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The Initial [Estimated] Costs of Electronic Health Records Systems

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A Decade Look-Back Analysis

[By Richard Mata MD MIS]

Dr. MataStudies by the Organization for Economic Cooperation and Development (OECD) showed that healthcare spending in the U.S. accounted for 15.3% of GDP, which is more than six percentage points higher than the average of 8.9% in other OECD countries.  This translates into per capita health spending of $5,635 in the U.S. compared with median costs of $2,280 in other OECD countries.[1]

Suggestions as to the economic drivers of U.S. health spending include excessive service use, administrative complexity, population aging, threats of malpractice litigation, defensive medicine practices, and the lack of patient waiting lists.  In further comparisons with the OECD countries, it appears the U.S. overpays for physician visits, hospital stays, and pharmaceuticals.

In 2004

A 2004 OECD paper suggested that one way of improving performance would be to move towards EHR:

Health systems should invest in automated health-data systems, including electronic medical records and systems to automate medication orders in hospitals. Better systems for recording and tracking data on patients, health and health care are needed to make major improvements in the quality of care. [2]

In the U.S., possible savings from the adoption of EHR have been projected to reach $142 billion in physician office visits, and $371 billion in hospital costs over a 15-year period.  These projections have not been validated by the experience in other OECD countries where the adoption movement is ahead of U.S. efforts by anything from four to thirteen years.

Nevertheless, the U.S. began its quest to move towards EHR in 2004 as medical software companies began actively marketing their systems, although funding for this endeavor did not come through until 2006.

In spite of this effort, the U.S. has the lowest percentage of physician providers using any EHR compared to Germany, Canada, United Kingdom, and Australia.  The U. S. physicians’ low adoption rate involves fear of the loss of productivity, lack of financial incentives, and high startup costs of as high as $40,000 per physician EHR adoption.

When spending on IT implementation in the healthcare system is compared on an international level, the U.S. lags dramatically behind the major OECD countries.  The U.S. spends $0.43 per capita compared to a high of $193 in the U.K.  This difference is even more dramatic when compared with the German experience, where IT adoption in the healthcare system is almost universal.  In thirteen years, Germany has spent $1.88 billion.  Their annual per capita cost has been $1.63.  The U.S. has reached only 25% of that expenditure so far.

The greatest barrier to adoption of EHR in most OECD countries has been the need to simplify the health insurance contracts payment structures with standard nomenclatures that can be adapted to EHR.  The major OECD countries also report that there must be a national adoption of IT standards in the healthcare system as well as a national effort to focus on privacy and confidentiality standards.  This assures better coordination of implementation and provides better strategies for adoptions through public incentives and grants.

In the U.S., the five-year costs for a national IT healthcare network have been estimated to be as high as $103 billion in capital and $53 billion in interoperability.  Hospital costs for functionality were estimated to be $51 billion, skilled nursing facilities would bear $31 billion of costs, and physician offices would bear $18 billion of the costs. (Anderson, 2006)  EHR systems that have been implemented have been used mainly for administrative rather than clinical purposes.

***

hospital bills

***

In 2005

A 2005 study by Richard Hillestad and colleagues at RAND [3] estimates that implementation of a nationwide EHR network would take about 15 years and cost hospitals about $98 billion and physicians about $17 billion.  Over the 15-year period, the average annual cost to hospitals would be $6.5 billion and the average annual cost to physicians would be $1.1 billion (CQ HealthBeat [1], 9/14).

However, if 90% of providers adopted such a network, annual savings would total $81 billion, including $77 billion from improved efficiency and $4 billion from reduced medical errors, the RAND study found.  The study estimates that an EHR network would reduce adverse drug events in inpatient hospital settings by 200,000 annually and reduce such events in ambulatory settings by two million annually, saving $1 billion annually in hospitals and $3.5 billion in ambulatory settings.

For hospitals, about 60% of these savings would be from reduced adverse drug events in patients ages 65 and older, while 40% of savings to ambulatory practices from reduced medication errors would be in patients 65 and older (CQ HealthBeat [1], 9/14).

In addition, the study estimates that a national EHR network would save Medicare about $23 billion annually and save private insurers about $31 billion annually.  The study projects that the estimated total annual savings of $81 billion would double if providers followed all checkup reminders and other prompts from the system (AP/Las Vegas Sun, 9/14).  Currently, about 20% to 25% of hospitals and 15% to 20% of physician offices have EHR systems, according to the study (CQ HealthBeat [1], 9/14).

Assessment

What about today in 2015? How close have these estimates been?

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[1]    For details of the report, see http://www.oecd.org/dataoecd/29/52/36960035.pdf.

[2]   OECD, Towards High-Performing Health Systems, see http://www.oecd.org/document/26/0,2340,en_2649_37407_31734042_1_1_1_37407,00.htm.

[3]   See http://www.rand.org/health/feature/2006/060414_shekelle.html.  The report is also discussed in some detail in Neergaard, AP/Las Vegas Sun, 9/14/05.  See http://www.ihealthbeat.org/index.cfm?Action=dspItem&itemID=114707.

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Population Health Management Integration

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Efficient Market Hypothesis – or Not?

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Contradicting the Hypothesis

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[By Timothy J McIntosh MBA CFP® MPH CMP™ [Hon]

[By Dr. David Edward Marcinko MBA CMP™]

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***

Not everyone believes in the efficient market.  Numerous researchers over the previous decades have found stock market anomalies that indicate a contradiction with the hypothesis.  The search for anomalies is effectively the hunt for market patterns that can be utilized to outperform passive strategies.

white swan

[White Swan of the EMH]

Such stock market anomalies that have been proven to go against the findings of the EMH theory include:

  1. Low Price to Book Effect
  2. January Effect
  3. The Size Effect
  4. Insider Transaction Effect
  5. The Value Line Effect

The Anomalies

All the above anomalies have been proven over time to outperform the market.  For example, the first anomaly listed above is the Low Price to Book Effect.  The first and most discussed study on the performance of low price to book value stocks was by Dr. Eugene Fama and Dr. Kenneth R. French.  The study covered the time period from 1963-1990 and included nearly all the stocks on the NYSE, AMEX and NASDAQ. The stocks were divided into ten subgroups by book/market and were re-ranked annually.

In the study, Fama and French found that the lowest book/market stocks outperformed the highest book/market stocks by a substantial margin (21.4 percent vs. 8 percent).  Remarkably, as they examined each upward decile, performance for that decile was below that of the higher book value decile.  Fama and French also ordered the deciles by beta (measure of systematic risk) and found that the stocks with the lowest book value also had the lowest risk.

What is Value?

Today, most researchers now deem that “value” represents a hazard feature that investors are compensated for over time.  The theory being that value stocks trading at very low price book ratios are inherently risky, thus investors are simply compensated with higher returns in exchange for taking the risk of investing in these value stocks.

The Fama and French research has been confirmed through several additional studies.  In a Forbes Magazine 5/6/96 column titled “Ben Graham was right–again,” author David Dreman published his data from the largest 1500 stocks on Compustat for the 25 years ending 1994. He found that the lowest 20 percent of price/book stocks appreciably outperformed the market.

***

Ex-Cathedra black swan

[Ex-Cathedra or Black Swan Event]

Assessment

One item a medical professional should be aware of is the strong paradox of the efficient market theory.   If each investor believes the stock market were efficient, then all investors would give up analyzing and forecasting.  All investors would then accept passive management and invest in index funds.

But, if this were to happen, the market would no longer be efficient because no one would be scrutinizing the markets.  In actuality, the efficient market hypothesis actually depends on active investors attempting to outperform the market through diligent research

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The Author

Timothy J. McIntosh is Chief Investment Officer and founder of SIPCO.  As chairman of the firm’s investment committee, he oversees all aspects of major client accounts and serves as lead portfolio manager for the firm’s equity and bond portfolios. Mr. McIntosh was a Professor of Finance at Eckerd College from 1998 to 2008. He is the author of The Bear Market Survival Guide and the The Sector Strategist.  He is featured in publications like the Wall Street Journal, New York Times, USA Today, Investment Advisor, Fortune, MD News, Tampa Doctor’s Life, and The St. Petersburg Times.  He has been recognized as a Five Star Wealth Manager in Texas Monthly magazine; and continuously named as Medical Economics’ “Best Financial Advisors for Physicians since 2004.  And, he is a contributor to SeekingAlpha.com., a premier website of investment opinion. Mr. McIntosh earned a Bachelor of Science Degree in Economics from Florida State University; Master of Business Administration (M.B.A) degree from the University of Sarasota; Master of Public Health Degree (M.P.H) from the University of South Florida and is a CERTIFIED FINANCIAL PLANNER® practitioner. His previous experience includes employment with Blue Cross/Blue Shield of Florida, Enterprise Leasing Company, and the United States Army Military Intelligence.

Conclusion

So, what about the “January Effect for 2015“?

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Driven Analytics Coming Soon?

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Leveraging connected car technology to provide piece of mind for car owners and effective marketing for Dealers

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DEM blueWhat it is

Driven Analytics uses connected car technology to better target car owners on behalf of dealerships, all the while reducing the anxiety associated with routine car maintenance for drivers.

How it works

Using advanced algorithms and a data transmission device installed on new cars by the dealership, Driven Analytics provides a marketing platform that allows dealers to advertise maintenance services to their customers exactly when they need them.

***

Jag A (1)***

Jag 3 (2)

***Jag 3 (1)***

Jaguar Sedan***

Sale Disposition

Once a vehicle is sold, Driven Analytics monitors the vehicle’s systems and provides the car owner with actionable maintenance information via a smartphone app, text or email.

Customer Retention

Information includes details about the needed service, as well as discounts and coupons based on their needs. Coupons are designed to bring customers back to the car dealership that sold them their car, increasing customer retention for the dealership and ultimately leading to future sales.

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***

site

***

What’s New with Renter’s Insurance?

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Affordable and Ideal for Future Physicians

[By Thomas A. Mudlowney MSFS CLU AIF® CFP® CMP™]

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Muldowney

Renters insurance can protect you from damage caused by weather events like wind, rain, snow or lightning, as well as fire, vandalism or theft.

Some policies also include liability protection. This would be valuable if someone got injured in your home and sued you; doctor’s are at high-risk for this sort of liability.

Costs

Renters insurance tends to be cheap. For a low payment, usually annually, you can often get replacement coverage for your belongings and living expenses if you are displaced.

This means that you can get money to replace a damaged or stolen item as well as paying for a hotel or alternative rent if you are forced to leave your home because of damage.

Assessment

Renter’s insurance may be ideal for medical residents, fellows and interns etc; as they travel around the country for education and post-graduate training; etc.

Renter's Insurance

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Overview of Hospital Information Systems Architecture

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On Configurations and Varieties

[By Brent Metfessel MD MIS]

Dr. Metfessel

Hospitals can use a variety of configurations for 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 tend 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 Possibilities

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 IT departments usually use in-house programmers to modify the core operating systems or applications programs such as billing and scheduling programs.

eHR diagram

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.  For instance, the Veterans Health Administration, which has implemented what is likely the largest integrated healthcare information system in the United States, uses client-server architecture.  Known as the Veterans Health Information Systems and Technology Architecture (VistA), this system provides technology infrastructure to about 1,300 care facilities, including hospitals and medical centers, outpatient facilities, and long-term care centers.  VistA utilizes a client-server architecture that links together workstations and personal computers using software that is accessed via a graphical user interface.

Overall, for hospitals that have the financial and manpower resources for a significant investment in IT, client-server architectures are the fastest-growing and typically the most preferred of the system architectures, due in large part to their local adaptability and flexibility to meet changing hospital and medical center needs.

Broad Categories

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, smart phones, laptop PCs and tablets,  and various 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.

Assessment

EHR

Another important aspect of HIS is the need for integration.  Often, different hospital departments have their own stand-alone systems — such as a Laboratory Information System (LIS) and pharmacy systems — that do not communicate with each other.  Duplicate data may be kept in separate systems, creating additional work to enter the data multiple times.

In an integrated system, each departmental system communicates with the other systems through either a centralized or decentralized. A computerized physician order entry (CPOE) system, for example, would be much less effective if it did not communicate electronically with the pharmacy system that would process the medication orders.

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NOTES: 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.

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On Money Withdrawn from Tax-Deferred Accounts before Age 59½

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For Doctors … Un-Locking the Money

By SHIKHA MITTRA; MBA, CFP®, CRPS®, CMFC®, AIF®

Shikha-MittraWithdrawing funds from a tax-deferred retirement account before age 59½ generally triggers a 10% federal income tax penalty; all distributions are subject to ordinary income tax.

However, there are certain situations in which you are allowed to make early withdrawals from a retirement account and avoid the tax penalty. IRAs and employer-sponsored retirement plans have different exceptions, although the regulations are similar.

IRA Exceptions

  • The death of the IRA owner: Upon death, your designated beneficiaries may begin taking distributions from your account. Beneficiaries are subject to annual required minimum distributions.
  • Disability: Under certain conditions, you may begin to withdraw funds if you are disabled.
  • Unreimbursed medical expenses: You can withdraw the amount you paid for unreimbursed medical expenses that exceed 10% of your adjusted gross income in a calendar year. Individuals older than 65 can claim expenses that surpass 7.5% of adjusted gross income through 2016.
  • Medical insurance: If you lost your job or are receiving unemployment benefits, you may withdraw money to pay for health insurance.
  • Part of a substantially equal periodic payment (SEPP) plan: If you receive a series of substantially equal payments over your life expectancy, or the combined life expectancies of you and your beneficiary, you may take payments over a period of five years or until you reach age 59½, whichever is longer, using one of three payment methods set by the government. Any change in the payment schedule after you begin distributions may subject you to paying the 10% tax penalty.
  • Qualified higher-education expenses: For you and/or your dependents.
  • First home purchase, up to $10,000 (lifetime limit).

lock

Employer-Sponsored Plan Exceptions

  • The death of the plan owner: Upon death, your designated beneficiaries may begin taking distributions from your account. Beneficiaries are subject to annual required minimum distributions.
  • Disability: Under certain conditions, you may begin to withdraw funds if you are disabled.
  • Part of a SEPP program (see above): If you receive a series of substantially equal payments over your life expectancy, or the combined life expectancies of you and your beneficiary, you may take payments over a period of five years or until you reach age 59½, whichever is longer.
  • Separation of service from your employer: Payments must be made annually over your life expectancy or the joint life expectancies of you and your beneficiary.
  • Attainment of age 55: The payment is made to you upon separation of service from your employer and the separation occurred during or after the calendar year in which you reached the age of 55.
  • Qualified Domestic Relations Order (QDRO): The payment is made to an alternate payee under a QDRO.
  • Medical care: You can withdraw the amount allowable as a medical expense deduction.
  • To reduce excess contributions: Withdrawals can be made if you or your employer made contributions over the allowable amount.
  • To reduce excess elective deferrals: Withdrawals can be made if you elected to defer an amount over the allowable limit.

Assessment

If you plan to withdraw funds from a tax-deferred account, make sure to carefully examine the rules on exemptions for early withdrawals. For more information on situations that are exempt from the early-withdrawal income tax penalty, visit the IRS website at www.irs.gov.

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About the Author 

Shikha Mittra has two decades industry experience working with physicians, dentists and top level executives in both public and private sector businesses and foundations; with several awards for her work. She was rated one of the top Financial Planners in the Country from 2006 – 2013. As a Certified Financial Planner®, she is also a Chartered Mutual Fund Counselor®, Chartered Retirement Plan Specialist® and Certified Cash Balance Consultant. Ms. Mittra is Adjunct Professor of Finance and Business, Rutgers University, New Brunswick, NJ; Regional Board Member of the National Association of Personal Financial Advisors NAPFA (2011-2013)  Board of Trustees of Financial Planning Association of New Jersey Chapter (2008-2011), Advisory Board Member of the ”Journal of Financial Planning” (2008-2009). Medical Economics listed her as a best financial advisor for doctors in 2012. Ms. Mittra is also an Accredited Investment Fiduciary® helping employers reduce their fiduciary liability by following global fiduciary standards of care in managing their retirement plans.

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UNDERSTANDING THE ALLOCATION OF MEDICAL PRACTICE PURCHASE PRICE

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Delineation of Various Practice Assets

[By Dr. Charles F. Fenton III JD PC]

fenton

The final purchase price of a medical practice upon sale will actually be the amalgamation of various assets of the practice.

These assets include the tangible and intangible assets. The tangible assets include the hard assets (such as computers, treatment tables, chairs and furniture, DME and x-ray machines, etc) and the soft assets (such as Q-tips, paper and cotton balls). The intangible assets will include going concern value, goodwill, and the value of any restrictive covenant.

The parties should delineate the allocation of the purchase price amongst those various categories to reach a mutual best fit with the potential tax obligations. The buyer is the one who should strive to make the allocation fit his needs as best as possible.

Generally, the sale of the assets will be ordinary income to the seller and taxed at the seller’s usual rate. The buyer will be able to depreciate the purchased items. However, the characterization of those assets and the allocated portion of the purchase price will determine how much can be depreciated and over what time period the items can be depreciated.

As a general rule, soft assets can be depreciated fully in the year of purchase. Generally, hard assets can be depreciated over a three to seven year time period, depending upon the class of the asset. Also, under Section §179, a certain dollar amount can be “expensed” or deducted in the year of purchase. The sooner and the faster that the assets can be deducted the less current taxes that the buyer will be required to pay. However, intangible assets generally must be deducted over a 15-year period. This prolongs the tax benefits of any payments characterized as such.

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hospital

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Nonetheless, purchase of the assets results in better tax consequences that purchase of the stock of the practice. When stock is purchased, there is no depreciation allowance allocated in the current or subsequent years. Instead, the cost of the stock becomes the “basis” of the buyer in the practice. Any gain or loss from that basis will only have tax benefits or tax consequences in the year that the stock is sold or becomes worthless.

Because of the tax consequences of the characterization of the allocations of the purchase price, it is important that the agreement delineate the portion of the practice price which is allocated to each category. Each party should further agree never to claim a different allocation in any future tax filings.

Assessment

Generally, the soft and hard assets will be valued at their current actual cash value. In no event should the purchase price allocated to the soft and hard assets exceed the actual initial cost that the seller paid for the item. The only exception to the foregoing would be if the sale involved the transfer of an appreciable asset.

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Beware Dubious Insurance Policies for Doctors

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Careful Consideration is Required

[By Dr. David Edward Marcinko MBA MBBS] http://www.CertifiedMedicalPlanner.org

Dr. David E. Marcinko MBAThe following insurance policies should be carefully considered before purchase, since they may be unnecessary, too expensive, provide only minimal benefits, or be duplicated in your other policies.

The Culprits

Disclosure: I was a licensed insurance agent for more than a decade.

So, the culprits include: credit life or home mortgage insurance  (decreasing term), life insurance for children, accident policies for students, hospital indemnity policies, dread disease insurance, credit card insurance, pet health insurance, life insurance for the elderly, funeral insurance, flight insurance, pre-paid legal insurance and most extended warranties on automobiles, televisions, stereos, home computers; other gadgets and the like.

New wave Health 2.0 culprits include: terrorist insurance, cyber security insurance and reputation management policies.

Assessment

On the other hand, the following types of coverage may be important, for some medical professionals, and in selected cases: trip cancellation insurance, termite insurance and flood and earthquake insurance.

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Insurance

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The Cost of Headaches

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Treatment Expenses 1999-2010

By http://www.MCOL.com

Headaches

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On Additional Disability Insurance Taxation for Medical Executives

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Additional Disability Insurance for Practice Owners and Physician Executives 

By Perry D’Alessio CPA

perry-dalessio-cpa

Some medical clinics, hospitals, health care employers and other business entities may offer disability insurance to their employees on a group basis as part of an employee benefit program. This is a good thing.

The expense for this coverage is typically deducted as an ordinary and necessary expense by the employer entity.

Additional DI

However, many entities also purchase additional disability insurance for the owners and executives; etc. This additional disability insurance expense should not be deducted on the entity’s tax return for two reasons.

  1. First, it would probably be considered a discriminatory benefit to the owners and, therefore, not be allowed as a deduction anyway.
  2. Second, and more importantly, when a person becomes disabled and qualifies for disability benefits whose premiums have been deducted as a business expense by the entity, the disability insurance proceeds are considered taxable income to the person receiving them.

A Catastrophe

This can be personally catastrophic since disability insurance covers only a portion (approximately 60 percent) of regular earnings. The coverage was designed to be paid on an after tax basis. The benefits would be tax free to the beneficiary and would be close to the disabled person’s net take home pay before being disabled.

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BandagesX

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Assessment

Here is one of those instances where the traditional tax planning thought process is overridden by a long term (potential) tax cost / benefit decision.

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An Educational Niche Resource Supporting Doctors and their Consulting Advisors

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By Eugene Schmuckler PhD MBA MEd CTS [Academic Provost]

About the Medical Executive-Post

We are an emerging online and onground community that connects medical professionals with financial advisors and management consultants.

We participate in a variety of insightful educational seminars, teaching conferences and national workshops. We produce journals, textbooks and handbooks, white-papers, CDs and award-winning dictionaries. And, our didactic heritage includes innovative R&D, litigation support, opinions for engaged private clients and media sourcing in the sectors we passionately serve.

Through the balanced collaboration of this rich-media sharing and ranking forum, we have become a leading network at the intersection of healthcare administration, practice management, medical economics, business strategy and financial planning for doctors and their consulting advisors. Even if not seeking our products or services, we hope this knowledge silo is useful to you.

In the Health 2.0 era of political reform, our goal is to: “bridge the gap between practice mission and financial solidarity for all medical professionals.”

More: Letterhead.iMBA_Inc.

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niche

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Enter the Certified Medical Planners™

There is no certification program, course of study or professional designation for FAs who wish to enter the lucrative financial planning space serving physicians and healthcare professionals.

That’s why the R&D efforts of our governing board of physician-directors, accountants, financial advisors, academics and health economists identified the need for integrated personal financial planning and medical practice management as an effective first step in the survival and wealth building life-cycle for physicians, nurses, healthcare executives, administrators and all medical professionals.

Now – more than ever – desperate doctors of all ages are turning to knowledge able financial advisors and medical management consultants for help. Symbiotically too, generalist advisors are finding that the mutual need for extreme niche synergy is obvious.

But, there was no established curriculum or educational program; no corpus of knowledge or codifying terms-of-art; no academic gravitas or fiduciary accountability; and certainly no identifying professional designation that demonstrated integrated subject matter expertise for the increasingly unique healthcare focused financial advisory niche … Until Now!

Enter the Certified Medical Planner™ charter professional designation. And, CMPs™ are FIDUCIARIES, 24/7.

FAs

Video: http://vimeo.com/84247360

An Interview with Bennett Aikin AIF®

Physician-Investors and the “F” Word

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How may we assist you?

Retirement Portfolio Real Estate?

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Inefficient and Illiquid … But?

By Rick Kahler MS CFP® http://www.KahlerFinancial.com

Rick Kahler MS CFPWhat’s the best way to hold real estate in a retirement portfolio? For many investors, the answer seems to be “not at all.” That’s not the right answer. This asset class, appropriately owned, can help support you well in retirement.

Not like Stocks

Unlike stocks, which trade on a highly efficient and liquid exchange, trading real estate is inefficient and illiquid. The ease of buying and selling stocks is one of the major reasons the asset class is over-represented in most portfolios.

Based on the fascination of the financial press with the stock market, it’s easy to get the impression that stocks comprise the largest financial asset class. According to Matthew Yglesias, author of The Rent Is Too Damn High, the total value of commercial real estate in the US as of December 2013 was $20 trillion. This equals the value of publicly traded stock. (The largest asset class is bonds with $37 trillion.)

While one could make a strong argument for owning equal amounts of real estate and stocks in most retirement portfolios, very few hold any real estate at all.

Direct Ownership

Probably the worst way to hold real estate is to own it directly. The only popular retirement plan that allows direct ownership of real estate is the self-directed IRA. Unfortunately, the government discourages holding real estate this way by taxing it unfavorably. As I’ve described in a previous column, it’s not a good idea.

RLPs

Registered Limited Partnerships [RLPs] were a popular way to own real estate in the 1980’s. While someone must have made money on these investments, I don’t think it was the investors. I don’t know an investor who made a dime, but I do know some distributors and promoters who got very rich with them. The problem wasn’t the real estate but the lack of transparency inherent in a limited partnership. This allowed promoters and distributors to hide high fees and commissions that didn’t give the investors a chance of profiting.

REITs

Gradually, the real estate investment trust gained popularity as another investment vehicle for owning real estate. A publicly traded REIT is similar to an ETF (a form of a mutual fund) that trades on the major exchanges and invests directly in real estate. REITs receive beneficial tax breaks, must pass through 90% of their cash flow to investors, have a high degree of transparency, and are highly liquid. They also tend to specialize in certain types of real estate, so rather than hold REITs individually; I prefer to own a mutual fund that owns a diversified assortment.

The fees and commissions associated with REITs are very low, which helps make them a good choice for investment portfolios. It is also another reason they don’t often show up there, since most financial vehicles are sold, not bought. Mutual funds, annuities, and cash value insurance pay much higher commissions than exchange traded REITs.

Wall Street solved that problem by creating the non-traded REIT, which does not trade on a securities exchange and therefore is highly illiquid. The benefits touted by salespeople are the potential for higher dividends, plus lower volatility than publicly traded REITs. Here’s the downside: Their lower volatility is an illusion created by their high illiquidity. They also lack transparency, which gives cover to charging high fees and commissions. The non-traded REIT is scarily like its older cousin of the 1980’s, the registered limited partnership.

USA

Assessment

Including real estate in a retirement portfolio can be a good idea as long as the ownership is properly structured. A mutual fund that holds a broad diversification of publicly traded REITS is one way to help you build a strong foundation for retirement.

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On Nursing Assistants

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Occupational Injuries for 2013

By http://www.MCOL.com

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nursing accidents***

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2015 Could Be Rough on Stocks?

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Here’s Why!

Daniel Crosby PhDBy Daniel Crosby, Ph.D.

“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” – Benjamin Graham

***

Believing as I do in the sage advice of Mr. Graham, I recently set out to quantify my growing unease with the heights obtained by the bull market of the last five-plus years. As you read below, please realize that this is not a forecast or prognostication about what will happen – especially not in the short term. Timing the market on any sort of a short-term basis is a fool’s errand, as is deviating from your specific financial plan on the advice of a stranger.

Consider this more of a “Where are we at?” with respect to market valuations, secure in the knowledge that times of sensational highs and lows tend to be fleeting and that the market has a tendency to mean-revert (that is, become a weighing machine) in the long term. Having now sufficiently hemmed and hawed my way through the legal stuff – let me say that I find the market significantly overvalued and think that some sort of defensive measures will be wise for most investors in the year(s) to come.

The Levels

To corroborate this belief, I’d like to present you with four measures of market value, all at historically high levels. They are:

  1. Shiller Cyclically Adjusted Price to Earnings Ratio (CAPE)

What it is – The work of Nobel Prize winning behavioral economist Robert Shiller, the CAPE is the price/earnings ratio based on average, inflation-adjusted earnings for the previous ten years.

What it says – The CAPE currently sits at 27.2, 63.9% higher than its’ historical mean of 16.6. The CAPE has only crested or approached 27 three other times – 1929, 1997-2000, and 2007.

What it means – The CAPE is a poor predictor of short-term market movements (most everything is), but is much more reliable in speaking to the long term return horizon. Using Shiller’s own expected return formula (taken from value investing site GuruFocus), yields an expected return over the next 8 years of .3%. What is much more informative than a single prediction, however, is considering the range of possible distributions for the longer term, which are as follows:

Scenario Returns for next 8 years from today

Really Lucky 5.2%

Lucky 3%

Unlucky -3%

Really Unlucky -7.5%

It is certainly worth noting that even the “Really Lucky” scenario that might play out over the next 8 years vastly underperforms the market average.

  1. S&P 500 Price to Earnings Ratio

What it is – A simple measure of the price paid for every dollar of earnings among some of the best capitalized and most liquid US securities.

What it says – The current P/E ratio of the S&P 500 is 19.96, well above it’s historical mean of 15.53 and median of 14.57.

What it means – As with the Shiller CAPE, greatly elevated levels of price to earnings have signaled a much lower return environment in the years to come. Ned Davis research has done the math on times when the market has been over or undervalued relative to fundamentals and has discovered the following:

Returns of S&P 500 Percentage Over/Under Valued (3-31-1926 to 5-31-2014)

More than 20% Overvalued (parentheses denote negative returns)

6 months – (.2)

1 year – (3.6)

2 years – (1.6)

3 years – 6.8

More than 20% Undervalued

6 months – 14

1 year – 19.4

2 years – 30.1

3 years – 47.3

Market Performance

6 months – 3.9

1 year – 8

2 years – 16

3 years – 23.6

According to Ned Davis and company, we are now well over 30% overvalued, comfortably above the threshold for the paltry “Overvalued” returns you see above.

*** future***

  1. Wilshire 5000/GDP – aka, “Buffett Valuation Indicator”

What it is – A sort of price to sales marker for the broader economy, once mentioned by Buffett as his favorite measure of market valuation.

What it says – The current market cap/GDP ratio sits at 127.3%, which is more than two standard deviations from the mean value of 68.8%.

What it meansGiven historical returns from this significantly elevated level of market cap to GDP, the predicted return for ’15 is .7%, which includes dividends. Drawing on Buffett’s comments, GuruFocus considers a 75 to 90% ratio fair value, with 90 to 115% modestly overvalued and anything over 115% significantly overvalued. The only other time since 1950 that this indicator has broken past two standard deviations of overvaluation is, you guessed it, in the run up to the 2000 crash.

  1. Crosby Irrationality Index

What it is – A measure of market sentiment that is comprised of sub-measures of volatility, valuation, fund flows, momentum and interest rate spreads.

What it says – The CII has spent all of 2014 at a level of elevated optimism just short of mania. While valuations have driven the score up, it has not reached “manic” levels, largely as a result of this having been “the most hated bull run in history.”

What it means – The CII provides one and three year projections based on the current levels of market sentiment. These projections should be understood less as specific predictions and more as headwinds or tailwinds to growth. The current projections are for slightly negative (-1.001) returns this year that persist even three years down the road (-2.6266).

Caveats

As with any measure, those listed above are subject to a number of failings. The CAPE includes data from the Great Recession that skew the results, a number of the measures fail to account for the interest rate environment, and so on. While no single measure is flawless, when so many measures point in the same direction, I believe it is worth taking note.

This information in and of itself is meaningless but should take on meaning as you discuss your individual needs with your advisor (you DO have an advisor, right?).

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For very long-term investors, even profound hiccups in the market may be little more than a contrarian buying opportunity. After all, there are more fun and important things to do in life than obsess over financial footnotes.

Assessment

But for those nearing retirement, an unambiguous picture seems to be emerging that returns for the next 8 to 10 years are likely to be depressed in light of the eye-popping returns of the more recent past. Do not act in haste or deviate from your plan if one is in place, but please accept this gentle warning from a concerned party who knows that “this time is never different.”

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Psychopathy and the Medical Profession

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Psychopathy Everywhere?

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By Michael Lawrence Langan MD

Psychopathy is present in all professions.

In The Wisdom of Psychopaths: What Saints, Spies, and Serial Killers Can Teach Us About Success, Kevin Dutton provides a side-by-side list of professions with the highest (CEO tops the list) and lowest (care-aid) percentage of psychopaths.

Interestingly surgeons come in at #5 among the professions with the highest percentage of psychopathy while doctors  (in general) are listed among the lowest [more ……>]

Psychopathy and the Medical Profession

 holloween

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On Hospital Endowment Fund Management

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A Case Model Example

[By Dr. David Edward Marcinko MBA]

http://www.CertifiedMedicalPlanner.org

DEM at Wharton

Just as the field of medicine continuously changes, so too does the field of endowment management.

Endowment managers continue to increase their knowledge of the science and expand their skill in the art.

However, successful endowment managers will continue to focus on the areas that they can control in order to minimize the risk of the areas they cannot.

***

So, here is a case model to show you how it is done.

[Case Model]

Endowment Fund

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hospital

Invite Dr. Marcinko

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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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“Crowd-Sourced” Health Predictions for 2015

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The “Gift of Wonder” Flip Book

A SPECIAL ME-P REPORT

[Download and share your free copy]

GG_HiRes1

 By Gautam Gulati MD

Gosh. What a year it’s been!

2014 was a wild ride filled with the unexpected, unimaginable, and unusual. And you know what? I wouldn’t have had it any other way.

So what’s in store for 2015?

All the healthcare futurists and pundits are taking stabs at predictions with the odds of a poorly played roulette table.  In reality your guess is as good as mine. So I decided to have some fun with it this year and opened up predictions to the community-at-large.

The results are finally in

So, to all those who have inspired me over the years to do the unimaginable, the impossible, and the unusual, I say thank you and offer you a small token of appreciation to stir your sense of wonder and curiosity into the New Year.

Please accept this “Gift of Wonder”a crowdsourced flip book of the community’s wildest predictions for health in 2015.

I hope you enjoy it and I wish you all an unusual new year full of hope, wonder, and curiosity! Please pass-it-on and pay-it-forward!

With sincere admiration for all my readers and supporters who inspire me everyday.

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Giving a Gift of Wonder

Crowdsourced Health Predictions for 2015 (download and share your free copy)

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About the Curator

Channel Surfing the ME-P

Have you visited our other topic channels? Established to facilitate idea exchange and link our community together, the value of these topics is dependent upon your input. Please take a minute to visit. And, to prevent that annoying spam, we ask that you register. It is fast, free and secure.

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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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How employees can acquire hospital securities without cash activity

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On discounted stock-purchase programs

[By Dr. David Edward Marcinko MBA CMP™]

DEM blueTo alleviate cash-flow problems of their employees, hospitals who want them to take part in a discounted stock-purchase program may lend the money to the employees to pay any taxes due and any purchase price for the stock.

Full recourse liability

However, it is important that any such loan be subject to a full recourse liability; if the loan is secured by the stock on a non recourse basis, the transaction may be treated as if it were a grant of an option, and thus there would be no transfer of property until the loan is paid.

The rationale for treatment as an option is that if the property drops in value below the amount of the debt, the employee will not pay the debt and walk away from the property, as he would an option. Thus, until the note is paid, no transfer has occurred. This could negate the effect of a Section 83(b) election.

Example:

The following example demonstrates how the use of employer loans, in connection with a Section 83(b) election, can be used to great advantage to an employee.

The employer in the example on Section 83(b) election (above) lends the employee the cash necessary to meet the income tax liability of the $10,000 grant at 30%, or $3,000. The employee gives the employer a promissory note for $3,000, bearing interest at 8%.

Thus, the employee acquires $100,000 worth of employer stock ownership after five years with no out-of-pocket cost at the date of the grant and an interest cost of approximately $1,300, payable over five years.

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Hospital

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Assessment

Of course, in lieu of making a loan to the employee, the employer can simply agree to give the employee, as a bonus, sufficient cash to cover the tax liability. This is obviously more costly to the employer, as it results in the employee acquiring stock at no out-of-pocket cost.

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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:

Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners(TM)

Foreword Dyken MD MBA

Some Academic Views of Financial “RISK” Tolerance

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The Psychological Studies

[By Staff Reporters]

Understanding risk tolerance should not be a guessing game especially when dozens of academic studies can point us in the right direction. Below are 2 important academic studies in the field of risk tolerance.

  1. Measuring the Perception of Financial Risk Tolerance: A Tale of Two Measures – John Gilliam, Swarn Chatterjee and John Grable – 2010

This study compares the explanatory power of a simple question about risk versus a multi-dimensional 13-item questionnaire when trying to understand someone’s risk tolerance. Unsurprisingly the multi-dimensional questionnaire showed better results. The research helps explain why advisors should not be using boilerplate questionnaires.

Link to paper

  1. Insights from Psychology and Psychometrics on Measuring Risk Tolerance – Michael Roszkowski, Geoff Davey, John Grable – 2005

This paper re-enforces previous studies that show risk tolerance can be measured as long as the questionnaire is long enough and asks good questions (doesn’t mix in questions about risk capacity and risk needs).

Link to paper

More:

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Risk[RISK TOLERANCE v. RISK AVERSION]

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Channel Surfing the ME-P

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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:

Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners(TM)

5 Great Places to Donate Post-Holidays

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It is better to give – than receive!

dave-and-hope10[By Dr. David Edward Marcinko MBA CMP™]

[By Hope Rachel Hetico RN MHA CMP™]

The holiday season elicits a broad range of feelings in people. The most important is that wonderful feeling of giving. We give presents to our family and close friends and often want to extend that a little bit to include others on our list.

Today, as always, a very long list of deserving charities and organizations hopes to be included on your list of post-holiday charity considerations.

The List

At the top of many lists is Toys for Tots. Started in 1947 “to bring the joy of Christmas to America’s needy children,” Toys for Tots is executed by the Marine Corps. You can check for local drop-off sites or donate money directly at their corporate website www.toysfortots.org The lines you see each year give testament to how much this charity means to families who cannot otherwise provide toys for their young children.

Every one of us knows the tinkle of that bell for the Salvation Army. This international organization is part of the Universal Christian church. Besides disaster relief, they provide basic necessities of life—food, shelter, and warmth—and offer many programs for rebuilding the lives of those in peril. Approximately 30 million people received help from the Salvation Army in 2011. You will help others each time you put money in one of the red buckets or donate on their website www.salvationarmyusa.org

giving

Food banks and soup kitchens also provide necessities year round, and the holidays place a considerable strain on donations and manpower. You can find them in your community with a call to the City Clerk or on sites like feedingamerica.org All the better if you can spare some of your time, as your gift will be appreciated by the many grateful people you will encounter.

Your local church may be a natural part of your donating during the holidays. Churches serve the community in many ways and deserve your consideration. Some have toy donation programs or serve holiday dinners, while others operate thrift shops and help to clothe families in need. Most are associated with food banks, and all want to help the community be a more joyful place during the holidays. A call to your church office will inform you about the biggest needs with which you can help.

You can also check with your local hospitals. Particularly, children may have to spend the holidays in the hospital, adding worry and financial drain to families. A new toy or even volunteering to read to a child could make all the difference.

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thanks

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But – Choosing where to donate to charity is tough!

Here’s a simple guide to help.

Assessment

Don’t forget – Give blood to your local blood bank – It is really needed during the holiday season. Your donation might be the most important gift of all to someone in crisis.

Channel Surfing the ME-P

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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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Doctor – What Do You Say When People Ask, “What Do You Do?”

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The Lesson of Magnets?

VR MD

[By Vicki Rackner MD]

http://www.CertifiedMedicalPlanner.org

Whether you’re a clinic employee or a private practitioner, you reap the greatest career satisfaction when you see more of your best-fit patients. How do you attract them?

Magnets

Magnets offer an important lesson.

Depending on the orientation, two magnets will either attract or repel each other.  The strength of the magnetic force is called the magnetism.

The way you present yourself to would-be patients, referring physicians and other SENDERS–people who send you patients– will either attract them or repel them.

Your goal is to optimize your magnetism so you will attract the attention of people you want to engage.

It begins with hello. They say you only have one chance to make a first impression.

One of the first questions people ask you at a social event is, “What do you do?”  To generate referrals, answer in a way that increases the chances of attracting your best-fit patients to your practice. You want your listener to say, “Wow!  I know someone who needs to see you!”

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Magnets

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The Three Answers

There are three ways of answering this question:

  1. By title: You could say, “I’m a rheumatologist” or “I’m a pediatrician.”

The problem with this approach is that your title brings an image to the mind of the listener over which you have little control.

I was at a wedding when a budding Barbara Walters-type  started interviewing me.  This child said to me, “You’re a doctor.”  I nodded.  She asked , “What kind of doctor?”  I told her, “I’m   a surgeon.”  She asked “What kind of surgeon?”  I told her,  “A   general surgeon.”  Her eyes got big as saucers as she said, “Oh, you’re the person who puts those warning labels on the cigarette packs!”

  1. By diagnostic and therapeutic activity: You could say, “I treat orthopedic injuries.”  or “I treat diseases of digestion.”

The problem with this approach is that you’re asking your listener to become a diagnostician. Is their mother’s sub-sternal burning angina or acid reflux?

  1. By result:  You could say, “I help women make a gracious transition through menopause.”  Or , “I help parents set their kids up for a life of health.”  This is the approach with the highest magnetism score.

The most attractive positioning statement answers these three questions:

  • Whom do you help?
  • What results do you help people get?
  • Why is this result important ?

Ideally you craft a simple, memorable, repeatable sound bite.  You and your staff members use it.  People calling your office repeat it.

Assessment

The most magnetic positioning statements are deceptively simple.  Keep working at it.  You’ll know when you’ve found yours.  You pique the curiosity of your listener.  They want to learn more

About the Author

Vicki Rackner MD, author, speaker, ME-P thought-leader and President of Targeting Doctors, helps financial advisors accelerate their practice growth by acquiring more physician clients. She calls on her experience as a practicing surgeon, clinical faculty at the University of Washington School of Medicine and nationally-noted expert in physician engagement to offer a bridge between the world of medicine and the world of business.

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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