Physicians, Nurses and Healthcare Executives Only

Posted on April 10, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

WHERE KINETIC OPPORTUNITIES AND POTENTIAL ENERGY CONVERGE

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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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Financial Advisors and Management Consultants Only

Posted on April 10, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

WHERE KINETIC OPPORTUNITIES AND POTENTIAL ENERGY CONVERGE

Meet OnLine More … to Learn and Earn More™

Wellsprings à à à

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

Posted on April 10, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

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

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Filed under: Op-Editorials | 7 Comments »

Retail Medical Clinics and IT

Posted on April 9, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Competitive HIT Issues Emerging by Default

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

Publisher-in-Chief

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.

***

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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FINANCE: Financial Planning for Physicians and Advisors
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Dictionary of Health Economics and Finance
Dictionary of Health Information Technology and Security
Dictionary of Health Insurance and Managed Care

Filed under: Information Technology | Tagged: CVs, Paul Starr, retail medical clinics | 3 Comments »

Big Pharma’s Dilemma

Posted on April 8, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

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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Filed under: Drugs and Pharma | 4 Comments »

About Dossia.org

Posted on April 7, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Power to the Patients?

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

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

Filed under: Information Technology | 5 Comments »

Modern Hospital IT Systems

Posted on April 6, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Overview of System Architectures

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

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

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FINANCE: Financial Planning for Physicians and Advisors
INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors
Dictionary of Health Economics and Finance
Dictionary of Health Information Technology and Security
Dictionary of Health Insurance and Managed Care

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.

Filed under: Information Technology | 1 Comment »

Of Hospitals and Hotels

Posted on April 5, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

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?

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Institutional: www.HealthcareFinancials.com

Terms: www.HealthDictionarySeries.com

Filed under: Op-Editorials | Tagged: Op-Eds | 3 Comments »

Social HMOs for the Elderly

Posted on April 4, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Extended Health Coverage for Unconventional Expenses

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

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

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

PHYSICIANS: www.MedicalBusinessAdvisors.com
PRACTICES: www.BusinessofMedicalPractice.com
HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
CLINICS: http://www.crcpress.com/product/isbn/9781439879900
ADVISORS: www.CertifiedMedicalPlanner.org
BLOG: www.MedicalExecutivePost.com
FINANCE: Financial Planning for Physicians and Advisors
INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors

Filed under: Managed Care, Retirement and Benefits | 1 Comment »

Enhancing Revenue Cycle Accounting

Posted on April 4, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

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.

Filed under: Practice Management | Tagged: Accounting in Medicine | 1 Comment »

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

Filed under: MAST-HEAD | Tagged: About the "Executive Post" | Leave a comment »

Hospital Employee Stock Ownership Plans

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

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

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

PRACTICES: www.BusinessofMedicalPractice.com
HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
CLINICS: http://www.crcpress.com/product/isbn/9781439879900
ADVISORS: www.CertifiedMedicalPlanner.org
FINANCE: Financial Planning for Physicians and Advisors
INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors
Dictionary of Health Economics and Finance
Dictionary of Health Information Technology and Security
Dictionary of Health Insurance and Managed Care

***

Filed under: Retirement and Benefits | 1 Comment »

Physician Compensation Trends

Posted on April 2, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Don’t Give up Medical Practice; Just Yet!

Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

By now, all physicians, medical practitioners, nurses and healthcare executives know that in 2006 the Medicare Trustees Report projected a 4.7% reduction in physician reimbursement for 2007, and 37% in cumulative cuts over the next nine years.

It also noted that each year in the next decade will feature a 5% cut in doctors’ pay, while physician costs will increase 2% annually www.ama-assn.org/ama/pub/category/16221.html

The Bush administration also called for $36 billion in Medicare reductions over five years, in 2008, and advocated pay-for-performance [P4P] reimbursement metered against predetermined quality standards.

Alarming Trends

As regular readers and subscribers to the Executive-Post realize, the direct results on physician compensation are predictable, but other trends may be even more alarming.

For example, medical student debt burdens (averaging $100,000-$250,000) are economically devastating.

In FY 2000, the federal Health Education Assistance Loan (HEAL) program squeezed significant repayment settlements from its Top 3 deadbeat doctor debtors, and excluded 303 practitioners from Medicare and other federal/state programs; even more occurred thru 2001-07.

And, the flight of doctors out of states like California and Massachusetts; and/or taking early retirement, is particularly noteworthy.

“Don’t Give Up”

Dr. Regina E. Herzlinger, the Nancy R. McPherson professor of business administration and chair at Harvard Business School, and mother of a physician-daughter, opines that there is little wonder that some physicians become depressed and want to give up their careers entirely when pondering the future of medicine, managed care and related compensation issues.

Nevertheless, Herzlinger implores in her classic book, Market Driven Healthcare, “don’t give up practice, yet.”

Pragmatically, the future is bright and offers great opportunity to early adaptors who have the foresight to change medicine for the better and be handsomely compensated, too!

But, physicians’ inability to deal with competitive market forces – and HIT – is well known and many are loath to deal with them.

Assessment

One way is to seek additional management education through a traditional Master’s Degree in Business Administration (MBA), or use an online distance-education resource like www.CertifiedMedicalPlanner.com And, tuition, textbooks and fees may be tax deductible.

In this way, doctors may hope to maintain their place as salary and compensation leaders in the U.S. labor force.

Another way is to read, post, and comment, opine and subscribe to in the Executive-Post. Make it your professional health economics social network-of-choice.

Conclusion

Will you stay the course, or retire from medical practice early?
Will you re-educate and re-engineer; or just give up on medicine?
Is medicine a viable career option for your children, or grand-children?

Please opine. Your comments are appreciated.

Related Information Sources:

Practice Management: http://www.springerpub.com/prod.aspx?prod_id=23759

Physician Financial Planning: http://www.jbpub.com/catalog/0763745790

Medical Risk Management: http://www.jbpub.com/catalog/9780763733421

Healthcare Organizations: www.HealthcareFinancials.com

Health Administration Terms: www.HealthDictionarySeries.com

Physician Advisors: www.CertifiedMedicalPlanner.com

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

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Filed under: Career Development, Practice Management | Tagged: Career Development | 11 Comments »

Hospital Cafeteria Plans

Posted on April 2, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

“Use it -or- Lose it” … Features

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

Under a hospital employee cafeteria plan, each eligible physician, nurse, technologist or employee may choose to receive cash or taxable benefits -or- an equivalent of qualified, non-taxable fringe benefits.

Not Taxable to Employees

The amounts contributed by the employer are not taxable to the employee. In effect, the employee pays for the benefits with before-tax dollars. They remain non-taxable even though the employee could have elected to receive those amounts in cash.

An additional benefit for both employee and employer is that nontaxable cafeteria plan benefits are not subject to FICA taxes, thus saving 7.65% on amounts that would otherwise be under the Social Security wage base.

However, if the healthcare worker or employee does not use all of the monies that are diverted into the cafeteria plan, the unused amounts are forfeited [“use it -or- loose it” provision].

C-Plan Essence

The essence of a hospital cafeteria plan is that it permits each participating employee to choose among two; or more benefits.

In particular, the employee may “purchase” non-taxable benefits by forgoing taxable cash compensation. This ability of participating employees, on an individual basis, to select benefits fitting their own needs, and to convert taxable compensation to non-taxable benefits, makes the cafeteria plan an attractive way of offering benefits to employees.

Many Non-Taxable Benefits

Cafeteria plans may include the following non-taxable benefits:

401 (k) or 403 (b) retirement plans
health and accident insurance
adoption assistance
dependent care assistance
group term life insurance including premiums for coverage over $50,000,
and more!

Cafeteria Plans and Healthcare

It is always to the tax advantage of a healthcare employee to receive employer-provided health and accident benefits in a tax-free form, rather than paying them with after tax money.

Note there is the potential draw back of employees thinking of health care benefits as an implicit condition of employment instead of true non-cash compensation.

Because of increases in healthcare costs, employers are not always willing or able to provide coverage for all of an employee’s medical expenses. This means many employees must often pay for a portion of their medical costs under a co-pay provision.

If an employee is fortunate, the employer may establish a cafeteria plan to allow the employee to fund the co-pay healthcare costs with before-tax dollars.

Example:

If an employee must spend $3,000 annually to provide healthcare coverage for his or her dependents, then the income-tax savings to the employee could be as much as $1129.50 annually, if the employee is in the 30% tax bracket ($900 in income taxes and $229.50 of FICA taxes).

The employer saves $229.50, the 7.65% of gross pay “matching” FICA taxes.

Other Benefits

A cafeteria plan may also be expanded to cover more than just medical benefits. It may offer participants a choice between one or more nontaxable benefits, and cash resulting from the employer’s contributions to the plan or the employee’s voluntary salary reduction.

Participants in cafeteria plans are sometimes given a choice of using vacation days, selling them to the employer and then getting cash for them, or, buying additional vacation days.

Some cafeteria plans also include one or more reimbursement accounts, often referred to as “flexible spending accounts” or “benefit banks.” Under these plans, cash that is forgone by an employee, by means of a salary reduction agreement or other agreement, is credited to an account and drawn upon to reimburse the employee for uninsured medical or dental expenses, or for dependent-care expenses.

Many cafeteria plans include both insurance coverage options and reimbursement accounts.

Conclusion

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

DICTIONARIES: http://www.springerpub.com/Search/marcinko
PHYSICIANS: www.MedicalBusinessAdvisors.com
PRACTICES: www.BusinessofMedicalPractice.com
HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
CLINICS: http://www.crcpress.com/product/isbn/9781439879900
ADVISORS: www.CertifiedMedicalPlanner.org
BLOG: www.MedicalExecutivePost.com
FINANCE: Financial Planning for Physicians and Advisors
INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors

Filed under: Retirement and Benefits | 1 Comment »

Marital By-Pass Trusts

Posted on April 1, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

The Unified Credit Shelter Trust

By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™

A Unified Credit Shelter Trust or Family Trust or By-Pass Trust or an A-B Martial Trust is established to receive property at death equal to the “exclusion amount.”

Thus, the amount in the trust is carved out of your estate and does not go directly to your spouse but is still subject to estate taxes.

However, the amount subject to taxes is offset by the unified credit and hence no tax is due.

Under Economic Growth and Tax Relief Reconciliation Act [EGTRRA], the increased exclusion amount, formerly $1,000,000 and scheduled to increase to $3,500,000 in 2009 and expires in 2010, presents another planning issue. Smaller estates need to be careful, so that the majority of the estate doesn’t end up in the credit shelter trust.

Example

A medical practitioner with a $1.5 million estate, dying in 2003 would have $1,000,000 allocated to the credit shelter trusts, leaving only $500,000 outright to the surviving spouse. The surviving spouse may be surprised to find out that the majority of the estate is in trust and will be subject to withdrawal limitations.

In 2004, when the exclusion amount increased to $1,500,000 the entire estate may go into trust leaving nothing out right to the surviving spouse. These trusts need to contain provisions to allow the spouse access to the money under what is called an “ascertainable standard.”

This standard permits money to be paid out for health, education, maintenance and support [HEMS].

IRS Language

This language has been approved by the IRS and should never be tampered with. If the trust document provides the spouse broader withdrawal power, the risk is that the assets in this trust could be included in her estate, which defeats the purpose of carving out the trust assets in the first place.

Upon your spouse’s death, the assets in the trust are paid to your beneficiaries, commonly the children. If the beneficiaries are minors, provisions are included for their well being until ultimate distribution, similar to the terms indicated previously under the testamentary trust.

Example:

A powerful effect of the trust is the potential for appreciation in trust value.

If for example, the trust starts out at $1,000,000 and then 7 years later the spouse dies, the trust might have appreciated to a $2 million or more and the appreciation is not subject to estate taxation. Drafting of trust language to allow for changing amounts and to accommodate different wording by Congress is important to avoid having to create new documents every time Congress decides to make changes.

Assessment

However, due to the far reaching effects of EGTRRA, all estate plans and documents should be reviewed by estate planning attorneys and informed financial advisors.

Conclusion

Please opine and comment if you have ever considered or used this strategy; and what was the result? How will the current political climate affect the estate tax situation?

Book info: http://www.jbpub.com/catalog/0763745790/

Institutional: www.HealthcareFinancials.com

Linguistics: www.HealthDictionarySeries.com

Filed under: Estate Planning | Tagged: Estate Planning | Leave a comment »

Hospital Cafeteria Plan Elections

Posted on April 1, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Benefit Considerations for Healthcare Workers

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

And, any hospital employee given the opportunity to participate in a cafeteria plan should consider the following issues.

Health Insurance Coverage

If the employee is married and has a spouse who also works, and, the employer-provided health benefits are better under the spouse’s plan, then the employee should elect to be covered by the spouse’s plan and choose another nontaxable benefit or a cash benefit that would be taxable under his or her own cafeteria plan, such as dependent-care coverage or group term insurance coverage.

Switching health insurance requires carefully strategic planning to eliminate potential gaps in coverage created by insurance enrollment criteria.

If the employee does not need the salary or cafeteria-plan benefits to meet current expenses, he or she should consider contributing the cash to a 401(k) or 403(b) plan and defer the tax liability.

If the employee has no working spouse and the employee’s plan is the only source for certain health benefits, the employee should consider what type of benefits he or she really needs for his or her family.

In other words, can the employee get the necessary benefits under the company plan cheaper than he or she could individually, after taking into account that individual coverage will be paid with after-tax dollars, where-as under a cafeteria plan such benefits can be paid with before-tax dollars?

Example:

If an employee who is in the 30% tax bracket is provided a $6,000 plan by her employer. He or she would have to be able to get a comparable plan independently for only $3,741 to be in the same position on an after-tax basis. ($6,000 minus income taxes of $1,800 = $4,200 [$4,200 minus $459 of avoided FICA].

Dependent-care costs

An employee who has a choice of including dependent-care costs may be entitled to an income-tax credit for such expenses if, the employer does not reimburse them.

Thus, if a credit is worth the same or more than the payment under the cafeteria plan, the employee may choose to contribute those dollars toward additional health or life insurance.

Conclusion

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

DICTIONARIES: http://www.springerpub.com/Search/marcinko
PHYSICIANS: www.MedicalBusinessAdvisors.com
PRACTICES: www.BusinessofMedicalPractice.com
HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
CLINICS: http://www.crcpress.com/product/isbn/9781439879900
ADVISORS: www.CertifiedMedicalPlanner.org
BLOG: www.MedicalExecutivePost.com
FINANCE: Financial Planning for Physicians and Advisors
INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors

Filed under: Retirement and Benefits | Leave a comment »

Family Gifting and Physician Loans

Posted on March 31, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Physician Gift and Estate Planning

By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™

The annual gift tax exclusion allows the physician, and others, to give any individual $13,000 per year [$26,000 per couple in 2009] without paying or filing a gift tax return.

There is no limit on the number of individuals who might benefit from your generosity.

Marrieds

If you are married, then you and your spouse together may gift to any number of individuals. The recipients do not owe any tax on the money either.

Excess Gifts

Gifts in excess of $12,000 are subject to current gift tax. A gift tax return must be filed by April 15^th of the year following the gift. Gifts to qualified charities are subject to a different set of income tax rules.

Lifetime Gifting

Gifting assets to family members or others during your lifetime can be an effective estate planning technique. A gift of money or stock to your children automatically reduces your estate.

If your taxable estate is in excess of $2 million, then you are in the [45] percent estate tax bracket; indexed at $3,500,000 in 2009, with repeal of the estate tax and generation-skipping tax scheduled for 2010.

This means that each dollar you can remove from your estate, and allow to appreciate in your children’s estate can help reduce a significant potential estate tax liability.

However, if the sole purpose of gifting is to reduce estate taxes, then the Economic Growth and Tax Relief Reconciliation Act [EGTRRA] of 2001’s reduction, and ultimate elimination of estate taxes, will nullify this technique.

You must remember that tax laws are always subject to change and EGTRRA has a Sunset provision in 2011, which in some form may not totally eliminate estate taxes.

Gifting strategies may still be appropriate depending on your expectation of law changes and where the estate is large and life expectancy is limited. There are gifting traps in these situations, so consult proper counsel.

Stock Gifting

When you gift stock you also give the recipient your cost basis.

For example, if you have low basis stock that you are thinking about selling but are concerned about paying 20 percent in capital gains tax, you could gift portions of the stock to your children (or anyone in the 15 percent income tax bracket) and sell just enough to pay the 10 percent capital gains tax in their bracket.

The gift value is the market price of the stock on date of gift. We are talking about an outright gift, so before you really do it, make sure you can afford to give up the cash or the asset forever.

Conclusion

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

PRACTICES: www.BusinessofMedicalPractice.com
HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
CLINICS: http://www.crcpress.com/product/isbn/9781439879900
ADVISORS: www.CertifiedMedicalPlanner.org
FINANCE: Financial Planning for Physicians and Advisors
INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors
Dictionary of Health Economics and Finance
Dictionary of Health Information Technology and Security
Dictionary of Health Insurance and Managed Care

***

Filed under: Estate Planning | Tagged: Estate Planning | 1 Comment »

Top 10 Diagnostic Related Groups

Posted on March 30, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

High Volume Medicare DRGs

[Staff Writers]

The ten highest volume Medicare DRGs represent about 30% of total Medicare patients. Each of these higher volume DRGs represent from about 2% to 6% of total Medicare volume.

***

	DRG	DRG Description	% Total	Rel Wt
1	127	Heart Failure & Shock	5.99	1.0234
2	089	Simple Pneumonia & Pleurisy Age>17 w/CC¹	3.85	1.1447
3	014	Specific Cerebrovascular Disorders except TIA	3.18	1.2056
4	430	Psychoses	3.18	0.9153
5	088	Chronic Obstructive Pulmonary Disease	3.11	1.0067
6	209	Major Joint & Limb Reattachment Procedures, Lower Extremity	2.78	2.3491
7	140	Angina Pectoris	2.33	0.6241
8	182	Esophagitis, Gastroent & Misc Digest Disorders Age>17 w/CC¹	2.09	0.7617
9	174	G.I. Hemorrhage w/CC¹	2.07	0.9657
10	296	Nutritional & Misc Metabolic Disorders Age>17w/CC¹	1.93	0.9313

Source: Health Care Financing Administration [CMS] 2005

Conclusion

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

DICTIONARIES: http://www.springerpub.com/Search/marcinko
PHYSICIANS: www.MedicalBusinessAdvisors.com
PRACTICES: www.BusinessofMedicalPractice.com
HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
CLINICS: http://www.crcpress.com/product/isbn/9781439879900
BLOG: www.MedicalExecutivePost.com
FINANCE: Financial Planning for Physicians and Advisors
INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors

Filed under: Health Economics | Tagged: Health Care Finance | 1 Comment »

Cash Based Compensation Medical Practices

Posted on March 30, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Business Model Related to Concierge Medicine

Staff Writers

A Cash Based Compensation (CBC) medical practice business model attracts patients who pay cash for desirable services, such as surgeons who dispense scar reducers or in areas such as pain relief, weight loss, aesthetic procedures, and natural health.

Model Parameters

According to consultant Michael Wallerstein, any well-rounded CBC program should include these parameters:

existing patient demand;
low entry cost;
little marketing costs;
existing employees to administer the program;
office capacity; and an
operating plan.

All Specialties Included

Even dentists and podiatrists who perform cosmetic and elective image enhancing services like teeth bleaching, veneer applications, vein reductions, toe shortenings and shoe appliances are amenable to CBC practices.

Assessment

With time and effort, profit for physician compensation may increase 10-20% annually by providing “wants”; rather than medical “needs.”

Conclusion

And so, what is your opinion of these new CBC medical practitioners; ethical physicians or medical merchants?

Book Info: http://www.springerpub.com/prod.aspx?prod_id=23759

Institutional: www.HealthcareFinancials.com

Linguistics: www.HealthDictionarySeries.com

Filed under: Practice Management | Tagged: Career Development | 2 Comments »

Unlimited Marital Deduction

Posted on March 30, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Understanding Physician Estate Planning

By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™

Under the unlimited marital deduction, virtually all transfers to a spouse, whether made during lifetime or at death, are tax-free.

Tax Consequences

However there is a tax consequence for leaving your entire estate to your spouse.

Leaving everything to your spouse does not utilize your exclusion amount, which was $1,000,000 in 2003.

However, under the Economic Growth and Tax Relief Reconciliation Act [EGTRRA] of 2001, the increased exclusion amount, formerly $1,000,000 is scheduled to increase to $3,500,000 in 2009 and expire in 2011.

Assessment

This has no effect after the first death, but when your spouse dies, the estate of the spouse will pay higher taxes.

Conclusion

Please opine and comment if you have ever considered or used this strategy; and what was the result?

Book info: http://www.jbpub.com/catalog/0763745790/

Institutional: www.HealthcareFinancials.com

Linguistics: www.HealthDictionarySeries.com

Filed under: Estate Planning | Tagged: Estate Planning | 1 Comment »

IRC §2032A Special-Use Valuation

Posted on March 28, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Understanding Physician Estate Planning

By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™

Suppose you are a physician or other individual who own a farm that for many years was located well outside the city limits of a growing community, and now the farm is in the path of this growth?

The dynamics of determining the fair market value of your farm have changed. You might be inclined to value it as a farm and your estate would make the argument that it is a farm.

“Highest and Best Use”

The IRS would argue the property should be valued at its highest and best use. Unfortunately for your estate the “highest and best use” might be as a mega mall, apartment buildings, or a high-rise office building.

All considerably more valuable than the farm might be worth.

Enter Internal Revenue Code Section §2032A

Valuation of a property at the highest and best use might force the survivors to sell the land to pay a large estate tax.

On the other hand, valuation at its present use might enable the survivors to carry on the farm business.

IRC Section 2032A permits qualifying estates to value at least a portion of the real property at its “qualified use.” The section applies to farms or other trades or businesses.

Major Requirements

Five major requirements and conditions must be satisfied. Ultimately, the maximum amount by which the value of the special use real estate can be reduced is $800,000 – or other amount indexed for inflation – after Y2000.

Assessment

While this is not an insignificant amount, if there is a large disparity between “highest and best use” and present use value, then planning to avoid the potential liquidity deficit is imperative.

Conclusion

Please opine and comment if you have ever considered or used this strategy; and what was the result?

Book info: http://www.jbpub.com/catalog/0763745790/

Linguistics: www.HealthDictionarySeries.com

Filed under: Estate Planning | Tagged: Estate Planning | Leave a comment »

Hospital-Based Home Care

Posted on March 28, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Agency Count Declines

Staff Writers

Over the past decade, the home care industry has evolved away from agencies that are affiliated with hospitals and toward independent, non-facility-based agencies.

Review

For example, in a recent study it was reported that the number of home care agencies in the U.S. fell nearly 10% in this period, to 13,313 in 2005 from 14,670 in 1996.

But, as the total number of home care agencies slipped over these 10 years, the number of agencies that were hospital-based plunged by more than one-third, to 1,636 from 2,563 in 1997. Hospital-based home care agencies accounted for just 12.3% of all agencies in 2005, down notably from 17.0% in 1997.

Assessment

Spurred by an aging U.S. population, demand for home care is growing. Generally less costly than hospital-based care, home care has benefited from government and third-party initiatives aimed at containing costs at non-hospital sites.

In the years to come, these government and third-party payer cost management efforts are expected to put increased pressure on hospital-based home care agencies.

Conclusion

As medical practitioners, physicians and/or nurse executives, or healthcare administrators; how will the above findings affect you and your institution? Your comments are appreciated.

Institutional: www.HealthcareFinancials.com

Terms: www.HealthDictionarySeries.com

Acknowledgements: We recognize Richard L Frye PhD and Verispan LLC, Yardley, Pa., as the research and reporting source for this information, reprinted with permission and based on information gathered by mail and telephone surveys gathered and effective as of December 31, 2007. It was commissioned, sponsored and underwritten in an arm’s length fashion by the Managed Care Digest Series of sanofi-aventis, Bridgewater, NJ, and developed and produced by Forte Information Resources, LLC, Denver, Colorado, USA

Filed under: Managed Care | Leave a comment »

IRC Section §6166 Extensions

Posted on March 27, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Understanding Physician Estate Planning

By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™

A benefit the IRS allows on the death of a doctor or qualifying small business owner is Internal Revenue Code § 6166. This provides for the extension of the payment of estate taxes over a period of 14 years.

Levels of Qualification

Recent legislation has made it more difficult to qualify; there are now three levels of qualification:

The first is the same as for § 303.
The second adds a strict definition of a closely held business.
The third requires that the business must have been actually engaged in carrying on a trade, medical practice, or business at the time of death.

The first four annual payments are interest only and then the next 10 annual payments are principal and interest. The interest rate on the first $484,000 – or currently indexed amount – of tax due is at 2 percent.

Assessment

Calculating the tax that qualifies for the extension requires applying the percentage of the adjusted gross estate attributed to the small business, multiplied by the total federal estate tax.

Conclusion

Please opine and comment if you have ever considered or used this strategy; and what was the result?

Book info: http://www.jbpub.com/catalog/0763745790/

Linguistics: www.HealthDictionarySeries.com

Related Opinion: Why IRC Section 6166 Is Outmoded By Joseph E. Godfrey III, CLU and Steven M. Schanker Esq. http://www.nysscpa.org/cpajournal/2003/0403/nv/nv3a.htm

Filed under: Estate Planning | Leave a comment »

The Qualified Terminal Interest Property Trust

Posted on March 26, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Understanding the QTIP in Estate Planning

By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™

A qualified terminal interest property trust (QTIP) was designed for physicians and those who have children from a prior marriage.

QTIP Rules

The QTIP rules are complicated and deal with legal rights to assets and in whose estate the assets are titled. Suffice it to say that Congress has allowed a qualification to be put on the normal terminal interest rules to provide for this situation.

The result provides assets that qualify for the unlimited marital deduction, but your spouse does not control where the assets go upon the spouses death. The spouse is entitled to the income generated from the trust for life and is also entitled to the use of tangible property, like the home and contents.

Assessment

In addition to the above, these trusts provide the surviving spouse a limited power to access principal for health, education, maintenance and/or support [HEMS].

Conclusion

Please opine and comment if you have ever considered or used this strategy; and what was the result?

Book info: http://www.jbpub.com/catalog/0763745790/

Linguistics: www.HealthDictionarySeries.com

Filed under: Estate Planning | Tagged: Estate Planning | Leave a comment »

Monte Carlo Simulation

Posted on March 26, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Combining Portfolio Asset Classes

By Dr. David Edward Marcinko; MBA, CMP™

Publisher-in-Chief

Combining the disparate information of a physician’s investment portfolio, into a workable asset allocation strategy, is as much art as it is science; perhaps even more so.

Most doctors, investors or endowment fund managers will use a combination of quantitative and qualitative analyses to develop their allocations.

The quantitative portion of the analyses generally uses a variety of statistical techniques to develop a top-down approach to the general allocation.

After developing a general sense of their desired range of returns, many doctors and investors will then use one of several “optimizer” techniques to assist in constructing such an allocation.

Commonly used optimization techniques include Mean Portfolio Variance Optimization (MPVO) – discussed elsewhere in the Executive Post – and Monte Carlo Simulation (MCS).

Monte Carlo Simulation [MCS]

Named after Monte Carlo, Monaco, which is famous for its games of chance, MCS is a technique that randomly changes a portfolio variable over numerous iterations in order to simulate an outcome and develop a probability forecast of successfully achieving an outcome.

In institutional and individual portfolio management, MCS is used to demonstrate the probability of “success” as defined by achieving the endowment’s asset growth and payout goals.

In other words, MCS can provide the physician, investor or endowment fund manager with a comfort level that a given payout policy and asset allocation success will not deplete the real value of the endowment.

Beware the Divorce from Judgment

Nevertheless, the problem with many quantitative tools is the divorce of judgment from their use. And, although useful, both MPVO and MCS have limitations that make it so they should not supplant physician insight, investor experience, or portfolio manager judgment.

For example, MPVO generates an efficient frontier by relying on several inputs, like expected rate-of-return, expected volatility and correlation coefficients. These variables are commonly input using historical measures as proxies for estimated future performance; which is not ascertainable.

Assessment

These facts alone may present a variety of problems:

First, the MPVO will generally assume that returns are normally distributed and that this distribution is stationary. As such, asset classes with high historical returns are assumed to have high future returns; and this may or may not be true.
Second, an MPVO optimizer is not generally time sensitive. In other words, the optimizer may ignore current environmental conditions that would cause a secular shift in a given asset class returns.
Finally, an MPVO optimizer may be subject to selection bias for certain asset classes. For example, private equity firms that fail, as was prominently noted in 2007 and 2008, will no longer report results and will be eliminated from the index used to provide the optimizer’s historical data-base.

Conclusion

And so, do you consider MPVO and Monte Carlo Simulation [MCS] when constructing your own investment portfolio? Why or why not?

Your thoughts are appreciated.

BUSINESS, FINANCE AND INSURANCE TEXTS FOR DOCTORS:

1 – https://lnkd.in/ebWtzGg

2 – https://lnkd.in/ezkQMfR

3 – https://lnkd.in/ewJPTJs

THANK YOU

Filed under: Portfolio Management | Leave a comment »

IRC Section §6161 Extensions

Posted on March 25, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Understanding Physician Estate Planning

By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™

The IRS has discretion under Internal Revenue Code § 6161 to grant an extension to a physician, or any estate, for up to 10 years to pay estate tax upon a showing of “reasonable cause.”

Interest Still Charged

The IRS charges interest of course, but if the estate does not have the money to pay all the estate taxes when initially due, then § 6161 is a potential opportunity to reduce the immediate payment burden on the estate.

Assessment

Unfortunately, this extension does keep the estate open for the duration of the payment plan and will incur additional accounting and administrative costs.

Conclusion

Please opine and comment if you have ever considered or used this strategy; and what was the result?

Book info: http://www.jbpub.com/catalog/0763745790/

Linguistics: www.HealthDictionarySeries.com

Filed under: Estate Planning | Tagged: Estate Planning | Leave a comment »

Mean Portfolio Variance Optimization

Posted on March 25, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

MPT and the Efficient Frontier

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

Mean Portfolio Variance Optimization [MPVO] has at its core Modern Portfolio Theory (MPT), which seeks to find the “efficient frontier” that defines the minimum risk for any given level of investment portfolio rate-of-return.

Efficient Frontier

In order to find the efficient frontier, MPVO will consider the expected returns, standard deviations (i.e., volatility) and correlation coefficient of individual asset classes within a physician or other investor’s portfolio.

All things being equal, the physician or endowment fund manager would generally choose investments with the highest expected long-term return.

However, the current funding needs placed upon endowments, or in personal portfolios, may require that they be sensitive to the volatility of asset classes. These restrictions are the stuff of MPVO.

Risk of Expected Volatility

Expected portfolio volatility is often defined as “risk” and measured by the standard deviation of investment returns around an expected average return for that same investment.

In other words, an asset class with an expected return of 10% and standard deviation of 5% would have its returns range from 5% to 15% approximately two-thirds of the time.

Two MPVO Types

In conventional single period MPVO, a doctor will make his portfolio allocation for a single upcoming period [time-certain], and the goal will be to maximize expected arithmetic return subject to a selected level of risk.
In multi-period MPVO, a doctor will be concerned with strategies in which the portfolio is rebalanced to a specified allocation at the end of each period.

Such a strategy is sometimes called Constant Proportion (CP), or Constant Ratio Asset Allocation (CRAAL). The goal is to maximize the true multi-period (geometric mean) return for a given level of fluctuation.

Assessment

MPVO is the quantitative assessment which facilitates portfolio asset allocation by considering the trade-off between risk [expected volatility] versus return [arithmetic or geometric]*.

* Geometric mean is the n-th root of the product of n numbers – unlike an arithmetic mean – it tends to dampen the effect of very high or low values which might bias the mean if a straight average (arithmetic mean) were calculated.

And so, do you consider MPT and MPVO [which type] when constructing your own investment portfolio? Why or why not?

Channel Surfing the ME-P

Conclusion

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

PRACTICES: www.BusinessofMedicalPractice.com
HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
CLINICS: http://www.crcpress.com/product/isbn/9781439879900
ADVISORS: www.CertifiedMedicalPlanner.org
FINANCE: Financial Planning for Physicians and Advisors
INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors
Dictionary of Health Economics and Finance
Dictionary of Health Information Technology and Security
Dictionary of Health Insurance and Managed Care

* 8

Filed under: Portfolio Management | 2 Comments »

Medical Care and Tuition Payments

Posted on March 24, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Understanding Direct Payments

By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™

Medical care and tuition payments are either direct payments to a health care provider for the medical care of another person; or direct payments of tuition to an educational institution for another person and are not transfers for gift tax purposes.

For instance, parents may pay all the college tuition for their grandchildren free of gift tax. This is limited to tuition, so room and board and other personal expenses are not included.

Conclusion

Please opine and comment if you have ever considered or used this strategy; and what was the result?

Book info: http://www.jbpub.com/catalog/0763745790/

Linguistics: www.HealthDictionarySeries.com

Filed under: Funding Basics | Tagged: Educational Content | 1 Comment »

IRC Section §529 College Plans

Posted on March 24, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Understanding Funding Options

[By Lawrence E. Howes; CFP™]
[By Joel B. Javer; CFP™]

Internal Revenue Code Section 529 Plans are for college education funding.

These plans allow assets to grow tax-free if the money is used to pay for qualified higher education expenses. Costs include tuition, room and board, books, and some miscellaneous expenses.

But, there are penalties if the money is not used for qualified higher education expenses.

State Pre-Paid Plans

Some states have what they call pre-paid tuition plans and they vary dramatically from state to state.

Contributions qualify for the $12,000 annual exclusion and the annual gift of $12,000 may be aggregated – X5 years – into one payment of $60,000.

Assessment

However, the right to use the $12,000 gift is eliminated for the subsequent four years.

The maximum amount per beneficiary was $235,000 until recently. The account may be structured so that the proceeds will be part of the child’s estate versus the UTMA where the account is included in the custodian’s estate.

Some states permit contributions to be income tax deductible.

Conclusion

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

PRACTICES: www.BusinessofMedicalPractice.com
HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
CLINICS: http://www.crcpress.com/product/isbn/9781439879900
ADVISORS: www.CertifiedMedicalPlanner.org
FINANCE: Financial Planning for Physicians and Advisors
INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors
Dictionary of Health Economics and Finance
Dictionary of Health Information Technology and Security
Dictionary of Health Insurance and Managed Care

Filed under: Funding Basics | Tagged: Educational Content | 7 Comments »

IRC Section §303 Stock Redemptions

Posted on March 23, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Understanding Physician Estate Planning

By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™

A family business or medical practice may make up the majority of a physician’s estate. Unfortunately, although the practice does have value, it may have very little cash.

Recognizing the Dilemma

In recognition of the closely held business owner, the IRS allows stock in the company to be redeemed to pay federal and state death taxes, generation-skipping transfer taxes, and funeral and administration expenses.

There are few tax-deductible ways of getting money out of a corporation and salaries and business expenses head the list.

Example:

For example the IRS maintains that, if a business is at least 35 percent of your adjusted gross estate, the business owner can redeem stock to pay for approved expenses. Since you get a step-up in basis at death, the shares redeemed should not generate a capital gain.

The transaction is deemed a sale of a capital asset, and not a dividend. (A dividend is not deductible so it is taxable to the corporation as well as taxed to you personally upon receipt).

Assessment

The strategy of an Internal Revenue Code § 303 redemption is prudent. However, there must be cash available to redeem the stock. Typically, a life insurance policy is purchased to provide the cash for the redemption.

Conclusion

Please opine and comment if you have ever considered or used this strategy; and what was the result?

Book info: http://www.jbpub.com/catalog/0763745790/

Linguistics: www.HealthDictionarySeries.com

Related: Funding IRC Section 303 to Pay Estate Taxes and Expenses

http://www.nysscpa.org/cpajournal/1997/0597/depts/pfp.htm

Filed under: Estate Planning | Tagged: Estate Planning | Leave a comment »

Introduction to Healthcare Economics

Posted on March 23, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

White-Paper: healthcare_economics

From the Public Health Management and Policy Department

By Ben Hagopian

By Matt Wilson

To understand health economics, it is first critical to understand the basics of economics; or the “dismal-science.”

At its most basic level economics can be defined as the study of choices, made by individuals or groups, when resources are limited. The concept is better known as “scarcity” and is the backbone of all economic thinking.

This white-paper on healthcare economics is a basic dissertation by two Master’s of Public Health [MPH] students from Case-Western Reserve University.

Although theoretical in nature, it is a good review of fundamental principles with recent domestic policy changes; complete with illustrative figures.

The one disappointment was its failure to mention or reference, Kenneth J. Arrow PhD – the youngest Nobel Prize winning economist – of 1972. For more than fifty years he has been one of the most listened to of all practicing economists and is arguably known as the father of “health economics.”

And, for a more pragmatic approach to augment this primer – with real world case models – the listed resources are suggested.

Nevertheless, all readers and ‘”Executive-Post” subscribers are encouraged to review this understandable treatise. It will be well worth your time.

Hope Rachel Hetico; RN, MHA, Certified Medical Planner™

iMBA, Inc – Atlanta, Georgia USA

www.MedicalBusinessAdvisors.com

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

Individual: http://www.jbpub.com/catalog/0763745790/

Risk Management: www.jbpub.com/catalog/9780763733421/

Institutional: www.HealthcareFinancials.com

Terms: www.HealthDictionarySeries.com

Filed under: Health Economics | Tagged: Health Economics | 2 Comments »

Medical Building Facility Fees

Posted on March 21, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Surcharging Startled Patients

[By Staff Writers]

As all print subscribers to Healthcare Organizations [Financial Management Strategies], and regular readers of the “Medical Executive-Post” are aware, medical billing is complex enough without throwing another factor into the mix.

Medical Facility Fees?

Increasingly, however, it seems that patients are being caught off guard by a new “facility fee” for visiting doctors who are based in a hospital-owned building. The issue is not exactly new, but it is expected to become more contentious as patients use high deductibles imposed by consumer directed health care plans [HD-HCPs]; according to a report by FireceHealthcare.

Those facilities, like Milwaukee’s Froedtert & Community Health who charge the fees, usually post warning signs although their patients often end up arguing with insurance companies over payment.

Making the financial sting even worse, some insurance companies treat the facilities fee at the doctor’s office as the first dollar of what can be a high hospital deductible, rather than applying it to a physician deductible.

And, the fees vary widely, from a relatively small $20 or $30 to a few hundred dollars.

Assessment

What’s even more insidious is that some hospitals are already charging patients not only for professional medical services, but also a facilities fee for physical use of the building.

Conclusion

This historical review paper provides a retrospective review of IRs and implications for modernity.

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

DICTIONARIES: http://www.springerpub.com/Search/marcinko
PHYSICIANS: www.MedicalBusinessAdvisors.com
PRACTICES: www.BusinessofMedicalPractice.com
HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
CLINICS: http://www.crcpress.com/product/isbn/9781439879900
ADVISORS: www.CertifiedMedicalPlanner.org
BLOG: www.MedicalExecutivePost.com
FINANCE: Financial Planning for Physicians and Advisors
INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors

Filed under: Practice Management | Tagged: Managed Care | 17 Comments »

Of Financial Footnotes and Fine-Print

Posted on March 21, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Financial Statements Review for Physicians

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

Of course, it is important to read the fine-print and understand the footnotes when reviewing all four consolidated financial statements or studying an annual business report.

And, these four consolidated statements are:

Balance sheet
Net-income statement
Cash Flow Statement
Statement of Retained Earnings

However, it is seldom done by the physician, financial manager or healthcare executive. Yet, the footnotes to financial statements and fine print of annual reports are often packed with meaningful information.

Footnote Highlights

The following are some usual footnote highlights for healthcare entities:

Significant accounting policies and practices – Public healthcare companies are required to disclose the accounting policies that are most important to the portrayal of the company’s financial condition and results. These often require management’s most difficult, subjective or complex judgments.
Income taxes – The footnotes provide detailed information about the healthcare company’s current and deferred income taxes. The information is broken down by level – federal, state, local and/or foreign, and the main items that affect the company’s effective tax rate are described.
Pension plans and other retirement programs – The footnotes discuss the healthcare company’s pension plans and other retirement or post-employment benefit programs. The notes contain specific information about the assets and costs of these programs, and indicate whether, and by how much, the plans are over-or-under funded.
Stock options – The notes also contain information about stock options granted to officers and employees, including the method of accounting.

Conclusion

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

DICTIONARIES: http://www.springerpub.com/Search/marcinko
PHYSICIANS: www.MedicalBusinessAdvisors.com
PRACTICES: www.BusinessofMedicalPractice.com
HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
CLINICS: http://www.crcpress.com/product/isbn/9781439879900
ADVISORS: www.CertifiedMedicalPlanner.org
BLOG: www.MedicalExecutivePost.com
FINANCE: Financial Planning for Physicians and Advisors
INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors

Filed under: Investing | Tagged: Health Care Finance | 1 Comment »

Statement of Retained Earnings [Shareholder’s Equity]

Posted on March 20, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Financial Statement Review for Physicians

Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

The Statement of Retained Earnings or Shareholder’s Equity [Statement of Changes in Unrestricted Net Assets] is only one of four financial statements.

The four consolidated financial statements are:

Balance sheet,
Net-income statement,
Cash flow statement, and
Statement of retained earnings.

The Statement of Shareholder’s Equity is the newest statement that lists changes that occurred the previous year.

The major elements of stockholders’ equity include capital stock, paid-in capital, retained earnings, treasury stock, unrealized loss on long-term investments, and foreign currency translation gains and losses.

Assessment

Shareholders equity sometimes called capital or net worth. It represents money that would be left if a company sold all of its assets and paid off all of its liabilities.

This leftover money belongs to the shareholders or the owners of the hospital, clinic, practice or other healthcare entity.

Conclusion

And so, do you understand and review your financial statements regularly; why or why not?

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

DICTIONARIES: http://www.springerpub.com/Search/marcinko
PHYSICIANS: www.MedicalBusinessAdvisors.com
PRACTICES: www.BusinessofMedicalPractice.com
HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
CLINICS: http://www.crcpress.com/product/isbn/9781439879900
ADVISORS: www.CertifiedMedicalPlanner.org
BLOG: www.MedicalExecutivePost.com
FINANCE:Financial Planning for Physicians and Advisors
INSURANCE:Risk Management and Insurance Strategies for Physicians and Advisors

Filed under: Investing | Tagged: Health Care Finance | Leave a comment »

Statement of Cash Flows [SCFs]

Posted on March 20, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Financial Statement Review for Physicians

Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief ]

Did you know that the Statement of Cash Flows [SCFs] is only one of four financial statements? Yep; it is true.

The four consolidated statements are:

Balance sheet,
Net-income statement,
Cash flow statement and,
Statement of retained earnings.

The SCF summarizes the affects of a medical practice or health entity on cash balances and/or liquidity from these three activities:

Operating activities: Including cash inflows (ARs, receipts, donations, accrued expenses, interest, and dividends) and outflows (inventory, prepaids, supplies, and loans) – this is where the majority of hospitals or medical practices generate most of their revenues from patient services and to a lesser degree from grants or other contributions, etc;
Investing activities: Including the disposal or acquisition of non-current assets, such as equipment, loans or marketable securities; and,
Financial activities: Generally including the cash inflow or outflow effects of transactions and other events, such as issuing capital stock or notes involving creditors, owners, or shareholders.

Assessment

Prior to 1988, the formal SCF was known as a Statement of Changes in Financial Position and projected estimated cash flows by month, quarter, and year, along with the anticipated timing of cash receipts and disbursements.

Conclusion

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Federal Drug Detailing Program

Posted on March 19, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

New Proposal for “Academic” Detailing

[By Staff Writers]

A bill will soon be introduced in the United States Senate that would offer physicians an alternative source for the latest information about new drugs, instead of relying on pharmaceutical manufacturers and retail drug representatives.

The Proposal

The legislation, sponsored by Senators Herb Kohl (D-Wisconsin) and Dick Durbin (D-Ill.) would create a federal “academic” detailing program to produce independent educational materials for physicians and medical professionals on the safety and comparative effectiveness of prescription drugs.

This would include generic and over-the-counter products, based on research at pharmacy and medical schools, according to Modern Physician.

Assessment

Now, some academic detailing services have already been implemented at the state level and by integrated health systems such as Kaiser Permanente, while preliminary results suggest that these programs have effectively changed prescribing behavior while reducing health care costs.

Conclusion

And so, what are your thoughts on the matter; please comment and opine?

***

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Fixed Annuity Tax Query?

Posted on March 19, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Dear Medical Executive-Post,

I purchased a fixed contract annuity for $50,000 in 2004.

This was a guaranteed principle annuity with MetLife. I used money from a CD. This was not an IRA. I withdrew interest monthly and withdrew the allowed 10% per year.

In January 2007, the interest was so low (2%), that I decided to withdraw all funds. I was charged a 6% early withdrawal penalty (approx. $2,300).

How is this treated for taxes?
Early withdrawal penalty on Line 33?
Loss on investment?

This does not show on the 1099, but it is on the remittance advice.

Thank you.
Linda

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Net Income [P&L] Statements

Posted on March 18, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Financial Statements [A Review for Physicians]

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

The Net Income [Profit-and-Loss Statement] Statement [NIS] is only one of four financial statements.

The four consolidated statements are: balance sheet, net-income, cash flow and retained earnings.

The NIS reflects the following in a medical practice or healthcare business entity:

Income from patient services, plus revenue from research grants, educational programs, gift and cafeteria sales, office space and parking lot rental, and investment income; and,
Expenses including general overhead, non-operating expenses like salaries and wages, fringe benefits, supplies, interest, professional fees, bad debts, depreciation, and amortization.

Increases in working capital, current assets, the retirement of debt, and investment in new fixed assets are not considered in the Net Income Statement [NIS].

Assessment of Accounting Differences

Definitional differences do occur, however, in the income statement.

For example, the NIS may report physician compensation and benefits in the expense category, during a period of time.

Small physician practices, on the other hand, may report income and expenses on a “cash accounting” basis reflecting income actually received and expenses actually paid.

The “accrual method” of accounting records expenses when they are incurred and income when earned, not when paid or received as in the cash method.

The cash method is easier, but the accrual method is more accurate and most healthcare entities use this method. Accrual accounting will increase going forward because of the nature of discounted contracts, capitated contracts, or other fixed reimbursement arrangements.

Conclusion

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Balance Sheet [Statement of Financial Position]

Posted on March 18, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Financial Statements Review for Physicians

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

The Balance Sheet [BS] is one of four financial statements that report a medical practice or healthcare entities financial position in terms of its assets, liabilities, and shareholder/owner equity, at a specified point in time.

The four consolidated statements are: balance sheet, net-income, cash flow and retained earnings.

Included on the Balance Sheet are the following line items:

Fixed assets include property, buildings, furniture, and equipment.
Current assets include those that can be converted into cash within a short period of time, typically within a year; such as Accounts Receivable (AR), checking accounts, cash equivalents and investments, money funds, inventory and pre-paid expenses; other long term assets like intangibles (and goodwill).
Current liabilities and Accounts Payable (AP) are to be paid within the fiscal year, and include short-term debts, salaries and wages, accrued expenses and other notes.
Short-term liabilities are loans repaid over one year.
Long-term liabilities are loans repaid over many years.

Assessment

Ownership is shown in the form of retained earnings or medical practice equity and represents the difference between the total assets and total liabilities of the unit.

Working Capital is a key concept in cash flow analysis. Working Capital is the difference between current assets and current liabilities [WC = CA – CL].

An increase in working capital implies (-) cash flow; a decrease implies (+) cash flow.

Cash position, or liquidity, is measured by changes in working capital, not the level of working capital.

Conclusion

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Hospital Acquired Conditions

Posted on March 17, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Clarifying “Never-Events” Terminology

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

Did you know that “never-events” are also being called “hospital acquired conditions”; in some cases?

Of Terms and Definitions

Below is the list of conditions that the Centers for Medicare and Medicaid Services (CMS) selected in its FY 2008 final rule:

Serious Preventable Event — Object Left in Surgery
Serious Preventable Event — Air Embolism
Serious Preventable Event — Blood Incompatibility
Catherther-associated Urinary Tract Infections
Pressure Ulcers (Decubitus Ulcers)
Vascular Catheter-Associated Infection
Surgical Site Infection — Mediastinitis After Coronary Artery Bypass Graft (CABG) Surgery
Hospital-Acquired Injuries — Fractures, Dislocations, Intracranial Injury, Crushing Injury, Burn and Other Unspecified Effects of External Causes

Assessment

IOW: You might say “nosocomial”; but I may say “hospital-acquired” when it comes to infections?

And so, is this a linguistic technique to take some of the legal-liability and “sting” out of “never-events” terminology?

Does a term-of-art really matter to the affected patient? Suppose you were the patient?

Conclusion

Please comment and opine?

Filed under: Risk Management | Tagged: Health Law & Policy | 9 Comments »

On CPT® and HCPCS Codes

Posted on March 17, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Understanding Cost Drivers

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

Currently, there are more than 10,000 physician services designated by the Current Procedural Terminology® (CPT) or Healthcare Common Procedure Coding System® (HCPCS) codes.

Types of Cost Drivers

Each reflects the three major cost drivers of a particular procedure:

1) Physician work: or the Relative Value Unit (RVUw) of medical providers’ work efforts, pre-service, intra-service and post-service time.

Patients may exhibit anxiety when examined orduring procedures resulting in the need for additional timeand effort by the physician to respond to and prepare for the examination or procedure. This uniformly adds moretime and stress to the pre-service and intra-service period as doctors respond to constantly changing behavior, questionsand level of cooperation in varying specialties.

Follow-up communicationwith employers, family, friends and concerned others requires increased post-service times.

2) Practice expenses (RVUpe): including non-physician costs but excluding medical malpractice coverage premiums.

The practice expense component of the RBRVS includes clinicalstaff time, medical supplies and medical equipment. Often, the costsof supplies and equipment are not proportional to practicesize.

Major factorsaffecting practice expense are the volume of telephone, cell or internet management services, and the casemanagement and administrative work required.

For example,high patient turnover requires more examination rooms to maintain physician efficiency.

High volume requires moreclerical staff to deal with larger patient-flow volume and resulting phone calls, difficultiesdressing and undressing patients, and is marked by increasedcomplexity and time in collecting laboratory specimens.

Thesefactors must be accounted for in any resource-based practiceexpense study and in the resulting practice expense calculationsfor medical services; and

3) Malpractice (RVUm): representing the cost of liability insurance.

The RBRVS system assigns RVUs to cover the malpractice expensesincurred by physicians.

These malpractice RVUs, originally calculatedfor office-based physicians, may systematically undervaluethe practice liability costs for some specialties.The prolonged statutes of limitation on some legalactions may result in increased malpracticerisk exposure for physicians providing such services [i.e., pediatricians].

Assessment

The differences in exposure may not be calculated in theRBRVS system, and were not included in initial studies. Specialty specific survey data for malpractice expenseshould be used for this component when assigning final RVU valuations.

Of course, without specialty specific CPT® codes, however, there is no wayto do this objectively.

Conclusion

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MS-DRG Classification System

Posted on March 16, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Upgrading the DRG Scheme of the Mid-Nineties

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

The Centers for Medicare and Medicaid Services [CMS] just adopted as final its proposal to restructure the older 538 Diagnosis-Related Groups (DRGs) to 745 new MS-DRGs (Medicare Severity-adjusted Diagnosis Related Groups) to better recognize severity of patient illness.

According to the CMS and the consulting RAND corporation, the newer MS-DRGs more accurately capture resource utilization by splitting the large number of former DRGs into three different categories based on the presence or absence of diagnoses classified as “major complication or co-morbidities” (MCC), “complications or co-morbidities” (CC), or “without MCC/CC” (Non-CC).

Phase-In Period

The MS-DRGs will be phased in over a two-year period, rather than at one time, as originally proposed.

For the first year of the transition (FY 2008) half of the relative weight for each MS-DRG will be based on the current DRG relative weight and half will be based on the new MS-DRG relative weight.
For the second year (FY 2009), the relative weights will be based entirely on the MS-DRG relative weight.

IPPS and Budget Neutrality

CMS adopted its proposal to reduce the In-Patient Prospective Payment System [IPPS] standardized amounts by 4.8% to maintain budget neutrality and account for expected changes in coding and documentation.

Instead of applying a 2.4% adjustment over a two year period as proposed, CMS will apply an adjustment of -1.2% for FY 2008 and based on current projections will apply adjustments of -1.8% each year to the IPPS standardized amounts for FYs 2009 and 2010.

Assessment

The final rule will implement Section 5001(c) of the Deficit Reduction Act of 2005 (DRA), which requires the secretary to select at least two conditions that are (a) high cost or high volume or both, (b) result in the assignment of a case to a DRG that has a higher payment when present as a secondary diagnosis, and (c) could reasonably have been prevented through the application of evidence-based guidelines by October 1, 2007.

Conclusion

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Thomas E. Getzen; PhD

Posted on March 15, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

ABOUT

Dictionary of Healthcare Economics and Finance

Why the Dictionary of Healthcare Economics and Finance?

Every business and healthcare administration student I’ve ever taught over the last three decades has struggled to decipher the alphabet soup of medical economics (i.e., OPHCOO, ALOS, DRG, RBRVS, behavioral health, acuity, etc), while those coming from clinical medicine struggled to internalize the lingo of finance (i.e., call premium, cost benefit ratios, IGARCH, aacpd, IBNR ABCM, internal rate of return, accounts receivable days outstanding, etc.).

Until we have a common language however, medical and business professionals cannot possess a shared vision, nor can we communicate successfully to create healthcare entities that provide quality care to patients and reasonable profits to medical practitioners.

Of course, no single tool can meet all needs and there are many fine books on healthcare economics and finance, along with a legion of consulting firms, management associations and university programs.

Yet, to effectively use these resources, one needs to have the right words, and to use seemingly everyday terms in a way that economists and healthcare financial experts speak.

Unfortunately, healthcare service costs continued to rise more rapidly than wages during the last decade, and consumed an ever-larger share of Gross Domestic Product (GDP), creating hardships for both employers and employees.

For example, health spending accounted for 15.3 percent of the nation’s economy or $2.05 trillion in 2006, averaging $6,175 for every American. Health insurance premiums rose 8.8% to more than $14,500 for family coverage, and by 2013, the US government forecasts health spending will reach 18.4 percent of gross domestic product.

It is no wonder that controlling costs is the top concern of fringe benefit specialists, according to Deloitte Consulting and the International Society of Certified Employee Benefit Specialists.

More than one-third of the rise was due to a 13.6% increase in outpatient spending. Higher utilization rates accounted for 43% of the increase, fueled by increased demand, more intense medical treatment and defensive medicine, according to PricewaterhouseCooper.

And, let us not forget that one in seven Americans lack health insurance; that’s 46 million people or 15.7 percent.

At the same time, medical professionals struggled to maintain adequate income levels. While some specialties flourished, others like primary care barely moved forward, not even incrementally keeping up with inflation.

Increasing, some physicians have become more aggressive in seeking out business opportunities. For example, Neurosurgeon Larry Teuber MD, built a specialty hospital in Rapid City SD, and earned $9 million dollars in a single year. Investors also became wealthy, and the hospital where he previously practiced and some former colleagues were not so fortunate or happy; even suggesting that he stepped “over the line.”

While it is difficult to fully understand a complex situation from a brief overview, it is vital for medical professionals to have definitions that clarify “the line,” and for businesses to define the forces and implicit understandings that underlie medical ethics.

Alas, the Dictionary of Healthcare Economics and Finance cannot solve these problems, just as the rule-of-law cannot answer the question of whether or not Dr. Teuber did “the right thing.”

What the Dictionary can do however, is set the context, and clarify the terms of debate. Consumers also need to know what these terms and conditions mean. If this was not evident until now, passage of Medicare Part D has made it painfully obvious that clarity is needed, and that continuing education in the economic and financial terminology of healthcare is a lifetime task.

Once drug co-payments, corridor deductibles and exclusions are mastered, one can begin to sort out the limits on long-term care insurance, homecare and hospice benefits, and the ever-changing levels of hospital and physician reimbursement dictated by SGA (sustainable growth adjustments) … and there is still much more to study and learn. It takes knowledge to practice medicine and to earn capital, assume risk and invest in emerging healthcare entities.

And, none of us can escape the responsibility of knowing what the terms of engagement are. In times of great flux, such as the revolution in reimbursement and payment systems occurring today, codified information protects us all.

The Dictionary of Healthcare Economics and Finance provides that protection by bringing stability to the nomenclature of healthcare fiscal and economic concerns.

With 10,000 definitions, acronyms, illustrations, cliometric equations and industry notables, the Dictionary is an authoritative and comprehensive guide to better healthcare administration transactions.

Dr. David Edward Marcinko, Academic Provost for the Institute of Medical Business Advisors, Inc, and a Certified Medical Planner© should be complimented for conceiving and completing this ambitious project.

The Dictionary of Healthcare Economics and Finance spells out the terms of reference and the principle players in the contemporaneous healthcare industrial complex. Having such a compendium readily at hand and sharing it with others, is a way for patients, accountants, financial planners and insurance agents, medical practitioners, nurse managers and healthcare executives to improve economic efficiency and clinical quality.

Of course, it may even help restore fiscal enterprise-wide sanity, as well.

Simply put, my suggestion is to refer to the Dictionary of Healthcare Economics and Finance frequently, and “reap”.

The New Yorker, April 4, p.47, 2005.
Wall St. Journal, Aug 2, 2005.
Reuters, Jan 31, 2006.
Modern Healthcare Jan 31, 2006.

Thomas E. Getzen, PhD

Executive Director, International Health Economics Association

Professor of Risk, Insurance and Healthcare Management

The Fox School of Business – Temple University

Philadelphia, Pennsylvania, USA 19122

More Terms – Health Dictionary Series:

***

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MGMA Reimbursement Report

Posted on March 15, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Charting Medicare Uncertainty in 2008

Staff Writers

According to the Medical Group Management Association [MGMA], physician group practices nationwide are reacting to an uncertain reimbursement environment and the failure of Medicare physician payments to keep pace with the cost of delivering care.

Uncertain Economics

As a result of a six-month adjustment to Medicare payments, the looming 10.6 percent cut scheduled for July 1 2008 – and an additional 5.4 percent cut to physician reimbursement scheduled for January 2009 – physicians and medical practices are considering reducing beneficiary access further and making operational sacrifices.

Assessment

Nearly 24 percent of respondents indicated that as a result of the financial uncertainty created by the temporary adjustment to Medicare physician payments – and pending 10.6% reductions scheduled for July 2008 – they had either begun limiting or not accepting new Medicare patients.

And, nearly half (46 percent) of respondents said they would have to stop accepting and/or limit the number of Medicare beneficiaries their practices treat.

Conclusion

And so, how will you deal with the diminishing reimbursement environment in a changing regulatory and economic milieu; please be specific with your comments?

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AMGA Physician Supply Study

Posted on March 14, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Cejka Suggests Economic Disparities to Increase

Staff Reporters

According to a new report by the American Medical Group Association (AMGA) and Cejka Search, the economic imbalance in supply and demand for physicians will intensify as the U.S. population continues to grow faster than the physician workforce.

Moreover, added pressure will come with the increasing number of physicians practicing medicine on a part-time basis.

Findings

In the recently released survey, responding groups reported an increase in the percentage of physicians practicing part-time from 13 percent in 2005 to 19 percent in 2007, while males increased from 5 percent to 7 percent, and females increased from 8 percent to 12 percent.

The age group with the greatest number of physicians practicing part-time is between 35 and 39; the gender split among part-time physicians in that age group is 15 percent male and 85 percent female.

Of the physicians practicing part-time, 83 percent practice more than half of a workweek and 45 percent practice at least three-quarters of a work-week.

And, eighty-six percent of respondents reported that they hired hospitalists or engaged with a hospitalist organization in the past year, while the likelihood of the group doing so increased with the size of the group and if it was owned by a hospital or an integrated delivery system.

Conclusion:

And so, is there a solution to this conundrum; please comment?

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Managed Care Contract De-Selection Risks

Posted on March 14, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Origins of Medical Practice Patient Flow

[By Dr. Charles F. Fenton III; Esq]

In the current medical environment a physician’s practice does not consist of a collection of individual patients, or even of the “charts.”

Rather, a physician’s practice consists of a number of managed care contracts that allows the physician to be a member of a panel and listed in the individual subscriber’s insurance book-of-business.

Practice Cash Flow

Today, patients merely flow from managed care contracts. Without managed care contracts, there are few patients and little cash flow.

Therefore, the physician may face the risk of being de-selected from an individual, or several, managed care panels as contractual issues change, morph or are otherwise altered during each enrollment period.

Assessment

Each de-selection will have an adverse effect on the physician’s practice. In actuality, the revenue lost from de-selection will come disproportionally from the net revenue of the practice.

Often one de-selection will snowball into several de-selections, until the physician barely has a practice remaining.

Conclusion

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Frank A. Cappiello; MBA

Posted on March 13, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

About:

Financial Planning for Physicians and Advisors [second edition]

Financial Planning for Physicians and Advisors is essentially a “how-to book” on finance, financial planning and related topics for healthcare providers.

Fortunately for patients, medicine requires a high degree of professional training, both in terms of science and technology. Unfortunately for providers, it affords little time for acquiring medical practice management skills, or learning about the financial aspects of business or investment planning.

More to the point, this is an unusual textbook on financial planning for two reasons:

First, it is a detailed guide for physician’s seeking the complex road to success and profit in the confusing healthcare industrial complex. Rarely does one see such clarity of presentation, without the usual jargon that often discourages those trying to learn such a foreign and forbidding subject, as finance.
Second, the subject matter is focused for medical providers who work in one of the fastest growing industries in the United States.

The contributors hope that by integrating both disciplines of finance and medical management, they will help foster affordable and profitable healthcare for our nation, which is so entrepreneurial, yet aging. I

In my thirty-five years on Wall Street, I have observed that physicians are particularly disadvantaged when it comes to anything regarding finance.

Most medical professionals have enough on their mind practicing their specialty and keeping up with healthcare technology and practice trends, that planning for their financial future is often forgotten.

Financial planning and good investment practices require a solid background of how companies work in the “real world”, and an awareness of how they function within the economy. These economic essentials are vital to understanding business, as principles like budgeting, risk management, cash flow analysis, fiscal benchmarking and rudimentary accounting are presented in this book.

Furthermore, the necessity of keeping up with state and federal insurance legislation, the Health Insurance Portability and Accountability Act and other complex managed care contracting issues, places a continual burden on the individual practitioner, group or medical network seeking to stay abreast of current developments.

But, the text focuses on financial planning and how the healthcare professional can increase personal knowledge and skills in this area. The coverage is both broad and yet detailed, ranging from basic macroeconomic factors that affect our national economy, such as the Gross Domestic Product (a single figure that summarize the business activity of the US), to the more mundane activities of maintaining cash flow, tax reduction strategies, home mortgages and even correcting credit card reporting errors.

More sophisticated topics include: debt and equity investment vehicles, derivatives, mutual fund and hedge fund investing, portfolio management and risk analysis, and the new laws on tax, retirement and estate planning.

The book rightly concludes with practice succession planning for doctors, and begins with a chapter on the psychological meaning of money itself.

It seems to me that all those in healthcare are well-served by reading this book with its format and step-by-step setup process for financial success, in terms of starting and ultimately surviving in a complicated business full of pitfalls and misinformation.

Most useful will be the extremely detailed table of contents that allows the user to quickly pinpoint an area of interest, and get started answering a problem.

Simply put, my recommendation is to read: Financial Planning for Physicians and Advisors, and “reap”

Frank A. Cappiello; MBA
President, McCullough, Andrews & Cappiello, Inc
10751 Falls Road Suite 250
Lutherville, MD 21093
Distinguished Visiting Professor of Finance
Loyola College, Maryland

Former Wall $treet Week with Louis Rukeyser Guest and Host

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Medical Management Services Organizations

Posted on March 13, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Understanding MSOs

By Dr. David Edward Marcinko; MBA CMP™

[Publisher-in-Chief]

Most medical practice management services organizations [MSOs] for doctors are organized as IPAs.

Under such plans, doctors make the rules, regulations and medical care guidelines while MSO executives (MBAs, CPAs, CFAs, PhDs and JDs) administer those policies. Centralized data is collected and the organization is responsible for utilization review, quality control, and eligibility verification and payment.

Definition

The MSO is more of a broker, who works for the physicians in the plan, marketing, selling and running it on a daily basis. This leaves the MD’s unfettered to provide patient care; for a price that is typically 10-18% of net patient revenues, per month.

Practitioner Candidates?

A medical practitioner may be a candidate for a MSO organization if s/he possesses most of the following characteristics:

excellent medical education,
good business background,
honed management and leadership skills,
practices in a large multi-doctor group with rising net income,
uses current HIT systems,
has gross margins exceeding fifty percent,
provides ancillary services such as a wound care or ambulatory surgery center,
is under 45 years of age, and;
desirous of practicing medicine in the future.

Assessment

Finally, the provider should have some business savvy and practice in an area with relatively weak MCO market penetration.

Any provider should also consider joining a MSO if his future professional outlook is optimistic and positive.

Conclusion

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Managed Medical Care Contract Risks

Posted on March 13, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

More than Malpractice Liability

By Dr. Charles F. Fenton III; Esq

Attorneys are becoming more aggressive in suing HMOs and other managed care companies.

A Review

Historic bars to such suits are declining simultaneously with recent Federal ERISA protection erosion. The upshot is that more litigation against managed care companies, their affiliates, and their health care providers are likely.

Doctor Awareness

The health care provider needs to be aware of these trends, needs to evaluate his/her own situation, and may need to take certain steps to limit these new evolving risks and potential liabilities.

For example, the usual method of protection for the practicing physician, the use of the corporate form of business, is usually no benefit when signing managed care contracts.

Most managed care companies credential the individual physician and hence require that the individual physician and not the professional corporation sign the contract.

Assessment

This may put all of the physician’s personal assets at risk!

Conclusion

Your comments are appreciated?

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Office Based EMR Cost Report

Posted on March 12, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

A Preliminary BC/BS Cost-Benefit Analysis

By Staff Reporters

BlueCross-BlueShield of Massachusetts recently announced that it will not require physicians to install or use electronic medical records [EMRs] to participate in its new bonus program. The health plan came to the conclusion that the financial benefits of office-based electronic medical records systems are just not worth the cost to doctors.

Little Office-Based Value

Relying on information from past studies, the American Medical Association [AMA] estimated that office-based doctors see only 11 cents of every dollar saved through the use of information technology, according to AMNews reports.

More Hospital Value

But, the Massachusetts Blues did find value in health information technology [HIT] that physicians would need to use, as its own cost-benefit analysis concluded that computerized physician order entry makes financial sense in the hospital and enterprise-wide healthcare setting.

Assessment

The MA-Blues will require hospitals and health systems to install computerized physician order entry systems [CPOEs] by 2012, in order to participate in the bonus program.

Conclusion

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

DICTIONARIES: http://www.springerpub.com/Search/marcinko
PHYSICIANS: www.MedicalBusinessAdvisors.com
PRACTICES: www.BusinessofMedicalPractice.com
HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
CLINICS: http://www.crcpress.com/product/isbn/9781439879900
ADVISORS: www.CertifiedMedicalPlanner.org
BLOG: www.MedicalExecutivePost.com
FINANCE:Financial Planning for Physicians and Advisors
INSURANCE:Risk Management and Insurance Strategies for Physicians and Advisors

Filed under: Information Technology | Tagged: AMA, ARRA, CPOEs, EHRs, electronic medical records, EMRs, Health I.T., healthcare IT, HITECH, MA-Blues, obama | 1 Comment »

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