corporatization was more correct, than not.

But, his vision was early in the evolutionary game. And, while corporate medicine seems inevitable in 2008 and beyond, the marketplace is still struggling for the correct business mode. It needs something that bridges the gap between medical professionalism and ROI.

The Balancing Act 

In-other-words, a better balancing act is needed. Slowly, like capitalism itself, the pendulum will swing back and forth between paucity and excess, until a point is reached where all concerned are moderately satisfied, ethical, and marginally profitable; while delivering quality medical care that is more needed by the citizenry-many [i.e., more pediatricians, internists, primary care doctors, OB-GYNs, nurse-practitioners, PAs, etc]; than the vital-few [neuro-surgeons, pediatric endocrinologists, super specialists, etc].

Maybe this “missing balance link” is the retail medical clinic model.

Retail Clinics 

As most doctors, payers, patients and consumers are aware, the retail quick-service medical care concept has found a familiar place in national chains such as Target, Wal-Mart and CVS, where pharmacies and patients already exist, and space is inexpensive and abundant.

These clinics are typically staffed by nurse practitioners and offer a limited menu of walk-in medical services with insurance co-payments between $10 and $30. And, unlike some physician practices, private pay patients are welcomed with fees ranging from $55 to $85 cash in many parts of the country!  Prescription drugs are nearby at robust generic discounts, or even for free in some cases. Office hours are extended, and convenience reigns.

HIT Issues by Default? 

Ironically, as one positive side-effect of this innovative next-gen corporate practice model, may be the goading of late adopting, tight-fisted and/or refusing MD-niks to enter into the modern health-information-technology [HIT] age.

Thus, one way to get margin compressed private medical practices up and running with electronic medical records [EMRs] may be these same retail clinics.

***

doctor-37707_640

***

Projected Growth of the Retail Industry 

Today, more than 800 retail clinics are open for business, and analysts predict that 85 percent of the U.S. population will have a clinic within five miles of home in five years. And, the number of retail health clinics is expected to multiply in 2009; as recently reported by the Washington Times

Illustration

Now, ponder the current state of affairs where a retail clinic [say Walgreen’s, etc] treats a vacationing patient for $65; who then receives the medical-record instantly on a flash-drive or securely uploaded to some virtual storage facility?

Just how will that patient’s premium priced private practitioner back-home explain his/her lack of EMR technology, and ages-old anchor to the hand-written paper-based medical records of yore?

Can you say Dossia.org, HealthVault.com, etc?

Competitive Assessment 

The ideological leap from technical buffoonery – to clinical distrust – will not be great in the minds of the modern, intelligent, educated and insightful patients that we all crave.

Assessment

Of course, one wonders how long will it take for EMRs to become a strategic competitive advantage for early adopting physicians. Will late adopters even survive as EMTs become main-stream?    

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Conclusion

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Big Pharma’s Dilemma

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Making it … Without Big Pharma

By Patrick C. Cox; Jr.

[Pharma Section Editor]

How are we going to make it without Big Pharma?

An alarming question but a very real one we nonetheless might have to face over the next few years. Look, we’ve become accustomed to Big Pharma delivering that blockbuster drug just when we need it. With patience and strong research and development, somehow we’ve all felt the drug industry would be there for us in the end. Reality is starting to set in however.

Given today’s business climate and the pressures of recent economic downturns, one must begin to ask:

Can we count on Big Pharma to be there for us at the level we’ve come to expect?

The Need Exists

Healthcare needs and consumer pressures for blockbuster compounds are certainly still there. Who doesn’t feel a sigh of relief when news of FDA approval for a product personally affecting our family or us hits the streets? One would like to think that the drug industry is primed and eager to keep the launch engines of innovation rolling, but that’s easier said than done in today’s business environment. It’s the same economics we all face.

Generic Competition Heats Up

Faced with the need to keep a lid on costs while producing dividends to attract new shareholders, there’s also the growing threat from generics. Sales and marketing expenses continue to skyrocket as companies compete for physician, and HMO, brand loyalty and dwindling patient drug dollars. Pressures are greater than ever.

The Questions:

What’s Big Pharma to do to keep delivering? What adjustments to traditional business models will it have to make? How can the industry keep giving us what we need to improve and prolong our lives while it fights just to survive?

Conclusion

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Our New “Look and Feel”

The Executive-Post

We’ve done our first major website interface redesign that not only includes a cleaner, fresher look, but also a reorganization of our content, too. Enjoy!

Dr. David Edward Marcinko; MBA, CMP

Publisher-in-Chief

Hope Rachel Hetico; RN, MHA, CMP

Managing Editor

Correspondents and Staff Writers

E-mail us with your opinion on this issue: MarcinkoAdvisors@msn.com

 

About Dossia.org

Power to the Patients?

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

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A common rallying cry of the turbulent sixties was “power to the people”. It embodied the zeitgeist of a generation that never seemed content until the democratizing electronic era emerged. In the healthcare space however, power still seems to rest in control of a select few; medical providers, employers, insurance companies, the government and other third-party intermediaries. Everyone, but the patient, until now!

And so, as a doctor, medical and nurse executive, health economists and scions of that era, the recent founding of Dossia.org, is particularly gratifying. Why? Because Dossia is an independent and nonprofit internet based platform that is personally controlled by patients, and patients alone? It is a voluntary, private, portable, secure, lifelong and decentralized repository of electronic medical information archived from many sources.

Early Adopters

Of course, as with any new technology, we wonder if patients and stakeholders are ready for it? Unfortunately, most are not; but increasingly more are. And, supporters of consumer directed healthcare, concierge medicine, marketplace competition, medical price transparency, retail clinics and the like, often respond in the affirmative. Therefore, allow us to ask if your clinic, facility, hospital or healthcare organization is aware and ready forDossia.org?

Inevitable

Ready or not, the promise of Dossia [or similar] is complete information about your patient’s medical history — information that they alone control — that will become available whenever needed: for routine office visits, away from home, in an emergency, for hospital admission or after a disaster that could destroy paper records. Dossia enables patients to become your active partner in their healthcare management. In short, it will allow them to:

  • Share information with  doctors, clinics, outpatient centers, hospitals and healthcare systems
  • Avoid delays, mistakes and miscommunication when more than one doctor is involved
  • Help reduce medical communication errors and eliminate waste, costs and redundancy
  • Help track, manage and treat chronic illnesses and enhance evidence-based best practices
  • More effectively utilize physician and patient-provider face-time
  • Help family members manage their health care; and more!

The key feature of Dossia is its personal and private nature. Only the patient is allowed to include or exclude information in a health record, and determine what parts will be shared with others. The patient will choose how much data is collected and how the record is shared – with whom – and in what form.

And, while we recommended patients share a complete medical history with their providers, the decision will always rest with them. Others can not access information without permission, including employers and insurance companies. 

Assessment

In brief, the mission of Dossia is nothing less than the complete transformation of health information technology, to reduce costs and improve quality, by developing a lifelong personal health record [LPHR].

Of course, the Dossia Founders Group is highly suited for this Herculean task. Thus far it includes: AT&T, Applied Materials, BP America, Inc., Cardinal Health, Intel Corporation, Pitney Bowes, sanofi-aventis and Wal-Mart. It is growing and has been endorsed by the American Academy of Pediatrics, the American Academy of Family Physicians, the Centers for Disease Control and Prevention [CDC] and the National Association of Manufacturers. Initially, Founders will work with Children’s Hospital in Boston, and other qualified experienced vendors to develop and implement the Dossia Network infrastructure.  

Conclusion

And so, your thoughts on patient controlled eMRS are appreciated. Of course, regular readers of the Executive-Post know that according to the HIPAA statutes, patients have had similar medical records power for more than a decade now.

It’s just that the electronic platform seems to make it so much more appealing, doesn’t it; or is it the anytime-anywhere instantaneous nature of it all? Please opine.

Institutional: www.HealthcareFinancials.com 

Speaker: If you need a moderator or a speaker for an upcoming event, Dr. David Edward Marcinko; MBA – Editor and Publisher-in-Chief – is available for speaking engagements. Contact him at: MarcinkoAdvisors@msn.com or Bio: http://www.stpub.com/pubs/authors/MARCINKO.htm

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Modern Hospital IT Systems

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Overview of System Architectures

Dr. Mata

By Dr. Richard J. Mata; MS, CIS, CMP™ (Hon)

Hospitals can use a variety of configurations for Health Information System [HIS] implementation depending on business needs and budgetary constraints.

Staffing needed for these systems can range from a few full-time equivalents (FTEs) per 100 beds for very basic off-site processing systems to 15 or more FTEs per 100 beds for sophisticated systems that attempt to combine several architectures into one system (e.g., combination of client-server systems with mainframe processing).

Resource use and customizability tends to vary in tandem; the greater the flexibility of the system to meet unique user needs, the greater the cost outlay for capital and/or additional FTEs.  

Relationship of Resource Use and Customizability Based on System Architecture Selected

Values range from one (low) to four (high) stars

Architecture

Hospital resource use

Customizability

Off-site processing

*

*

Turnkey systems

**

**

Mainframe systems

***

***

Client-server

***

****

 

The basic system architecture possibilities are as follows:

  • Off-site (remote) processing: In this case the hospital contracts with a vendor external to the hospital. The hospital sends data over to the vendor site where the actual processing takes place. When processing is complete, the vendor sends the data back to the hospital, usually in electronic form.
  • Turnkey systems: A vendor provides the hospital with systems that are “pre-packaged” so that hospital-based system development is minimal. Limited customization of the system is possible using systems analysts or programmers.
  • Mainframe systems: Most applicable to large hospitals, this configuration is highly centralized. A large and powerful computer performs basically all the information processing for the institution and connects to multiple terminals that communicate with the mainframe to display the information at the user sites. Hospital Information Technology (IT) departments usually use programmers to modify the core operating systems or applications programs such as billing and scheduling programs.
  • Client-server systems: In this configuration one or more “repository” computers exist, known as “servers,” that store large amounts of data and perform limited processing. Communicating with the server(s) are client workstations that perform much of the data processing and often have graphical user interfaces (GUIs) for ease of use. Both customizability and resource use is high, depending on the desired sophistication. Many clinical information systems that process data directly related to patient care use this configuration.

Assessment

The above architectures are broad categories. Modifications and combinations of the above also exist, such as the use of client-server technology with mainframe systems and the addition of wireless technology and personal digital assistants (PDAs) to supplement the core computing functionality. In considering the optimal architecture for a hospital, management needs to take into account factors such as size of the institution, desired sophistication of the application, IT budget, and anticipated level of user community involvement.

Can you improve on the basic system architecture outlined above; or does your institutional have a different HIS architecture?

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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Resource use refers to the need for FTEs and hospital capital expenditure.
Customizability refers to the ability for users to alter the system structure or function to meet the unique needs of the institution.

Of Hospitals and Hotels

The Discharge Planning Dilemma

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

I read with interest – and a bit of sad amuse’ – the post of March 26, 2008 by Robert Wachter MD, entitled “Average Time of Discharge: Why a Hospital is Not a Hilton”; and felt compelled to respond affirmatively to his comments … and more!

Link: http://www.thehealthcareblog.com/the_health_care_blog/2008/03/average-time-of.html

As you may know from prior posts, speaking engagements and books, I am a big Bob Wachter fan [although not necessarily the hospitalist movement] referencing him from our material on www.MedicalBusinessAdvisors.com and www.HealthDictionarySeries.com and periodicals like www.HealthCareFinancials.com where I serve as Editor-in-Chief.  

Moreover, his interests seem to be favoring a more process-driven and quality improvement zeitgeist that’s in the long-term interest of all of us.  

Hospital Discharge Planning

So, what he says about the sad state of hospital discharge planning is not only true in my experience, but nothing new for the industry and hence the cause of my dismay. Unfortunately, it seems that sans some disruptive influence that overcomes inertia; little seems to change in the healthcare industry status quo.

Hopefully, Bob’s notoriety will help change the discharge practice situation he highlights; while personal industry infamy serves to reinforce similar bottleneck situations that not only impact the bottom line – but patient safety – as well.

Other Bottleneck Issues

After all, these issues have plagued hospitals for decades now, and are often accepted as de rigor. However they should not be; for example: 

1. The July starting point problem of new hospital interns and residents.

2. End-of-shift nurse “reporting” and evening hospital (mis) communications.

3. Weekend or “after hour” admissions and departmental scheduling.

4. Similarly named patient and drug mix-ups.

5. Wrong site surgery; lost or stolen infants, etc

Yes, some issues are being address with powerful information technology systems. But, do we really need RFID tags to ensure proper side surgery, or bar codes bracelets for newborns?

A Common Sense Approach

As for me, I helped deliver my own daughter and immediately splashed a (far-too-large) swatch of gentian-violet on her left heel as an identifier; cheap, effective and simple.

And, these other issues might be alleviated with some managerial common sense; along with a dose of mindset change, as well.

How? Well, for starters, how abut staggering employee schedules; providing rolling medical student admissions; placing name tag warnings on patient room doors and extremities [HIPPA be darned] and/or implement the timely outsourcing of laboratory/pathology and other off-hour hospital services?

Assessment

And yep, even my infamous gentian-violet episode is still discussed years later as -um- “insightful.”  Candor, intelligence and goodwill to all!

Conclusion

Your thoughts and comments are appreciated?

More info: http://www.springerpub.com/prod.aspx?prod_id=23759

Institutional: www.HealthcareFinancials.com

Terms: www.HealthDictionarySeries.com

Speaker: If you need a moderator or a speaker for an upcoming event, Dr. David Edward Marcinko; MBA – Editor and Publisher-in-Chief – is available for speaking engagements. Contact him at: MarcinkoAdvisors@msn.com or Bio: http://www.stpub.com/pubs/authors/MARCINKO.htm

Social HMOs for the Elderly

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Extended Health Coverage for Unconventional Expenses

By Dr. David Edward Marcinko; MBA, CMP™ 

[Publisher-in-Chief]dem23

A social HMO offers extended coverage for some of the unconventional expenses associated with senior healthcare, such as transportation and in-home day care not covered by traditional MCOs.  

AAHP Definition 

According to the American Association of Health Plans (AAHP), social HMOs provide coordinated services by uniting federal and state funds and services, to benefit the elderly.

Real Life Example: 

One such social HMO is the 21 year-old Elderplan, based in Brooklyn, New York.*  It is a Medicare Advantage Plan (MA-PD) with the following characteristics:

Elderplan Classic:

  • $0 monthly premium
  • $0 to see a doctor
  • Unlimited brand name drugs
  • Unlimited generic drugs
  • $0 for approved generic drugs

 Elderplan Extra:

  • $0 plan premium
  • Low prescription co-payments
  • $40 reduction in Part B premium every month
  • Coverage for dental, hearing and vision services

 Elderplan Access:

  • $0 regular doctor visits
  • $0 monthly premium for you
  • Unlimited brand name drugs
  • Unlimited generic drugs

 Elderplan Advantage:

  • Coverage designed for individuals living in a skilled nursing facility
  • A personal registered nurse care practitioner
  • Complete coordinated care
  • Treatment for some medical issues at residence
  • $0 co-payment for skilled nursing facility stays

Assessment

Are you familiar with the social HMO concept and what has been your experience with it? Please comment and opine. 

*illustrative purposes only. Not an endorsement of http://www.Elderplan.org.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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Enhancing Revenue Cycle Accounting

Hospital Claims Denial Management

By Karen White; PhD 

Typically, denied and rejected hospital and health systems claims quickly surface as a source of multi-millions in revenue leakage and unnecessary expense.

And, it is the same for medical practice accounting, regardless of size. 

Increasing Costs 

Payers have been struggling with increased costs for the past decade. They thoroughly inspect claims for errors and have become adept at using their rules to deny and delay claims.

For example, Zimmerman reported the denied percentage of gross charges climbed from 4% in 1990 to 11% in 2001, and even more by 2008. In contrast, some hospitals and many more medical providers still typically lack the tools to aggressively manage current denied claims and prevent future ones. 

Denial Tracking 

Without current denial tracking systems, a hospital or healthcare organization may not recognize the heavy financial impact of denied medical claims.  The HARA report indicates that bad debt and gross days are declining.

However, a majority of providers write off denials as contractual allowance, distorting the numbers but not the resulting lower margins and reduced cash flow. 

For example, H*Works reports that the typical 350-bed hospital loses between $4 million and $9 million each year in earned revenue from denials and underpayments (assume $103 million annual gross revenue and 40% contractual allowance).

And, the situation is similarly depressing for private practices. Recouping lost revenue from denials and underpayments will, according to H*Works, increase an organization’s operating margin by 2.6%.

Assessment 

Health industry estimates report that at least 50% of denials are recoverable and 90% are preventable with the appropriate workflow processes, management commitment, strong change leadership, and the correct health information technology.  

H*Works estimates that for a revenue capture of $3 million from denials and underpayments, the recovery infrastructure costs are only about 3%.

Conclusion 

With all this in mind, better management as well as the information necessary to resolve and prevent them, surfaces as probably the best strategy to the improved financial management of any healthcare organization.  

And, streamlining the revenue cycles and managing rejected claims and denials, proves to be less expensive and provides faster returns than initiating any new ancillary healthcare services. Your thoughts and comments are appreciated. 

More info: http://www.springerpub.com/prod.aspx?prod_id=23759 

Institutional: www.HealthcareFinancials.com 

Terms: www.HealthDictionarySeries.com 

Link: http://www.podiatrytoday.com/article/5916   


  • Zimmerman & Associates, LLC. Best Practices of Denial Management. Presentation at HFMA Annual Networking Institute (ANI) conference (2004).
  • Joann Petaschnick, Sr. Editor. HARA. Aspen Publishers. (Fourth Quarter 2001).
  • For further information, see http://www.advisoryboardcompany.com.
  • H*Works (The Advisory Board). Capturing Lost Revenues. Washington, D.C. 2001-05.

 

Whither the Medical Executive-Post?

“In My Opinion”

By Hope Rachel Hetico; RN, MHA, CMP™

Managing Editor 

Anyone who’s paid a doctor or hospital bill lately knows that healthcare costs are out of control.

It should come as no surprise that the “golden-era” of medicine for physician reimbursement and health entity compensation is over. And, that healthcare is the latest, and one of the last industries to tighten its payment belt.  

Hospital, medical clinic and physician personal compensation is also a contentious issue in medical group practice, and much fodder for public scrutiny. Few situations produce the same level of emotion as doctors fighting over how a seemingly collegial employment contract should be interpreted.

This situation often springs from a failure of both sides to understand mutual compensation terms-of-art when the deal was negotiated; or the larger issue of macro-economics and domestic demographics.  

It is our hope that the Executive-Post communication forum; along with our institutional print periodical www.HealthcareFinancials.com; related books www.HealthDictionarySeries.com; online certification program www.CertifiedMedicalPlanner.com and financially focused medical consulting services www.MedicalBusinessAdvisors.com will help you avoid these, and other contentiously polarizing human conditions, economic polemics and financial catastrophes.  

For example, our more than fifty forum topics and categories include the basic principles of student-debt avoidance, the intangible concept of goodwill, and the compensation-versus-value paradox of medical practice worth and Fair-Market-Value. 

Employer-employee deferred compensation arrangements are also visited as important retirement and fringe benefits. Compensation benchmarks for medical and allied healthcare specialties are presented. 

And, newer health delivery models such as consumer-directed health plans, cash-based-compensation extenders and concierge medicine, are mentioned by our career philosophers, medical practice management gurus and healthcare thought leaders. 

Of course, we also discuss and integrate corporate and personal financial planning principles like economic fundamentals, tax, and accounting strategies; portfolio and investment strategies; insurance and risk management ideas; retirement, practice succession essentials; and ultimately estate planning for physicians, nurses and health executives. 

Why the Executive-Post? 

Several years ago, Fortune magazine carried the headline “When Six Figure Incomes Aren’t Enough. Now Doctors Want a Union.” 

To the man in the street, it was just a matter of the rich getting richer. 

The sentiment was quantified by consultant Russ Alan Prince who reported that 50,000 physicians, with a net worth of $5 million or more, control assets worth $375 billion. 

Healthcare executives, physicians and other medical practitioners were not complaining under the traditional fee-for-service system; the imbroglio only began when managed care adversely impacted incomes.

Rightly or wrongly, the public has little sympathy for affluent doctors, or the entire healthcare sector.  

Contemporary Assessment 

Thus, the raison-d’etra of the Executive-Post is to change this perception, and the many other shibboleths that taint the healthcare industrial complex and all of its stakeholders. 

Today, the situation is vastly different as medical professionals struggle to maintain adequate income levels. While a few specialties flourish, others, such as primary care, barely move.  

In the words of Atul Gawande, MD, a surgical resident at Brigham and Women’s Hospital in Boston, “Doctors quickly learn that how much they make has little to do with how good they are. It largely depends on how they handle the business side of practice.”  

In order to remain a compassionate quality practitioner, and become a compensation-maximizing health executive, it is critical to understand contemporary thoughts on health economics and finance; medical management and HIT; as well as reimbursement trends, models and approaches. 

And, we feel it is just as critical to read, post, comment, opine and subscribe to in the Executive-Post.  

Make it your professional health economics social network-of-choice; embrace the changing trends and your Executive-Post colleagues. 

Conclusion Well, that’s my opinion. Your comments are appreciated. Please opine. 

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Institutional: www.HealthcareFinancials.com 

Terms: www.HealthDictionarySeries.com

Hospital Employee Stock Ownership Plans

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A Qualified Retirement Plan

dem

By Dr. David Edward Marcinko; MBBS MBA CMP™

The growth over the past few decades of plans that give hospital and other corporate employees a stake in the ownership of their company has been a significant development in the area of employee compensation and corporate finance.  

Though there are many forms of hospital employee ownership, the employee stock ownership plan (ESOP) has achieved widespread application.

The rapid growth in the number of ESOPs being created has important ramifications for employees, corporations, healthcare industrial complex and economy at large. 

ESOP Definition 

An ESOP is a special kind of qualified retirement plan in which the sponsoring employer establishes a trust to receive the contributions by the employer on behalf of participating employees.  The trust then invests primarily in the stock of the sponsoring employer.

The plan’s fiduciaries are responsible for setting up individual accounts within the trust for each employee who participates, and the company’s contributions to the plan are allocated according to an established formula among the individual participants’ accounts, thus making the employees beneficial owners of the company where they work.  

ESOPs Must be in Writing 

Like all qualified retirement plans, ESOPs must be defined in writing.  

Further, in addition to the usual rules for qualified deferred compensation plans, ESOPs must meet certain requirements of the Internal Revenue Code [IRC] with respect to voting rights on employer securities. 

In general, employers that have “registration class securities” (publicly traded companies) must allow plan participants to direct the manner in which employer securities allocated to their respective accounts are to be voted on all matters.

Companies that do not have registration class securities are required to pass through voting rights to participants only on “major corporate issues.” These issues are defined as merger or consolidation, re-capitalization, reclassification, liquidation, dissolution, sale of substantially all of the assets of a trade or business of the corporation, and, under Treasury regulations, similar issues.  

On other matters, such as the election of the Board of Directors, the shares may be voted by the designated fiduciary unless the plan otherwise provides.

In regard to unallocated shares held in the trust, the designated fiduciary may exercise its own discretion in voting such shares. 

Motivating Factors 

As owners, physicians, nurses, and hospital employees may be more motivated to improve corporate performance because they can benefit directly from company profitability. A growing company showing significant increases in the value of its stock can mean significant financial benefits for participating employees.  

Employee Risk 

However, because the assets of the ESOP trust are invested primarily in the stock of one company, there is a higher degree of risk for the employee. 

IRC Code § 401(a) 

Until January 1, 2003 the employee did not incur FICA tax on exercised stock options. ESOPs, like all qualified deferred compensation plans, must meet certain minimum requirements spelled out in Code § 401(a) in order for the contributions to be tax deductible to the sponsoring employer.  

Many employers who set up ESOPs do so not to take advantage of the very substantial tax incentives they can receive, but rather to provide their employees with a special kind of employee benefit—one with many implications for the way a company does business.

Assessment 

An ESOP is the only employee-benefit plan that may also be used as a technique of corporate finance.  

Thus, in addition to the usual tax benefits of qualified retirement plans, studies have shown that ESOPs provide employers with significant amounts of capital, which often result in financial benefits far superior to other employee-benefit plans, while employees can share in the benefits realized through corporate financial transactions.  And so, are you familiar with ESOPs and do you participate in them, when available? Why or why-not? Please comment on your experiences. 

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™  Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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