Whither the Medical Executive-Post?

Posted on April 3, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

“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. 

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

Institutional: www.HealthcareFinancials.com 

Terms: www.HealthDictionarySeries.com

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Hospital Employee Stock Ownership Plans

Posted on April 3, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

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A Qualified Retirement Plan

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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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