HOSPITALS: Management, Operations and Strategies

Tools, Templates and Case Studies

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COMPREHENSIVE FINANCIAL PLANNING STRATEGIES

For Doctors and Advisors

BOOK REVIEWS WITH FOREWORD

Reviews

Written by doctors and healthcare professionals, this textbook should be mandatory reading for all medical school students―highly recommended for both young and veteran physicians―and an eliminating factor for any financial advisor who has not read it. The book uses jargon like ‘innovative,’ ‘transformational,’ and ‘disruptive’―all rightly so! It is the type of definitive financial lifestyle planning book we often seek, but seldom find.
LeRoy Howard MA CMPTM,Candidate and Financial Advisor, Fayetteville, North Carolina

I taught diagnostic radiology for over a decade. The physician-focused niche information, balanced perspectives, and insider industry transparency in this book may help save your financial life.
Dr. William P. Scherer MS, Barry University, Ft. Lauderdale, Florida

This book was crafted in response to the frustration felt by doctors who dealt with top financial, brokerage, and accounting firms. These non-fiduciary behemoths often prescribed costly wholesale solutions that were applicable to all, but customized for few, despite ever-changing needs. It is a must-read to learn why brokerage sales pitches or Internet resources will never replace the knowledge and deep advice of a physician-focused financial advisor, medical consultant, or collegial Certified Medical Planner™ financial professional.
―Parin Khotari MBA,Whitman School of Management, Syracuse University, New York

In today’s healthcare environment, in order for providers to survive, they need to understand their current and future market trends, finances, operations, and impact of federal and state regulations. As a healthcare consulting professional for over 30 years supporting both the private and public sector, I recommend that providers understand and utilize the wealth of knowledge that is being conveyed in these chapters. Without this guidance providers will have a hard time navigating the supporting system which may impact their future revenue stream. I strongly endorse the contents of this book.

―Carol S. Miller BSN MBA PMP,President, Miller Consulting Group, ACT IAC Executive Committee Vice-Chair at-Large, HIMSS NCA Board Member

This is an excellent book on financial planning for physicians and health professionals. It is all inclusive yet very easy to read with much valuable information. And, I have been expanding my business knowledge with all of Dr. Marcinko’s prior books. I highly recommend this one, too. It is a fine educational tool for all doctors.

―Dr. David B. Lumsden MD MS MA,Orthopedic Surgeon, Baltimore, Maryland

There is no other comprehensive book like it to help doctors, nurses, and other medical providers accumulate and preserve the wealth that their years of education and hard work have earned them.
―Dr. Jason Dyken MD MBA,Dyken Wealth Strategies, Gulf Shores, Alabama

I plan to give a copy of this book written
by doctors and for doctors’ to all my prospects, physician, and nurse clients. It may be the definitive text on this important topic.
―Alexander Naruska CPA,Orlando, Florida

Health professionals are small business owners who need to apply their self-discipline tactics in establishing and operating successful practices. Talented trainees are leaving the medical profession because they fail to balance the cost of attendance against a realistic business and financial plan. Principles like budgeting, saving, and living below one’s means, in order to make future investments for future growth, asset protection, and retirement possible are often lacking. This textbook guides the medical professional in his/her financial planning life journey from start to finish. It ranks a place in all medical school libraries and on each of our bookshelves.
―Dr. Thomas M. DeLauro DPM,Professor and Chairman – Division of Medical Sciences, New York College of Podiatric Medicine

Physicians are notoriously excellent at diagnosing and treating medical conditions. However, they are also notoriously deficient in managing the business aspects of their medical practices. Most will earn $20-30 million in their medical lifetime, but few know how to create wealth for themselves and their families. This book will help fill the void in physicians’ financial education. I have two recommendations: 1) every physician, young and old, should read this book; and 2) read it a second time!
―Dr. Neil Baum MD,Clinical Associate Professor of Urology, Tulane Medical School, New Orleans, Louisiana

I worked with a Certified Medical Planner™ on several occasions in the past, and will do so again in the future. This book codified the vast body of knowledge that helped in all facets of my financial life and professional medical practice.
Dr. James E. Williams DABPS, Foot and Ankle Surgeon, Conyers, Georgia

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

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YOUR THOUGHTS ARE APPRECIATED.

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BUSINESS PLAN CONSTRUCTION: For Health Industry Modernity

FOR MEDICAL AND HEALTHCARE ENTREPRENEURS AND INNOVATORS

By Dr. David Edward Marcinko MBA MEd CMP®

I was asked by business schools and medical colleagues – and their bankers, CPAs and advisors – to speak about this topic several times last year before the pandemic.

Now, with the specter of M-4-A etc; it certainly is a vital concern to all young entrepreneurs, doctors & medical professionals whether live, audio recorded or in podcast form. And so, here is a written transcript of a recent presentation for your review.

Now, with the specter of tele-health, tele-medicine, M-4-A etc; it certainly is a vital concern to all young doctors & medical professionals whether live, audio recorded or in podcast form. And so, here is a written transcript of a recent presentation for your review.

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New Product Business Plan Sample [2021 Updated] | OGScapital

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READ: https://healthcarefinancials.files.wordpress.com/2017/08/mba-business-plan-capstone-outline.pdf

YOUR THOUGHTS ARE APPRECIATED.

SECOND OPINIONS: https://medicalexecutivepost.com/schedule-a-consultation/

INVITE DR. MARCINKO: https://medicalexecutivepost.com/dr-david-marcinkos-bookings/

Thank You

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Financial Management Strategies for Hospitals and Healthcare Organizations

TEXTBOOK RELEASE AND REVIEW

Reviews

Navigating a course where sound organizational management is intertwined with financial acumen requires a strategy designed by subject-matter experts. Fortunately, Financial Management Strategies for Hospital and Healthcare Organizations: Tools, Techniques, Checklists and Case Studiesprovides that blueprint.
―David B. Nash, MD, MBA,Jefferson Medical College, Thomas Jefferson University

It is fitting that Dr. David Edward Marcinko, MBA, CMP™ and his fellow experts have laid out a plan of action in Financial Management Strategies for Hospital and Healthcare Organizationsthat physicians, nurse-executives, administrators, institutional CEOs, CFOs, MBAs, lawyers, and healthcare accountants can follow to help move healthcare financial fitness forward in these uncharted waters.
―Neil H. Baum, MD, Tulane Medical School

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SECOND OPINIONS: https://medicalexecutivepost.com/schedule-a-consultation/

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AGI: What it is – How it Works?

ADJUSTED GROSS INCOME

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BY Dr. DAVID EDWARD MARCINKO MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

The U.S. individual tax return is based around the concepts of Adjusted Gross Income (AGI) and Taxable Income (TI).  AGI is the amount that shows up at the bottom of page one of Form 1040, individual income tax return.  It is the sum of all of the taxpayer’s income less certain allowed adjustments (like alimony, one-half of self-employment taxes, a percentage of self-employed health insurance, retirement plan contributions and IRAs, moving expenses, early withdrawal penalties and interest on student loans).  This amount is important because it is used to calculate various limitations within the area of itemized deductions (e.g., medical deductions: 10 percent of AGI; miscellaneous itemized deductions: 2 percent of AGI). 

When a healthcare professional taxpayer hears the phrase “an above the line deduction”, the line being referenced is the AGI line on the tax return.  Generally, it is better for a deduction to be an above the line deduction, because that number helps a taxpayer in two ways.  First, it reduces AGI, and second, since it reduces AGI, it is also reducing the amounts of limitations placed on other deductions as noted above.

Obviously, if there is an above the line there is also a “below the line” deduction.  These below the line deductions are itemized deductions (or the standard deduction if itemizing is not used) plus any personal exemptions allowed. AGI less these deductions provides the taxable income on which income tax is actually calculated. All of that being said, it is better for a deduction to be an above the line deduction. Although this is a bit dry, it helps to understand the concepts in order to know where items provide the most benefit to the medical professional taxpayer.

                            PERSONAL TAXATION CALCULATIONS

Gross Income (all income, from whatever source derived, including illegal activities, cash, indirect for the benefit of, debt forgiveness, barter, dividends, interest, rents, royalties, annuities, trusts, and alimony payments-no more)

    Less non-taxable exclusions (municipal bonds, scholarships, inheritance, insurance

                                            proceeds, social security and unemployment income [full or

                                            partial exclusion], etc.).

Total Income

    Less Deductions for AGI (alimony, IRA contributions, capital gains, 1/2 SE tax,

                                               moving, personal, business and investment expenses, and

                                               penalties, etc.). 

Adjusted Gross Income (bottom Form 1040)

    Less Itemized Deductions from AGI, (medical, charitable giving, casualty,

involuntary conversions, theft, job and miscellaneous expenses, etc.), or

    Less Standard Deduction (based on filing status)

    Less Personal Exemptions (per dependents, subject to phase outs)

Taxable Income

   Calculate Regular Tax

      Plus Additional Taxes (AMT, etc.)

      Minus Credits (child care, foreign tax credit, earned income housing, etc.)

      Plus Other Taxes

Total Tax Due

YOUR THOUGHTS ARE APPRECIATED.

CITE: https://www.r2library.com/Resource/Title/0826102549

Thank You

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CASH FLOW ANALYSIS: Real Life ACO Accounting Example

ACCOUNTABLE CARE ORGANIZATION EXAMPLE

Touring with Marcinko | The Leading Business Education ...

BY DR. DAVID EDWARD MARCINKO MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

What is an ACO?

ACOs are groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high-quality care to their Medicare patients. The goal of coordinated care is to ensure that patients get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors.

When an ACO succeeds both in delivering high-quality care and spending health care dollars more wisely, the ACO will share in the savings it achieves for the Medicare program.

Citation: https://www.r2library.com/Resource/Title/0826102549

Case Model

Now, suppose that in a new Accountable Care Organization [ACO] contract, a certain medical practice was awarded a new global payment or capitation styled contract that increased revenues by $100,000 for the next fiscal year. The practice had a gross margin of 35% that was not expected to change because of the new business. However, $10,000 was added to medical overhead expenses for another assistant and all Account’s Receivable (AR) are paid at the end of the year, upon completion of the contract.

Cost of Medical Services Provided (COMSP):

The Costs of Medical Services Provided (COMSP) for the ACO business contract represents the amount of money needed to service the patients provided by the contract.  Since gross margin is 35% of revenues, the COMSP is 65% or $65,000.  Adding the extra overhead results in $75,000 of new spending money (cash flow) needed to treat the patients. Therefore, divide the $75,000 total by the number of days the contract extends (one year) and realize the new contract requires about $ 205.50 per day of free cash flows.

Assumptions

Financial cash flow forecasting from operating activities allows a reasonable projection of future cash needs and enables the doctor to err on the side of fiscal prudence. It is an inexact science, by definition, and entails the following assumptions:

  • All income tax, salaries and Accounts Payable (AP) are paid at once.
  • Durable medical equipment inventory and pre-paid advertising remain constant.
  • Gains/losses on sale of equipment and depreciation expenses remain stable.
  • Gross margins remain constant.
  • The office is efficient so major new marginal costs will not be incurred.

Physician Reactions:

Since many physicians are still not entirely comfortable with global reimbursement, fixed payments, capitation or ACO reimbursement contracts; practices may be loath to turn away short-term business in the ACA era.  Physician-executives must then determine other methods to generate the additional cash, which include the following general suggestions:

1. Extend Account’s Payable

Discuss your cash flow difficulties with vendors and emphasize their short-term nature. A doctor and her practice still has considerable cache’ value, especially in local communities, and many vendors are willing to work them to retain their business

2. Reduce Accounts Receivable

According to most cost surveys, about 30% of multi-specialty group’s accounts receivable (ARs) are unpaid at 120 days. In addition, multi-specialty groups are able to collect on only about 69% of charges. The rest was written off as bad debt expenses or as a result of discounted payments from Medicare and other managed care companies. In a study by Wisconsin based Zimmerman and Associates, the percentages of ARs unpaid at more than 90 days is now at an all time high of more than 40%. Therefore, multi-specialty groups should aim to keep the percentage of ARs unpaid for more than 120 days, down to less than 20% of the total practice. The safest place to be for a single specialty physician is probably in the 30-35% range as anything over that is just not affordable.

The slowest paid specialties (ARs greater than 120 days) are: multi-specialty group practices; family practices; cardiology groups; anesthesiology groups; and gastroenterologists, respectively. So work hard to get your money, faster. Factoring, or selling the ARs to a third party for an immediate discounted amount is not usually recommended.

3. Borrow with Short-Term Bridge Loans

Obtain a line of credit from your local bank, credit union or other private sources, if possible in an economically constrained environment. Beware the time value of money, personal loan guarantees, and onerous usury rates. Also, beware that lenders can reduce or eliminate credit lines to a medical practice, often at the most inopportune time.

4. Cut Expenses

While this is often possible, it has to be done without demoralizing the practice’s staff.

5.  Reduce Supply Inventories

If prudently possible; remember things like minimal shipping fees, loss of revenue if you run short, etc.

6. Taxes

Do not stop paying withholding taxes in favor of cash flow because it is illegal.

Hyper-Growth Model:

Now, let us again suppose that the practice has attracted nine more similar medical contracts. If we multiple the above example tenfold, the serious nature of potential cash flow problem becomes apparent. In other words, the practice has increased revenues to one million dollars, with the same 35% margin, 65% COMSP and $100,000 increase in operating overhead expenses.  Using identical mathematical calculations, we determine that $750,000 / 365days equals $2,055.00 per day of needed new free cash flows!  Hence, indiscriminate growth without careful contract evaluation and cash flow analysis is a prescription for potential financial disaster.

ASSESSMENT: Your comments are appreciated.

INVITE DR. MARCINKO: https://medicalexecutivepost.com/dr-david-marcinkos-

CONTACT: Ann Miller RN MH

[Executive Director]

THANK YOU

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Personal BUDGET Rules for Doctors

Personal Physician Budgeting Rules

See the source image

BY DR. DAVID E. MARCINKO MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

Budgeting is probably one of the greatest tools in building wealth. However, it is also one of the greatest weaknesses among physicians who tend to live a certain lifestyle. This includes living in an exclusive neighborhood, driving an expensive car, wearing imported suits and a fine watch, all of which do not lend themselves to expense budgeting. Only one in ten medical professionals has a personal budget. Fear, or a lack of knowledge, is a major cause of procrastination.

The following guidelines will assist in this microeconomic endeavor:

  1. Set reasonable goals and estimate annual income. Do not keep large amounts of cash at     home, or in the office. Deposit it in a money market account for safety and interest.
  1. Do not pay bills early, do not have more taxes withheld from your salary than you owe, and develop spending estimates and budget fixed expenses first. Fixed expenses are usually contractual, and may include housing, utilities, food, telephone, social security, medical, debt repayment, homeowner’ or renter’s insurance, auto, life and disability insurance, and maintenance, etc.
  1. Make variable expenses a priority. Variable expenses are not usually contractual, and may include clothing, education, recreational, travel, vacation, gas, entertainment, gifts, furnishings, savings, investments, etc.
  1. Trim variable expenses by 10-15 percent, and fixed expenses, when possible. Ultimately, all fixed expenses get paid and become variable in the long run.
  1. Use carve-out or set-asides for big ticket items and differentiate “wants from needs.”
  1. Know the difference between saving and investing. Savers tend to be risk adverse and     investors understand risk and takes steps to mitigate it.
  1. Determine shortfalls or excesses with the budget period.
  1. Track actual expenses.
  1. Calculate both income and expenses as a percentage of the total, and determine if there    is a better way to allocate resources. Then, review the budget on a monthly basis to determine if there is a variance. Determine if the variance was avoidable, unavoidable, or a result of inaccurate assumptions, and take needed corrective action.

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How to budget for medical expenses

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Verify Your Budget and Follow a Financial Plan

The process of establishing a budget relies heavily on guesswork, and the use of software or “apps”, that seamlessly track expenditures and help your budget and your financial plan become more of reality. Most doctors underestimate their true expenses, so lumping and best guesses on expense usually prove very inaccurate. Personal financial software and mobile phone applications make the verification of budgets easier. Once your personal accounts are setup, free apps like MINT.com will let give you a detailed report on where your money is going and the adjustments you must make. Few professions make larger contributions to the Internal Revenue Service than physicians and the medical profession. It is very important to categorize different budget categories not only to be proactive about your expenses, but also to accurately reflect the effect your different expenditures have on your real savings capability. All expense dollars are not equal.

For example, a mortgage payment, which is mostly interest expense in the early years, is likewise mostly tax deductible. Spending money on your family vacation is typically not tax deductible. Itemized deductions, which are deductions that a US taxpayer can claim on their tax return in order to reduce their Adjustable Gross Income (AGI), may include such costs as property taxes, vehicle registration fees, income taxes, mortgage expense, investment interest, charitable contributions, medical expenses (to the extent the expenses exceed 10% of the taxpayers AGI) and more.

Employing a qualified certified medical planneR® that utilizes a cash-flow based financial planning software program may help the physician identify their actual after-tax projected cash flow and more accurately plan their future.

ASSESSMENT: Your thoughts are appreciated.

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

ORDER TEXTBOOK: https://www.routledge.com/Comprehensive-Financial-Planning-Strategies-for-Doctors-and-Advisors-Best/Marcinko-Hetico/p/book/9781482240283

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SIMPLE: The “50-30-20” Budget Rule of Thumb

Try the 50/30/20 rule OF WANTS, NEEDS AND SAVINGS

By Dr. David Edward Marcinko MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

There are varying opinions on how much of your total income should go toward savings and retirement goals each month. Moreover, the answer is likely to vary, depending on your full financial profile.

But if you’re looking for some basic KISS guidelines, consider applying the 50-30-20 rule, a budgeting method that allocates 50% of your income to essentials, like rent and bills, 30% to discretionary spending and 20% to savings.

Citation: https://www.r2library.com/Resource/Title/0826102549

Image shows a pie chart broken up into 50%, 30%, and 20%. Title reads: "The 50/30/20 Budgeting Rule." Under 50% says "Needs: groceries, housing, utilities, health insurance, car payment." Under 30% reads: "Wants: shopping dining out, hobbies." Under 20% says "Savings"

Your thoughts are appreciated.

THE RULE: https://www.thebalance.com/the-50-30-20-rule-of-thumb-453922

THANK YOU

ZERO BASED BUDGET: https://medicalexecutivepost.com/2021/05/24/the-zero-based-budget-for-physicians/https://medicalexecutivepost.com/2015/07/02/can-doctors-achieve-financial-independence-without-budgeting/

EPI BUDGET FACTS: https://www.epi.org/resources/budget/budget-factsheets/

NO BUDGETS: https://medicalexecutivepost.com/2015/07/02/can-doctors-achieve-financial-independence-without-budgeting/

HOUSEHOLD BUDGET: https://medicalexecutivepost.com/2013/10/07/on-setting-your-household-budget-ugh/

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

ORDER: https://www.routledge.com/Comprehensive-Financial-Planning-Strategies-for-Doctors-and-Advisors-Best/Marcinko-Hetico/p/book/9781482240283

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TAX DEDUCTIONS: Home Ownership Simplified

Take Full Advantage Of These Tax Deductions

DR. DAVID EWARD MARCINKO MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

The housing market is HOT right now. Lumbar and wood is expensive. Inflation is emerging. So, owning a home can be very lucrative. Seriously, owning a home can not only give you a cheaper monthly payment than renting but in many cases, the tax benefits make the decision a no-brainer.

Citation: https://www.r2library.com/Resource/Title/0826102549

Home ownership falls for first time in a century - Telegraph

Here are a few of the larger deductions that you need to be sure to take:

Interest you pay on your mortgage: If you own a home and don’t have a mortgage greater than $750,000, you can deduct the interest you pay on the loan. This is one of the biggest benefits to owning a home versus renting–as you could get massive deductions at tax time. The limit used to be $1 million, but the Tax Cuts and Jobs Act of 2017 (TCJA) reduced the limit and made some clarifications on deducting interest from a home equity line of credit.

Property taxes: Another awesome benefit to owning a home is the ability to deduct your property taxes. Before TCJA, the rules were a little more flexible and you were able to deduct the entirety of your property taxes. Now things have a changed a bit. Under the new law, you can deduct up to $10,000. The deduction for state and local income taxes was combined with the deduction for state and local property taxes, too.

Tax incentives for energy-efficient upgrades: While most of the tax incentives for making energy-efficient upgrades to your home have gone away, there are still a couple worth noting. You can still claim tax deductions on solar energy–both for electric and water heating equipment, through 2021. The longer you wait, though, the less money you’ll get back. Here’s the percentage of equipment you can deduct, based on time of installation:

Between January 1, 2017, and December 31, 2019 – 30% of the expenditures are eligible for the credit
Between January 1, 2020, and December 31, 2020 – 26%
Between January 1, 2021, and December 31, 2021 – 22%

ASSESSMENT: But, is now the best time to buy a home? Your thoughts are appreciated.

Rent V. Buy: https://medicalexecutivepost.com/2017/03/14/the-apartment-rent-vs-home-buy-decision/

MDs: https://medicalexecutivepost.com/2012/02/15/is-home-renting-for-chumps/

DIY Textbooks: https://medicalexecutivepost.com/2021/04/29/why-are-certified-medical-planner-textbooks-so-darn-popular/

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HOSPITALS and Health Care Organizations

Management Strategies, Operational Techniques, Tools, Templates and Case Studies

Tex Book Review

Drawing on the expertise of decision-making professionals, leaders, and managers in health care organizations, Hospitals & Health Care Organizations: Management Strategies, Operational Techniques, Tools, Templates, and Case Studies addresses decreasing revenues, increasing costs, and growing consumer expectations in today’s increasingly competitive health care market.

Offering practical experience and applied operating vision, the authors integrate Lean managerial applications, and regulatory perspectives with real-world case studies, models, reports, charts, tables, diagrams, and sample contracts. The result is an integration of post PP-ACA market competition insight with Lean management and operational strategies vital to all health care administrators, comptrollers, and physician executives. The text is divided into three sections:

  1. Managerial Fundamentals
  2. Policy and Procedures
  3. Strategies and Execution

Using an engaging style, the book is filled with authoritative guidance, practical health care–centered discussions, templates, checklists, and clinical examples to provide you with the tools to build a clinically efficient system. Its wide-ranging coverage includes hard-to-find topics such as hospital inventory management, capital formation, and revenue cycle enhancement. Health care leadership, governance, and compliance practices like OSHA, HIPAA, Sarbanes–Oxley, and emerging ACO model policies are included. Health 2.0 information technologies, EMRs, CPOEs, and social media collaboration are also covered, as are 5S, Six Sigma, and other logistical enhancing flow-through principles. The result is a must-have, “how-to” book for all industry participants.

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What is the “5-100” Insurance Rule?

THE 5 -100 “Policy” Rule 

BY DR. DAVID E. MARCINKO MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

With any universal life insurance policy (and certainly all variable life policies), fluctuating rates of return, the actual timing of the premium payments, and potential internal policy changes by the insurance company, all contribute to results that will probably differ substantially from the original illustration. 

See the source image

RULE: The 5 – 100 Rule states that as a result of accounting for these elements, all initial projections of cash value beyond 5 years, will necessarily be 100 percent incorrect when compared to actuality. 

A prudent policy owner should therefore keep on top of any changes and react accordingly.  If a policy owner ignores his/her policy for even 5 years, any adverse changes could be so drastic as to make rectifying them very costly.

Citation: https://www.r2library.com/Resource/Title/0826102549

Your thoughts are appreciated.

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

ORDER TEXTBOOK: https://www.routledge.com/Risk-Management-Liability-Insurance-and-Asset-Protection-Strategies-for/Marcinko-Hetico/p/book/9781498725989

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PODCAST: Physician WEDDING Costs

 The Economics of Weddings for Medical Professionals

The average wedding costs about $ 25,525 and medical professionals often spend much more.

Destination Weddings - Dynamic Roadshow

QUERY: Do you want a big wedding party for your family and friends, or an earlier retirement for yourself?

PODCAST: https://www.youtube.com/watch?v=XQBRHJ7aGbM

Your thoughts are appreciated.

THANK YOU

***

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

ORDER TEXTBOOK: https://www.routledge.com/Comprehensive-Financial-Planning-Strategies-for-Doctors-and-Advisors-Best/Marcinko-Hetico/p/book/9781482240283

INVITE DR. MARCINKO: https://medicalexecutivepost.com/dr-david-marcinkos-

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HOSPITAL EMPLOYER PROVIDED TRANSPORTATION BENEFITS

By Dr. David Edward Marcinko MBA CMP©

SPONSOR: http://www.CertifiedMedicalPlanner.org

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COST COMPARISONS

Example 1: Dr. Kurt purchases an automobile for $15,000.

His hospital business use is 80% and he drives 20,000 total miles per year.  Operating costs for the year, including gasoline, oil, insurance, maintenance, repairs, and license fees, are $4,000. If Kurt owns the car for five years, ownership will cost $35,000 ($4,000 x 5 = $20,000, $20,000 + $15,000 = $35,000), or $7,000 per year. For, each personal use mile costs $1.75 (100% -80% = 20%, 20% x 20,000 miles = 4,000 miles, $7,000/4,000 miles = $1.75). Kurt’s employer reimburses him 34.5 cents per mile for the business-related miles. As a result, the business use of the car is only partially reimbursed (16,000 business miles x 34.5 cents = $5,520).  

However, the business usage costs Kurt $5,600(80% of $7,000). Kurt subsidizes the employer 9.25 cents per mile ($7,000 – $5,520 = $1,480, $1,480 /16,000 = 9.25 cents). Kurt’s total cost of ownership is $1.84 per mile, or $36,850 ($1.88 x 20,000 personal miles over the five-year life).

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Example 2: Dr. Ben uses a hospital employer-provided vehicle 4,000 miles per year in 2003.

He reimburses the employer 34.5 cents per mile. His cost for five years is $6,900 (5y x 4,000 = 20,000 miles, 20,000 miles x 34.5 = $6,900).

Beginning on January 1st 2013, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) were:

  • 56.5 cents per mile for business miles driven
  • 24 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

Note the dramatic contrast, from the employee’s perspective, between the above two examples, of the company reimbursing the employee for business use of his personal car, versus the employee reimbursing the company for personal use of the vehicle.

The business, medical, and moving expense rates decrease one-half cent from the 2013 rates.  The charitable rate is based on statute.

Source: http://www.irs.gov

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ASSESSMENT: Your updated thoughts in modernity are appreciated.

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On DISPOSABLE and Other “Next-Gen” Credit Cards

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BY DR. DAVID EDWARD MARCINKO MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

‘Chip & Pin’ Technology

Disposable credit cards are the newest innovation to help reduce fraud and assumed identity scams on e-commerce based websites. As with traditional credit cards, these cards are numbered, but used only once. Then, electronically they are erased so that there is nothing left in the merchant’s database for hackers to steal.

But, in 2014, Congress began looking at new ways to keep personal credit card information safe after several high-profile security breaches at some of America’s top retailers.

WHY? Current credit cards use easy to hack magnetic strip technology from the 1960s. Many consumers want more secure “pin & chip” cards which have been in use in Europe for years. Even though micro-chip technology costs billions to implement, merchants are moving in that direction as they issue new cards to consumers. Most modern polls show nearly half of all people surveyed are extremely concerned about the safety of their personal credit card information.

Burner Cards: Similar to a burner phone or “throwaway” social media account, burner credit cards are temporary, virtual credit cards that are not your “main” credit card. The bank or burner card app will give you a temporary number that links back to your main credit card which you can use for online purchases.

An ANonymous Credit Card provides an extreme degree of privacy and prevents the tracking of your expenses by a spouse, people with bad intentions or government monitoring agencies. It is important to realize that there are plenty of legitimate reasons for wanting to buy something discreetly through an Anonymous Credit Card.

Credit Card Mistakes to Avoid

No number has as far-reaching an impact on your money as your credit scores.

Here are some obstacles, physicians and all of us, should dodge on the road to financial security:

  • Don’t pay for a credit card repair service.
  • Don’t miss a payment.
  • Don’t max out your card.
  • Don’t take a cash-advance.
  • Don’t skip using your cards.
  • Don’t chase interest rates.
  • Don’t apply for several credit cards all at once.
  • Don’t co-sign a loan.
  • Don’t spread our car or mortgage payments.

Citation: https://www.r2library.com/Resource/Title/0826102549

Denied Credit

If you are denied a credit card, you have the right to obtain a credit report free from the agency which denied you. Your request must be made in writing and within thirty-sixty days. Consumer credit is governed by the Fair Credit Reporting Act (FCRA).  The regulations are issued by and enforced by the Federal Trade Commission. Certain states offer consumers additional rights.  Credit reporting agencies are referred to as a “consumer reporting agency”.

ASSESSMENT: Your thoughts are appreciated.

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

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ASK A FINANCIAL ADVISOR? About Company “Vesting”

A YOUNG PHYSICIAN INQUIRES ABOUT NON-PUBLIC COMPANY SHARES AND VESTING?

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QUESTION: I am a physician and work for a startup healthcare IT company with shares in a non-public company that vests over time. What does that mean, and will the shares only be worth something if we go public or are acquired?

Shelly from Boston, MA

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ANSWER: In most cases, startups dangle equity compensation over employees like a just-out-of-reach cupcake in front of a treadmill. Vesting means some condition needs to be met before you fully own your shares, whether it’s staying at the company for a period of time, reaching a target valuation, or both.

Once your shares have fully vested, you’d think you can finally cash in. But that’s not always the case. It’s a hassle to sell private company shares because there are far fewer buyers compared to selling shares in a publicly traded company. 

If you want to sell your stake before the company goes public, you can ask the execs at your company to buy back your shares. If they say no—and they might, because once they let one employee sell, it’s hard to turn down others—you need another buyer, like an outside investor.

There are eBay-like marketplaces for selling private company shares, but it’s not like posting a picture of your old iPod and offering free shipping. You can only sell to accredited investors (aka hedge funds and other rich folks), and your company needs to authorize the sale. 

It’s way easier to sell your shares if and when your company goes public or is acquired by another company.

Thanks for the query.

Citation: https://www.r2library.com/Resource/Title/0826102549

***

ASSESSMENT: Your thoughts are appreciated.

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

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COVID-19 Financial Resources for Physicians

Bhagwan Satiani, MD, MBA, DFSVS, FACHE, FACS

Todd A. Zigrang, MBA, MHA, FACHE, CVA, ASA

Jessica L. Bailey-Wheaton, JD

ABSTRACT

The appropriate focus in managing the COVID-19 pandemic in the United States has been addressing access and delivery of care to the population affected by the outbreak. All sectors of the U.S. economy have been significantly affected,including physicians. Physician groups of all specialties and sizes have experienced the financial effects of the pandemic.Hospitals have received billions of dollars to support and enable them to manage emergencies and cover the costs of the disruption.

However, many vascular surgeons are under great financial pressure because of the postponement of all non-emergency procedures. The federal government has announced a myriad of programs in the form of grants and loans to reimburse physicians for some of their expenses and loss of revenue. It is more than likely that unless the public health emergency subsides significantly, many practices will experience dire consequences without additional financial assistance.

The authors have attempted to provide a concise listing of such programs and resources available to assist vascular surgeons who are small businesses in accessing these opportunities.

Health Capital Consultants - Healthcare Valuation

WHITE PAPER: https://www.healthcapital.com/researchmaterialdocuments/publishedarticles/Journal%20of%20Vascular%20Surgery%205.8.20.pdf

Your comments are appreciated.

THANK YOU

***

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Dictionary of Health Economics and Finance

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The Business of Medical Practice [3rd. edition]

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Activity Based Medical Cost Accounting and Management

NON-TRADITIONAL ACCOUNTING METHODS KNOWN IN THE BUSINESS COMMUNITY BUT NOT USED IN HOSPITALS OR HEALTH CARE ORGANIZATIONS

By Dr. David Edward Marcinko; MBA CMP® CPHQ

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Sooner or later – as a practicing physician – you will want to ascertain and then demonstrate the cost effectiveness of your medical care. By using the process of Activity Based Cost (ABC) Management, you will be able to do so.  

ALAS: But, if you’re using a traditional accounting system – like most all hospitals today that use the fictional “average wholesale cost” method – you won’t know a thing about your medical practice or clinic activity costs. Hence, again like most all hospitals, fees become simply vacuous.

Managerial Accounting Assignment Help in Australia

Here’s how: https://medicalexecutivepost.com/2007/12/15/activity-based-cost-medical-management/

HOW TO READ A SCIENTIFIC PAPER: https://medicalexecutivepost.com/2021/04/09/how-to-read-and-understand-a-scientific-paper/

DETAILED WHITE PAPERIN-PROGRESS [thru editing but before peer-reviewed publication]: https://healthcarefinancials.files.wordpress.com/2007/12/abcm.pdf

ASSESSMENT: Your thoughts are appreciated.

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Financial Management Strategies for Hospitals and Healthcare Organizations

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“Money Laundering” in Medical Practice?

2

By Dr. David Edward Marcinko MBA CMP©

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MONEY LAUNDERING

Charges of money laundering may seem foreign to the practice of medicine. The term “money laundering” evokes visions of a suitcase of drug cash being brought into a legitimate business and being transformed into that business’s receipts and later tunneled through legal channels.

Citation: https://www.r2library.com/Resource/Title/0826102549

In medicine the route beings with receipt of a claim payment check (i.e., a check as opposed to the drug dealer’s cash). The check is then deposited into the professional corporation’s checking account. The funds are then paid to the physician in the form of wages. Those wages are then deposited into the physician’s personal checking account.

Those funds and other similarly situated funds are then accumulated until a check is written to pay for a new automobile. The money received from the alleged fraudulent insurance claim has successful been “laundered” into a hard asset (e.g., Jaguar XJL-V8 4 door luxury sedan).

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The “Zero-Based Budget” for Physicians?

Zero-Based Budget

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By Dr. David Edward Marcinko MBA CMP©

SPONSOR: http://www.CertifiedMedicalPlanner.org


A zero-based budget means you start with the absolute essential expenses, and then add expenses from there until you run out of money. This is an extremely effective, yet rigorous exercise for most medical professionals and can be used personally or at the office.

Guess what your first personal financial item should be?

That’s right, retirement plan contributions. Then your mortgage and other debt payments, and other required fixed expenses. From the office perspective, the first budget item should be salary expenses, both your own and your staff.

Operating assets and other big ticket items come next, followed by the more significant items on your net income statement.

Some doctors even review their P&L statements quarterly, line by line, in an effort to reduce expenses. Then add discretionary personal or business expenses that you have some control over.

P&L: https://medicalexecutivepost.com/2008/03/18/net-income-pl-statement/

Do you run out of money before you reach the end of the month, quarter, or year? 

Then you better cut back on entertainment at home or that fancy new, but unproven piece of office or medical equipment.  This sounds Draconian until you remind yourself that your choice is either a) entertainment now but no money later, or b) living a simpler lifestyle now as you invest so you’re able to enjoy yourself at retirement.

Risks: https://medicalexecutivepost.com/2017/10/18/on-retirement-planning-risks/

Zero-Based Budgeting: The Ultimate Guide - MintLife Blog

Why?

When you were a young doctor, it may have been a difficult trade-off. But at mid-life, you’re staring ultimate retirement in the face.

ASSESSMENT: Your thoughts are appreciated.

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Physician Medical Practice “Misrepresentation” Risks

BUSINESS FRAUD RISKS

True Case Report

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By Dr. David Edward Marcinko MBA CMP©

SPONSOR: http://www.CertifiedMedicalPlanner.org

A Medical Practice Misrepresentation Case Model

Let’s say a physician decided to sell his practice and move to another state. The value of the sale was based, in part, on the yearly gross of the practice. The physician accepted installment payment terms from the buyer and moved to the new state. The buyer began to practice medicine at his new office. Although he was busy, his gross never approached the gross of the prior physician.

Eventually the buyer defaulted on the loan. The selling physician sued for the deficit. The defaulting physician and his forensic consultants then performed an in-depth evaluation of the seller’s practice. The buyer and his team noticed some discrepancies in the billing patterns and practices of the seller. Considering these discrepancies to constitute Medicare and insurance billing fraud, the seller counter-sued the buyer on the grounds of misrepresentation, alleging the gross receipts of the practice purchase price, was grossly inflated.

Citation: https://www.r2library.com/Resource/Title/0826102549

ASSESSMENT: Therefore, the buyer determined that the seller had fraudulently misrepresented the potential of the practice. He also notified state and federal authorities and filed complaints of insurance fraud against the seller.

The seller thought that he would move to the good life in the new state, but his old practice kept him in constant legal trouble.

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REAL ESTATE Investing for Physicians?

OVER HEARD IN THE ADVISOR’S LOUNGE

Real Estate and Physicians

What I see in my accounting practice is that significant accumulation in younger physician portfolio growth is not happening as it once did. This is partially because confidence in the equity markets is still not what it was; but that doctors are also looking for better solutions to support their reduced incomes.

For example, I see older doctors with about 25 percent of their wealth in the market, and even in retirement years, do not rely much on that accumulation to live on. Of this 25 percent, about 80 percent is in their retirement plan, as tax breaks for funding are just too good to ignore.

What I do see is that about 50 percent of senior physician wealth is in rental real estate, both in a private residence that has a rental component, and mixed-use properties. It is this that provides a good portion of income in retirement.

So; could I add dialog about real estate as a long term solution for retirement?

Yes, as I believe a real estate concentration in the amount of 5 percent is optimal for a diversified portfolio, but in a very passive way through mutual or index funds that are invested in real estate holdings and not directly owning properties.

Today, as an option, we have the ability to take pension plan assets and transfer marketable securities for rental property to be held inside the plan collecting rents instead of dividends.

Real estate holdings never vary very much, tend to go up modestly, and have preferential tax treatment due to depreciation of the property against income.

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GLEASONS GIVE A KID A DREAM | gleasonsgiveakidadream

Perry D’Alessio, CPA
[D’Alessio Tocci & Pell LLP]

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The Biden Tax Plan “Dissected” on Tax Day 2021

Biden Tax Plan: Details & Analysis | Tax Foundation

NOT JUST A POLL TAX?

LINK: https://taxfoundation.org/joe-biden-tax-plan-2020/

PDF FILE: https://files.taxfoundation.org/20201109095935/Details-and-Analysis-of-President-Elect-Joe-Bidens-Tax-Plan.pdf

The Bidentax plan includes the following payroll tax, individual income tax, and estate and gift tax changes.

It imposes a 12.4 percent Old-Age, Survivors, and Disability Insurance (Social Security) payroll tax on income earned above $400,000, evenly split between employers and employees.

ASSESSMENT: Your thoughts are appreciated.

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***

Clue-Less Physicians and Taxes

OVER HEARD IN THE DOCTOR’S LOUNGE

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A PHYSICIAN POLL

[IRS Tax Day – May 17, 2021]

“I read a poll on SERMO (a doctor-only web forum) asking what percentage of income was paid in taxes. The lowest option was <20%.  I thought it ridiculous since I make about an average salary and paid about 8% in Federal tax, 3.5% in payroll tax, and 4% in state income taxes. So, I spoke up about it. 

After a few days of correspondence, it became evident that most doctors have no idea what they pay in taxes, or that they pay far too much in taxes.  For example, of 58 responses on the poll, I was the only one who paid less than 20% in taxes.  Keep in mind that more than half of doctors make less money than I do.

I found it hilarious that 4 doctors thought they paid more than 50% in taxes.  I can’t quite figure out how to pull that off; even if you are single, make a ton of money, take a standard deduction, are self-employed, and pay ridiculous state and local income taxes. Really … more than 50%!  You’re either mistaken or stupid … hopefully; just mistaken.

Or is the problem simply that doctor’s have no idea what their effective tax rate is”?

DJ. Morgane DO

[Internal Medicine]

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Capital Gains Tax Non-Sense?

Please Stow Your Outrage About a Capital Gains Tax Hike!

There is no evidence for any of the calamities that opponents argue would befall the economy and markets.

See the source image
By Scott Sumner

To anyone with knowledge of public finance theory, reading media reports of capital gains taxation is almost painful. Here’s an example from Bloomberg:

A group of economists recently argued in the Chicago Booth Review that the prevailing wisdom among scorekeepers that the revenue-maximizing rate is about 30% may be misplaced — and could allow for an even higher rate. A pair of Princeton University economists published research in December showing that hikes may raise “substantially more tax revenue” than scorekeepers currently believe and that the revenue-maximizing rate may be about 40% — almost exactly where Biden’s proposal falls.

Economists and analysts have also made the case that cuts in capital gains rates have a negligible impact on investment decisions and economic growth. (Though, like much around capital gains, that debate isn’t entirely settled.)

LINK: https://www.bloomberg.com/opinion/articles/2021-04-26/stow-your-outrage-about-a-capital-gains-tax-hike?srnd=premium&sref=XgZBm7li

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DICTIONARY: Health Economics and Finance

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FOREWORD: https://healthcarefinancials.files.wordpress.com/2007/10/dr-getzen.pdf

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CEO ADMITS: Payments in Value-Based Contracts Were Actually Fee-For-Service Based

Fee-For-Service Physician Reimbursement Not to be Replaced Anytime Soon!

AN EXPOSE’

Image result for eric brixcker

By Eric Bricker MD

VALUE BASED CARE PROPONENTS?

Definition: Value-Based Care (VBC) is a health care delivery model under which providers — hospitals, labs, doctors, nurses and others — are paid based on the health outcomes of their patients and the quality of services rendered. Under some value-based contracts, providers share in financial risk with health insurance companies. In addition to negotiated payments, they can earn incentives for providing high-quality, efficient care.

VBC differs from the traditional fee-for-service model where providers are paid separately for each medical service. While quality care can be provided under both models, it’s the difference in how providers are paid, paired with the way patient care is managed, that provides the opportunity for health improvements and savings in a VBC environment.

DICTIONARY CITATION: https://www.amazon.com/Dictionary-Health-Insurance-Managed-Care/dp/0826149944/ref=sr_1_4?ie=UTF8&s=books&qid=1275315485&sr=1-4

MEDICAL EXECUTIVE-POST REVIEW:

Advocacy: https://medicalexecutivepost.com/2015/10/19/the-case-for-value-based-medical-care/

Status: https://medicalexecutivepost.com/2018/12/07/the-state-of-value-based-care-vbc/

Transition: https://medicalexecutivepost.com/2017/08/06/transitioning-to-value-based-medical-care-payments/

Physicians: https://medicalexecutivepost.com/2016/02/03/value-based-care-vbc-and-physician-performance/

THE SHOCKING EXPOSE’

But – During a Panel Discussion Captured on YouTube at the 2019 HLTH Conference in Las Vegas, Blue Cross Blue Shield of Arizona CEO Pam Kehaly Admitted that Only 10% of the Payments in Value-Based Contracts Were Value-Based.

So, what gives?

VIDEO: https://www.youtube.com/watch?v=PfAxOpyP-sA

Your thoughts are appreciated.

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The Medicare Cost Control Paradox

WHAT IS THE “MEDICARE COST CONTROL EFFICIENCY” PARADOX?

The 800 Pound Gorilla in the Medical Treatment Room

Blogger Ezra Klein opined more than a decade ago that one of the dirty little secrets of the health-care system is that Medicare has done a much better job controlling costs than private health insurers. It is a paradox!

DEFINITION: A paradox is a seemingly absurd or self-contradictory statement or proposition that when investigated may prove to be well founded or true.

QUERY: But, what about Medicare, cost control efficiency, today?

Medicare Will Not Cover These 6 Medical Costs

LINK: https://www.msn.com/en-us/money/insurance/medicare-will-not-cover-these-6-medical-costs/vi-BB1g6Oes

Your thoughts are appreciated.

THANK YOU
***

“Triple Entry Accounting”

What it is – How it works?

[By staff reporters]

The term “Triple Entry Accounting,” was first used by Ian Grigg, financial cryptographer, and described in his paper published in 2005, three years before the emergence of Bitcoin and its underlying Blockchain protocol.

Here is the original historical article on “Triple Entry Accounting” by Grigg:

LINK: https://nakamotoinstitute.org/triple-entry-accounting/

Conclusion

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

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

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DOCTORS:

“Insurance & Risk Management Strategies for Doctors” https://tinyurl.com/ydx9kd93

“Fiduciary Financial Planning for Physicians” https://tinyurl.com/y7f5pnox

“Business of Medical Practice 2.0” https://tinyurl.com/yb3x6wr8

HOSPITALS:

“Financial Management Strategies for Hospitals” https://tinyurl.com/yagu567d

“Operational Strategies for Clinics and Hospitals” https://tinyurl.com/y9avbrq5

***

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

 

Understanding the Art of Selling Your Medical Practice

Part Two of Medical Practice Valuation

By Dr. David Edward Marcinko, MBA, CMP

By Prof. Hope Rachel Hetico, RN, MHA, CMP

www.CertifiedMedicalPlanner.org

In Part 1, we discussed how to establish fair market value (FMV) for a medical practice in the article, “Establish Your Practice’s Fair Market Value.” This time, we’ll review important terms and conditions for the sale transaction.

Valuation Types

Unfortunately, as a general rule, medical practice worth is presently deteriorating. A good medical practice is no longer a good business necessarily, and selling doctors can no longer automatically expect to extract a premium sale price. Nevertheless, appraising your medical practice on a periodic basis can play a key role in obtaining maximum value for it.

Competent practice valuation specialists typically charge a retainer to cover out-of-pocket expenses. Fees should not be based on a percentage of practice value, and may take 30-45 days to complete. Flat fees should be the norm because a sliding scale or percentage fee may be biased toward over-valuation in a declining marketplace. Fees range from $7,500-$50,000 for the small to large medical practice or clinic.

Expect to pay a retainer and sign a formal, professional engagement letter. Seek an unbiased and independent viewpoint. Buyer and sellers should each have their own independent appraisal done, using similar statistics, accounting measures, and economic assumptions.

At the Institute of Medical Business Advisors, Inc www.MedicalBusinessAdvisors.com we use three engagement levels that vary in intensity, purpose, and cost:

1. A comprehensive valuation provides an unambiguous value range. It is supported by most all procedures that valuators deem relevant, with mandatory onsite review. This gold standard is suitable for contentious situations. A written “opinion of value” is applicable for litigation support activities like depositions and trial. It is also useful for external reporting to bankers, investors, the public, Internal Revenue Service (IRS), etc.

2. A limited valuation lacks additional suggested Uniform Standards of Professional Appraisal Practice (USPAP) procedures. It is considered to be an “agreed upon engagement,” when the client is the only user. For example, it may be used when updating a buy/sell agreement, or when putting together a practice buy-in for a valued associate. This limited valuation would not be for external purposes, so no onsite visit is necessary and a formal opinion of value is not rendered.

3. An ad-hoc valuation is a low level engagement that provides a gross non-specific approximation of value based on limited parameters or concerns involved parties. Neither a written report nor an opinion of value is rendered. It is often used periodically as an internal organic growth/decline gauge.

Structure Sales Transactions

When the practice price has been determined and agreed on, the actual sales deal can be structured in a couple of ways:

(1) Stock Purchase v. Asset Purchase

In an asset transaction, the buyer will receive a tax amortization benefit associated with the intangible value of the business. This tax amortization represents a non-cash expense benefiting the buyer. In this case, the present value of those future tax benefits is added to the business enterprise value.

(2) Corporate Transactions

Typical private deals in the past involved some multiple (ratio) of earning before income taxes (EBIT)—usually a combination of cash, restricted stock, notes receivable, and possibly assumption of liabilities. For some physician hospital organizations, and public deals, the receipt of common stock can increase the practice price by as much as 40-50 percent (to accept the corresponding business risk, in lieu of cash).

Complete the Deal

The deal structure will vary depending on whether the likely buyer is a private practitioner, health system or a corporate partner. Some key issues to consider in the “art of the deal” include:

  • Working capital (in or out?): Including working capital in the transaction will increase the sale price.
  • Stock vs. asset transaction: Structuring the deal as an asset purchase will increase practice value due to the tax amortization benefits received by the buyer for intangible assets of the practice.
  • Common stock premium: The total sale price can be significantly higher than a cash equivalent price for accepting the risk and relative illiquidity of common stock as part of the payment.
  • Physician compensation: If your goal is to maximize practice value, take home a lower salary to increase practice sale price. The reverse is also true.

Understand Private Deal Structure

Assuming a practice sale is a private transaction, deal negotiations are based on the following pricing methodologies:

Seller financing: Many transactions involve an earn-out arrangement where the buyer puts money down and pays the balance under a formula based on future revenues, or gives the seller a promissory note under similar terms. Seller financing decreases a buyer’s risks (the longer the terms, the lower the risk). Longer terms demand premiums, while shorter terms demand discounts. Premiums that buyers pay for a typical seller-financed practice are usually more than what you would expect from a simple time value of money calculation, as a result of buyer risk reduction from paying over time, rather than up front with a bank loan or all cash. Remember to obtain a life insurance policy on the buyer.

Down payment: The greater the down payment for acquisition of a medical practice, the greater the risk is to the buyer. Consequently, sellers who will take less money up front can command a higher than average price for their practice, while sellers who want more down usually receive less in the end.

Taxation: Tax consequences can have a major impact on the price of a medical practice. For instance, a seller who obtains the majority of the sales price as capital gains can often afford to sell for a much lower price and still pocket as much or more than if the sales price were paid as ordinary income. Value attributed to the seller’s patient list, medical records, name brand, good will, and files qualifies for capital gains treatment. Value paid for the selling doctor’s continuing assistance after the sale and value attributed to a non-compete agreement are taxed at ordinary income. A buyer willing to allocate more for items with capital gains treatment, or a seller willing to take more in ordinary income, can frequently negotiate a better price. This is the essence of economically prudent practice transition planning.

Sidestep Common Buyer Blunders

Here are 10 blunders to avoid, as a buyer:

1. Believing the selling doctor’s attestations. Always verify data through an independent appraisal.

2. Wanting to change the culture of the practice. Be careful: Patients may not adjust quickly to change.

3. Using all available cash without keeping a reserve for potential contingencies.

4. Creating a conflict with the seller by recognizing a weakness and continually focusing on it for a bargain price.

5. Failing to realize that managed care plan contracts can be lost quickly or may not be always transferable.

6. Suffering from analysis paralysis. Money cannot be made by continually checking out a medical practice, only by actually running one.

7. Not appreciating the uniqueness of each practice, and using inaccurate “rules of thumb” from the golden age of medicine.

8. Not realizing that practice worth and goodwill value have plummeted lately and continue to decline in most parts of the country.

9. Not understanding that practice brokers may play both sides of the buy/sell equation for profit. Brokers usually are not obligated to disclose conflicts of interest, are not fiduciaries, and do not provide testimony as a court-approved expert witness.

10. Not hiring an appraisal professional who will testify in court, if need be, using the IRS-approved USPAP methods of valuation. Always assume that the appraisal will be contested (many times, it is).

After pricing and contracting due diligence has been performed, the next step in the medical practice sale process—as Donald Trump might say—is just good, old-fashioned negotiation.

Electronic Downloads

Part I: Part I

Part II: Part II

Additional Reading:

Cimasi, R.J., A.P. Sharamitaro, T.A. Zigrang, L.A.Haynes. Valuation of Hospitals in a Changing Reimbursement and Regulatory Environment. Edited by David E. Marcinko. Healthcare Organizations: Financial Management Strategies. Specialty Technical Publishers, 2008.

Marcinko, D.E. “Getting it Right: How much is a plastic surgery practice really worth?” Plastic Surgery Practice, August 2006.

Marcinko, D.E., H.R. Hetico. The Business of Medical Practice (3rd ed). Springer Publishing,New York,N.Y., 2011.

Marcinko, D.E. and H.R. Hetico. Risk Management and Insurance Planning for Physicians and Advisors. Jones and Bartlett Publishers, Sudbury, Mass., 2007.

Marcinko, D.E. and H.R. Hetico. Financial Planning for Physicians and Advisors. Jones and Bartlett Publishers, Sudbury, Mass., 2007.

Marcinko, D.E. and H.R. Hetico. Dictionary of Health Insurance and Managed Care. Springer Publishers, New York, N.Y., 2007.

Marcinko, D.E. and H.R. Hetico. Dictionary of Health Economics and Finance. Springer Publishers,New York,N.Y., 2007.

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On Accounting -VERSUS- Economic Profit

Yes – There is A Difference

[By staff reporters]

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

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How to Compare Cost-of-Living Benefits?

On Career Advancements and New Jobs

By Rick Kahler MSFS CFP®

As a doctor, nurse or allied healthcare professional; suppose you’re ready to take your career up a step, and you’re exploring opportunities in various parts of the country. You may easily be misled by the money script that a higher salary equates to a higher standard of living; however this is not necessarily always true.

What can you do to expand and reframe this money script?

Here are a few things to consider:

1. If the salary isn’t published, ask the money question right up front. Many candidates leave the inquiry into salary and benefits until the last step when both they and the potential employer have invested time and perhaps money into the interview process. Asking earlier avoids this wasted time, as well as allowing you to do your research on the front end and avoid potentially passing up other opportunities.

2. Get a clear picture of the lifestyle the salary will buy.  One of the best ways to do this is at bestplaces.net, which offers a cost-of-living calculator to compare the relative locations and salaries you are considering. For example, if you compare Rapid City, SD, and Redwood City, CA, you will find the latter costs 259% more than the former. That means you need to multiply the Rapid City salary by 3.59 to find the equivalent salary in Redwood City.

The “City Compare” tab also allows you to compare specific categories. For example, health care is 10% more in Rapid City than Redwood City, while housing in Redwood City costs over eight times as much. You can also compare factors like crime rate, climate, air quality, and tax rates. Pay particular attention to taxes; needing to pay both state and city income taxes, for example, could make a significant difference in your cost of living.

3. Investigate surrounding areas that have a lower cost of living. A 45-minute to one-hour commute each way from La Honda to Redwood City would result in a 37% decrease in the cost of living. A salary of $140,000 would buy a lifestyle in La Honda equivalent to that provided by $222,222 in Redwood City.

4. Examine your own beliefs about various areas. Look beyond salary amounts to your perceptions and assumptions about factors such as amenities, city-vs-rural living, lifestyles, status, etc. Then investigate the realities of those factors—both their value to you and the probability that you could take advantage of them. If a city offers professional sports, theatre productions, and concerts, for example, could you realistically afford the time and money to attend regularly? Would available public transportation fit your lifestyle and work schedule?

5. Consider your short-term and long-term family circumstances. Is a big-city lifestyle what you want as a young adult but not for raising a family? Would a given location fit your spouse’s needs as well as your own? Are your kids toddlers or about to leave home? Do you have aging parents that might need help?

6. If you choose a job in an area with a high cost of living, consider ways to reduce your budget. Thesimpledollar.com has 40 great tips on how to save money on monthly expenses.

Assessment

Finally, put all your research together and do your best to imagine year-round daily living in various locations. Envision yourself in the different routines and possibilities, whether they might include a daily two-hour commute, a city apartment, or a home in the woods with your own snow blower. Look beyond the financial cost of living to the emotional benefits and costs of living in various places. The most important lifestyle factor is finding the place where you will feel most at home.

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Conclusion

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

Book Marcinko: https://medicalexecutivepost.com/dr-david-marcinkos-bookings/

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DOCTORS:

“Insurance & Risk Management Strategies for Doctors” https://tinyurl.com/ydx9kd93

“Fiduciary Financial Planning for Physicians” https://tinyurl.com/y7f5pnox

“Business of Medical Practice 2.0” https://tinyurl.com/yb3x6wr8

HOSPITALS:

“Financial Management Strategies for Hospitals” https://tinyurl.com/yagu567d

“Operational Strategies for Clinics and Hospitals” https://tinyurl.com/y9avbrq5

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

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2019 Tax Deductions and Credits

Update on Tax Reform

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Conclusion

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

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Subscribe: MEDICAL EXECUTIVE POST for curated news, essays, opinions and analysis from the public health, economics, finance, marketing, IT, business and policy management ecosystem.

DOCTORS:

“Insurance & Risk Management Strategies for Doctors” https://tinyurl.com/ydx9kd93

“Fiduciary Financial Planning for Physicians” https://tinyurl.com/y7f5pnox

“Business of Medical Practice 2.0” https://tinyurl.com/yb3x6wr8

HOSPITALS:

“Financial Management Strategies for Hospitals” https://tinyurl.com/yagu567d

“Operational Strategies for Clinics and Hospitals” https://tinyurl.com/y9avbrq5

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

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

2018 – 2021 HSA Contribution Limits

Inflation Adjustments for the Tax Cuts and Jobs Act

By Dr. David Edward Marcinko MBA

http://www.CertifiedMedicalPlanner.org

On March 5, 2018, the IRS released Revenue Procedure 2018-18 (as part of Bulletin 2018-10). Due to changes made in the Tax Cuts and Jobs Act, certain adjustments needed to be made to inflation amounts.

The includes a reduction in the maximum family HSA contribution for those with family coverage under an HDHP from $6,900 to a new limit of $6,850 for calendar year 2018. The single contribution limit remains unchanged at $3,450 per year.

This reduction affects employees participating in an HSA Plan who have elected to contribute more than $6,850 for family coverage in 2018.

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

About the Laffer Curve

What it is – How it works
By staff reporters

DEFINITION:

In economics, the Laffer curve is a representation of the relationship between rates of taxation and the resulting levels of government revenue.

The Laffer curve claims to illustrate the concept of taxable income elasticity—i.e., taxable income will change in response to changes in the rate of taxation. http://www.HealthDictionarySeries.org

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HISTORY:

The Laffer Curve is a theory developed by supply-side economist Arthur Laffer to show the relationship between tax rates and the amount of tax revenue collected by governments.

The curve is used to illustrate Laffer’s main premise that the more an activity such as production is taxed, the less of it is generated. Likewise, the less an activity is taxed, the more of it is generated.

MORE: https://www.investopedia.com/terms/l/laffercurve.asp

Conclusion

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Contact: MarcinkoAdvisors@msn.com

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On The Tax Cut and Jobs Act (TCJA)

The Tax Cut and Jobs Act (TCJA)

By Rick Kahler CFP®

The Tax Cut and Jobs Act (TCJA) has generated a lot of media hype, much of which is coming from the extreme wings of both political parties and much of which is simply not true.

Here is some perspective

When he signed the bill President Trump called it “the largest tax cuts in our history”. This is not so.

According to a November 2, 2017, article in Reuters, the largest personal tax cuts in U.S. history came from Presidents Warren Harding and Calvin Coolidge, both Republicans. In 1922, the top tax rate was 73 percent. By 1925, it was only 25 percent.

Under Presidents John Kennedy and Lyndon Johnson, both Democrats, the tax cuts of 1964 and 1965 cut the top rate from 91 percent to 70 percent. The 1986 Reagan cuts lowered the top rate from 70 percent to 28 percent.

In comparison, the Trump cuts reduced the top rate from 39.6% to 37%, a miniscule 6.6% drop.

The new tax rules do mean some significant changes 

The good news is that the standard deduction will nearly double and the maximum child tax credit will increase from $1000 to $2000. But almost nowhere do you read about the bad news: the current personal exemptions will go away.

For 2017, an individual can take the $6350 standard deduction plus the $4050 personal exemption for a total of $10,400 (plus $4050 for each dependent). For 2018, this is $12,000, only $1,600 more in deductions. This means a median tax savings of about $192 per person, and only if you don’t itemize.

The even worse news

Home office expenses, moving expenses to relocate for a new job, casualty and gambling losses, unreimbursed business expenses, tax preparation software, tax preparation fees, and investment advisory fees will no longer be deductible on Schedule A.

This tax act has been labeled as terrible for the middle class and wonderful for the uber-rich. I don’t see that either claim is true. It appears to me that the winners (not “big winners”) are the middle class. Yes, the uber-rich also get a small 6.6% reduction—hardly a big deal compared to the cuts of 23% to 73% under Kennedy, Reagan, Harding, and Coolidge.

Corporate taxes

The real impact of the TCJA is its reductions on corporate taxes, not personal taxes. Taxes on C-corporations are cut from 34% to 21% (a 38% reduction). What isn’t reported is that reducing America’s corporate income tax has had bipartisan support for several years. The current US rate of 34% is the highest in developed countries, when the average global corporate tax rate is 22.6%.

Those who attack “big corporations that will just pass tax savings on to investors” tend to forget that 43% of Americans invest in these same corporations, including those with 401(k), IRA, or 403(b) retirement plans.

You also probably haven’t read that the new law actually raises taxes on corporations with taxable incomes of under $50,000, from 15% to 21% (a 38% increase). These corporations are those most generally owned by the Main Street business person.

The TCJA helps tax payers that are sole proprietors, partners and shareholders of S-corporations, LLCs and partnerships, which pass profits or losses through to be taxed in the taxpayer’s personal tax brackets. The new law allows most of these pass-through entities to exclude 20% of their profit from taxes. However, if you are in the profession of law, accounting, medicine, or financial planning, or are a professional musician or athlete, the exclusion probably doesn’t apply.

Assessment-Irony

Finally, for the 51% of Americans who pay taxes, the TCJA adds an unbelievable amount of complexity to an already complex tax code.

Conclusion

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The Tax Cuts and Jobs Act of 2018

The Tax Cuts and Jobs Act

By Robert Whirley CPA

Congress has enacted the biggest tax reform law in thirty years, one that will make fundamental changes in the way you, your family and your business calculate your federal income tax bill, and the amount of federal tax you will pay. Since most of the changes will go into effect next year, there’s still a narrow window of time before year-end to soften or avoid the impact of crackdowns and to best position yourself for the tax breaks that may be heading your way.

Attached you will find summaries of the various provisions. We have tried to make sure these are final given the fact that the law changed three times in 24 hours.

Here’s a quick rundown of last-minute moves you should think about making

Lower tax rates coming. The Tax Cuts and Jobs Act will reduce tax rates for many taxpayers, effective for the 2018 tax year. Additionally, many businesses, including those operated as pass-through, such as partnerships, may see their tax bills cut.

The general plan of action to take advantage of lower tax rates next year is to defer income into next year. Some possibilities follow:

• . . . If you are about to convert a regular IRA to a Roth IRA, postpone your move until next year. That way you’ll defer income from the conversion until next year and have it taxed at lower rates.

• . . . Earlier this year, you may have already converted a regular IRA to a Roth IRA but now you question the wisdom of that move, as the tax on the conversion will be subject to a lower tax rate next year. You can unwind the conversion to the Roth IRA by doing a recharacterization—making a trustee-to-trustee transfer from the Roth to a regular IRA. This way, the original conversion to a Roth IRA will be cancelled out. But you must complete the recharacterization before year-end. Starting next year, you won’t be able to use a recharacterization to unwind a regular-IRA-to-Roth-IRA conversion.

• . . . If you run a business that renders services and operates on the cash basis, the income you earn isn’t taxed until your clients or patients pay. So if you hold off on billings until next year—or until so late in the year that no payment will likely be received this year—you will likely succeed in deferring income until next year.

• . . . If your business is on the accrual basis, deferral of income till next year is difficult but not impossible. For example, you might, with due regard to business considerations, be able to postpone completion of a last-minute job until 2018, or defer deliveries of merchandise until next year (if doing so won’t upset your customers). Taking one or more of these steps would postpone your right to payment, and the income from the job or the merchandise, until next year. Keep in mind that the rules in this area are complex and may require a tax professional’s input.

• . . . The reduction or cancellation of debt generally results in taxable income to the debtor. So if you are planning to make a deal with creditors involving debt reduction, consider postponing action until January to defer any debt cancellation income into 2018.

Disappearing or reduced deductions, larger standard deduction. Beginning next year, the Tax Cuts and Jobs Act suspends or reduces many popular tax deductions in exchange for a larger standard deduction.

Here’s what you can do about this right now:

• Individuals (as opposed to businesses) will only be able to claim an itemized deduction of up to $10,000 ($5,000 for a married taxpayer filing a separate return) for the total of (1) state and local property taxes; and (2) state and local income taxes. To avoid this limitation, pay the last installment of estimated state and local taxes for 2017 no later than Dec. 31, 2017, rather than on the 2018 due date. But don’t prepay in 2017 a state income tax bill that will be imposed next year – Congress says such a prepayment won’t be deductible in 2017. However, Congress only forbade prepayments for state income taxes, not property taxes, so a prepayment on or before Dec. 31, 2017, of a 2018 property tax installment is apparently OK.

• The itemized deduction for charitable contributions won’t be chopped. But because most other itemized deductions will be eliminated in exchange for a larger standard deduction (e.g., $24,000 for joint filers), charitable contributions after 2017 may not yield a tax benefit for many because they won’t be able to itemize deductions. If you think you will fall in this category, consider accelerating some charitable giving into 2017.

• The new law temporarily boosts itemized deductions for medical expenses. For 2017 and 2018 these expenses can be claimed as itemized deductions to the extent they exceed a floor equal to 7.5% of your adjusted gross income (AGI). Before the new law, the floor was 10% of AGI, except for 2017 it was 7.5% of AGI for age-65-or-older taxpayers. But keep in mind that next year many individuals will have to claim the standard deduction because many itemized deductions have been eliminated. If you won’t be able to itemize deductions after this year, but will be able to do so this year, consider accelerating “discretionary” medical expenses into this year. For example, before the end of the year, get new glasses or contacts, or see if you can squeeze in expensive dental work such as an implant.

IRS

Other year-end strategies

Here are some other last minute moves that can save tax dollars in view of the new tax law:

• The new law substantially increases the alternative minimum tax (AMT) exemption amount, beginning next year. There may be steps you can take now to take advantage of that increase. For example, the exercise of an incentive stock option (ISO) can result in AMT complications. So, if you hold any ISOs, it may be wise to postpone exercising them until next year. And, for various deductions, e.g., depreciation and the investment interest expense deduction, the deduction will be curtailed if you are subject to the AMT. If the higher 2018 AMT exemption means you won’t be subject to the 2018 AMT, it may be worthwhile, via tax elections or postponed transactions, to push such deductions into 2018.

• Like-kind exchanges are a popular way to avoid current tax on the appreciation of an asset, but after Dec. 31, 2017, such swaps will be possible only if they involve real estate that isn’t held primarily for sale. So if you are considering a like-kind swap of other types of property, do so before year-end. The new law says the old, far more liberal like-kind exchange rules will continue apply to exchanges of personal property if you either dispose of the relinquished property or acquire the replacement property on or before Dec. 31, 2017.

• For decades, businesses have been able to deduct 50% of the cost of entertainment directly related to or associated with the active conduct of a business. For example, if you take a client to a nightclub after a business meeting, you can deduct 50% of the cost if strict substantiation requirements are met. But under the new law, for amounts paid or incurred after Dec. 31, 2017, there’s no deduction for such expenses. So if you’ve been thinking of entertaining clients and business associates, do so before year-end.

• Under current rules, alimony payments generally are an above-the line deduction for the payor and included in the income of the payee. Under the new law, alimony payments aren’t deductible by the payor or includible in the income of the payee, generally effective for any divorce decree or separation agreement executed after 2017. So if you’re in the middle of a divorce or separation agreement, and you’ll wind up on the paying end, it would be worth your while to wrap things up before year end. On the other hand, if you’ll wind up on the receiving end, it would be worth your while to wrap things up next year.

• The new law suspends the deduction for moving expenses after 2017 (except for certain members of the Armed Forces), and also suspends the tax-free reimbursement of employment-related moving expenses. So if you’re in the midst of a job-related move, try to incur your deductible moving expenses before year-end, or if the move is connected with a new job and you’re getting reimbursed by your new employer, press for a reimbursement to be made to you before year-end.

• Under current law, various employee business expenses, e.g., employee home office expenses, are deductible as itemized deductions if those expenses plus certain other expenses exceed 2% of adjusted gross income. The new law suspends the deduction for employee business expenses paid after 2017. So, we should determine whether paying additional employee business expenses in 2017, that you would otherwise pay in 2018, would provide you with an additional 2017 tax benefit.

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Also, now would be a good time to talk to your employer about changing your compensation arrangement—for example, your employer reimbursing you for the types of employee business expenses that you have been paying yourself up to now, and lowering your salary by an amount that approximates those expenses. In most cases, such reimbursements would not be subject to tax.

Assessment

Please keep in mind that I’ve described only some of the year-end moves that should be considered in light of the new tax law.

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The Home Office Tax Deduction Explained

What it is – How it works?

By Dr. David Edward Marcinko MBA CMP™
http://www.CertifiedMedicalPlanner.org

A taxpayer’s business use of his or her home may give rise to a deduction for the business portion of expenses related to operating the home.

The basic requirement:

1. There must be a specific room or area that is set aside for and used exclusively on a regular basis as:
a. The principal place of any business, or
b. A place where the taxpayer meets with patients, clients or customers in the normal course of their trade or business, or
c. A separate structure that is used in the taxpayer’s trade or business and is not attached to their house or residence.

2. An employee can take a home office deduction if he or she meets the regular and exclusive use test and the use is for the convenience of the employer.

Deductions

Deductible expenses include business portions of mortgage interest, property taxes, depreciation, repairs and maintenance to the overall home that help the business use area, janitorial services or maid, utilities, insurance as well as other expenses directly related to the operating the remainder of the home.

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Conclusion

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Why Medical Claims are Denied?

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By Eric Duchinsky

[Advertisement: BHM Healthcare Solutions, Inc.]

One Doctor’s POV

Hi Ann,

Dr. Nicholas Fogelson wrote a perspective article for KevinMD.com. He wrote about his experience as a peer reviewer for an independent review organization network. The observations hit to the heart of why third-party peer review (for payers) and physician advisor services (for providers) are vital for building efficiencies.

The categories

Here are the main categories Dr. Fogelson saw while reviewing:

  • Full-spectrum medicine
  • Poor documentation
  • Industry acceptance of something that cannot be supported in the literature or not evidence-based.

Assessment

The takeaway lessons, from Dr. Fogelson’s observations, point to two very fixable inefficiencies: better documentation and following evidence-based research for care.

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Click HERE for the follow-up blog on more reasons claims are denied. 

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Conclusion

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

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

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A Social Security Taxation Synopsis

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By Vanguard Services

Infographic on Social Security Taxation

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Conclusion

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

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

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

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

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The New Social Security Wage Base for 2017

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Social Security wage base increases to $127,200 for 2017

[By Robert Whirley CPA & Associates, LLC + ProActive Advisory]

The Social Security Administration has announced that the wage base for computing the Social Security tax (OASDI) in 2017 will increase to $127,200.

The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees, and self-employed workers—one for Old Age, Survivors and Disability Insurance (OASDI; commonly known as the Social Security tax), and the other for Hospital Insurance (HI; commonly known as the Medicare tax).

For 2017, the FICA tax rate for employers is 7.65%—6.2% for OASDI and 1.45% for HI.

For 2017, an employee will pay:

  1. 6.2% Social Security tax on the first $127,200 of wages (maximum tax is $7,886.40 [6.2% of $127,200]), plus
  2. 1.45% Medicare tax on the first $200,000 of wages ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return), plus
  3. 2.35% Medicare tax (regular 1.45% Medicare tax + 0.9% additional Medicare tax) on all wages in excess of $200,000 ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return). (Code Sec. 3101(b)(2))

For 2017, the self-employment tax imposed on self-employed people is:

  • 12.4% OASDI on the first $127,200 of self-employment income, for a maximum tax of $15,772.80 (12.40% of $127,200); plus
  • 2.90% Medicare tax on the first $200,000 of self-employment income ($250,000 of combined self-employment income on a joint return, $125,000 on a separate return), (Code Sec. 1401(a), Code Sec. 1401(b)), plus
  • 3.8% (2.90% regular Medicare tax + 0.9% additional Medicare tax) on all self-employment income in excess of $200,000 ($250,000 of combined self-employment income on a joint return, $125,000 for married taxpayers filing a separate return). (Code Sec. 1401(b)(2))
  • There is a maximum amount of compensation subject to the OASDI tax, but no maximum for HI.

IRS

Conclusion

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

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What is Hospital WACC?

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By Calvin Weise CPA and Dr. David E. Marcinko MBA

http://www.CertifiedMedicalPlanner.org

The Weighted Average Cost of Capital 

It is critical to understand and to measure the total cost of capital. Lack of understanding and appreciation of the total cost of capital is widespread, particularly among not-for-profit hospital executives. The capital structure includes long-term debt and equity; total capital is the sum of these two. Each of these components has cost associated with it. For the long-term debt portion, this cost is explicit: it is the interest rate plus associated costs of placement and servicing.

Equity portion

For the equity portion, the cost is not explicit and is widely misunderstood. In many cases, hospital capital structures include significant amounts of equity that has accumulated over many years of favorable operations. Too many executives wrongly attribute zero cost to the equity portion of their capital structure. Although it is correct that generally accepted accounting principles continue to assign a zero cost to equity, there is opportunity cost associated with equity that needs to be considered. This cost is the opportunity available to utilize that capital in alternative ways.

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In general, the cost attributed to equity is the return expected by the equity markets on hospital equity. This can be observed by evaluating the equity prices of hospital companies whose equity is traded on public stock exchanges. Usually the equity prices will imply cost of equity in the range of 10% to 14%.

Almost always, the cost of equity implied by hospital equity prices traded on public stock exchanges will substantially exceed the cost of long-term debt. Thus, while many hospital executives will view the cost of equity to be substantially less than the cost of debt (i.e., to be zero), in nearly all cases, the appropriate cost of equity will be substantially greater than the cost of debt.

http://www.HealthDictionarySeries.org

Hospitals need to measure their weighted average cost of capital (WACC).

WACC is the cost of long-term debt multiplied by the ratio of long-term debt to total capital plus the cost of equity multiplied by the ratio of equity to total capital (where total capital is the sum of long-term debt and equity).

WACC is then used as the basis for capital charges associated with all capital investments. Capital investments should be expected to generate positive returns after applying this capital charge based on the WACC. Capital investments that don’t generate returns exceeding the WACC consume enterprise value; those that generate returns exceeding WACC increase enterprise value.

Assessment

Hospital executives need to be rewarded for increasing enterprise value. 

Conclusion

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Product DetailsProduct Details

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Key Hospital Employee Benefits

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For KEY Hospital Employees

By PERRY D’ALESSIO; CPA

[D’Alessio Tocci & Pell LLP]

Dr. David E. Marcinko; MBA CMP®

http://www.CertifiedMedicalPlanner.org

Effective January 1st 2014, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) was increased from $205,000 to $210,000.

For a participant who separated from service before January 1st 2014, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2013, by 1.0155.

The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2014 from $51,000 to $52,000.

The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A). These dollar amounts and the adjusted amounts are as follows:

  • The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased to $17,500.
  • The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $255,000 to $260,000.
  • The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased from $165,000 to $170,000.
  • The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5‑year distribution period is increased from $1,035,000 to $1,050,000, while the dollar amount used to determine the lengthening of the 5‑year distribution period is increased from $205,000 to $210,000.
  • The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from to $115,000.
  • The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over is increased from $5,000 to $5,500. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $2,500.
  • The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost‑of‑living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, is increased from $380,000 to $385,000.
  • The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) is increased from $500 to $550.
  • The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from to $12,000.
  • The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased to $17,500.
  • The compensation amounts under Section 1.61‑21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation purposes is increased from $100,000 to $105,000.  The compensation amount under Section 1.61‑21(f)(5)(iii) is increased from $205,000 to $210,000.
  • The Code also provides that several pension-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3). These dollar amounts and the adjustments are as follows:
  • The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $35,500 to $36,000; the limitation under Section 25B(b)(1)(B) is increased from $38,500 to $39,000; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), from $59,000 to $60,000.
  • The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing as head of household is increased from $26,6250 to $27,000; the limitation under Section 25B(b)(1)(B) is increased from $28,875 to $29,250; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), from $44,250 to $45,000.
  • The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers is increased from $17,750 to $18,000; the limitation under Section 25B(b)(1)(B) is increased from $19,250 to $19,500; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), from $29,500 to $30,000.
  • The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $95,000 to $96,000. The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $59,000 to $60,000. The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $178,000 to $181,000.
  • The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $178,000 to $181,000. The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $112,000 to $114,000.

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IRS

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Assessment

Administrators of defined benefit or defined contribution plans that have received favorable determination letters should not request new determination letters solely because of yearly amendments to adjust maximum limitations in the plans.

Source: http://www.irs.gov/newsroom/article/0,,id=187833,00.html

Conclusion

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

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

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On Corporate Taxes

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Erik Hare

[By Erik Hare]

What is a fair corporate tax?

It’s a hot political topic, but one loaded with a tremendous amount of mis-information. On the left, it’s common to cite “loopholes” which allow corporations to “offsh…

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Corporate Taxes

Conclusion

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OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

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Don’t forget 1st. Quarter Estimated Tax

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Andrew Schwartz

By Andrew Schwartz CPA

Doctors –Don’t forget 1st Quarter Estimated Tax payments for 2016; due April 18th.

‘Estimated Tax’

Estimated taxes are usually paid on a quarterly basis. If the estimated taxes that are paid do not equal at least 90% of the taxpayer’s actual tax liability (or 100% or 110% of the taxpayer’s prior-year liability, depending on the level of adjusted gross income), then interest and penalties are assessed against the delinquent amount.

Don’t forget- 1st Quarter Estimated Tax

IRS

Conclusion

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

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

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Tax Changes for 2015-16

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By Robert Whirley CPA

[Whirley & Associates, LLC]

Alpharetta, GA

Doctors – Be Aware!

As tax filing season rapidly approaches I wanted to provide you with a few key items to note for 2015 and 2016.  If you are interested I can send you my full list of tax changes for 2015 and 2016 – I warn you, it’s 19 pages long – and this is only my short list.

Welcome to the New Year 2016! 

  • For 2015, the standard mileage rate for business travel is 57.5¢ (54¢ for 2016).
  • The simplified per diem rates for post-Sept. 30, 2015 travel are $275 for high-cost areas and $185 for all other localities (up from $259 and $172).
  • For 2015 and 2016, a HDHP for health savings account (HSA) purposes is a health plan with an annual deductible that is not less than $1,300 for individual coverage and $2,600 for family coverage. Maximum out-of-pocket expenses can’t exceed $6,450 for individual coverage for 2015 ($6,550 for 2016) and $12,900 for family coverage for 2015 ($13,100 for 2016). The maximum annual HSA deductible contribution is the sum of the monthly contribution limits, based on eligibility and health plan coverage on the first day of the month. The monthly limit is 1/12 of the indexed amount for self-only coverage ($3,350 for 2015 and 2016) and for family coverage ($6,650 for 2015 and $6,750 for 2016).
  • Enhanced expensing—in the form of increased limitations and treatment of certain real property as Code Sec. 179 property—was made permanent, as was the ability to revoke a Code Sec. 179 election without IRS’s consent.
  • The mileage rate for use of a car for qualified medical transportation is 23¢ per mile for expenses paid or incurred in 2015 (19¢ for 2016).
  • Bonus first-year depreciation was retroactively extended through 2019 with a number of modifications, including a gradual reduction over that time (50% for qualified property placed in service in 2015 through 2017, 40% for 2018, and 30% for 2019).
  • The de minimis safe harbor for taxpayers that don’t have an applicable financial statement was raised from $500 to $2,500. – For items expensed as miscellaneous supplies.
  • For contributions by individuals (including ranchers and farmers), the increased charitable deduction for qualified conservation easements was made permanent.
  • 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements was made permanent.
  • Education Tax Breaks:
  • The American Opportunity tax credit (AOTC) was made permanent. It was also made subject to heightened verification processes and paid-preparer due diligence requirements in order to reduce the number of improper payments.
  • The up-to-$250 above-the-line deduction for teachers’ out-of-pocket classroom-related expenses was made permanent.

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IRS

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The above-the-line deduction for qualified tuition and related expenses was retroactively extended through 2016.

  • Starting in 2015, the definition of “qualified higher education expenses” for Sec. 529 qualified tuition programs includes certain computer and technology-based costs.
  • For tax years beginning after June 29, 2015, taxpayers must receive a Form 1098-T from the educational institution containing all required information in order to claim the AOTC, the above-the-line deduction for higher education expenses, or the Lifetime Learning Credit.
  • For 2015 and 2016, the AOTC phases out at the same level of modified AGI—over $80,000 ($160,000 for a joint return).
  • For 2015 and 2016, the maximum AOTC/Hope Scholarship Credit is $2,500.
  • For 2015, the Lifetime Learning credit phases out for taxpayers with modified AGI in excess of $55,000 ($110,000 for a joint return). For 2016, the corresponding figures are $55,000 and $111,000.
  • For 2015, the higher education exclusion for savings bond income phases out ratably for taxpayers with modified AGI between $77,200 and $92,200 ($115,750 to $145,750 for joint filers). For 2016, the corresponding ranges are $77,550 to $92,550, and $116,300 to $146,300.
  • For 2015 and 2016, the deduction for interest paid on qualified higher education loans phases out ratably for taxpayers with modified AGI between $65,000 and $80,000 ($130,000 and $160,000 for joint filers).

Assessment

Just days into 2016 and you’re also facing pressures bearing down on your payroll operations. Are you ready to meet them? For example:

  • You’re not done with tax year 2015 … yet. There are FUTA credit reductions to determine and budget for, the impact of tax extenders legislation to consider (including retroactive reinstatement of parity between mass transit benefits and parking benefits), and more.
  • Major tax reform is probably off the table for now. But don’t let that fool you. New federal laws increase payroll tax penalties, change the due dates for your corporate returns and yank passports from individuals with tax debts. Of course, Payroll will bear the brunt of these new laws.
  • The IRS has issued a raft of payroll tax regulations, and proposed regulations from the Department of Labor will ratchet up the amount employees must earn to be exempt from overtime. Finally, the IRS and its sister agencies continue to issue guidance on compliance with the Affordable Care Act.
  • There’s a key FLSA case pending before the U.S. Supreme Court. Word on the street is that it may continue to permit class action lawsuits for unpaid overtime.

Conclusion

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

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Congress Passes Permanent Tax Provisions

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By Cindy Freking CPA

[Tax Manager ]

cfreking@whirleyproactive.com

Late on December 15th, a bipartisan agreement was reached on tax extenders—i.e., the 50 or so temporary tax provisions that are routinely extended by Congress on a one- or two-year basis—and numerous other tax provisions in the “Protecting Americans from Tax Hikes (PATH) Act of 2015” (the Act). This agreement makes permanent many of the individual and business extenders and contains provisions on Real Estate Investment Trusts (REITs), IRS administration and the Tax Courts and miscellaneous other provisions.

Below are some provisions that have been made permanent:

DEPRECIATION & EXPENSING PROVISIONS

  • The Act makes permanent the $500,000 expensing limitation and $2 million phase out amounts under Code Section 179
  • For property placed in service after Dec 31, 2015, the Act provides that air conditioning and heating units are now eligible for expensing
  • Assets for which the De Minimis election applies are not counted in determining the Code Section 179 expensing election or the ceiling
  • 15 Year Write off for Qualified Leasehold , Retail Improvements & Restaurant Property

INDIVIDUALS

  • American Opportunity Credit
  • Enhanced Earned Income Tax Credit
  • Above the line Educator Expenses
  • Exclusion for Employer Provided Mass Transit & Parking
  • State and Local Sales deduction
  • Liberalized rules for Qualified Conservation Contributions
  • Nontaxable IRA transfers to eligible charities

BUSINESSES

  • Research & Development credit & offset now available against taxes in addition to income taxes
  • Reduction in S-Corporation recognition period for Built in Gains Tax
  • Exclusion of 100% Gain on certain small business stock
  • Enhanced deduction for Food Inventory
  • Differential Wage Payment Credit (active duty employees)

Assessment

The above provides a brief overview of the Act. There are various provisions that have been extended through 2016 and 2019 and other miscellaneous provisions. If you need additional information or have questions, please contact your CPA.

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IRS

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Conclusion

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

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Beware these “Old-School” Medical Practice Embezzlement Schemes!

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2 Doctors and 2 CPAs Discuss Office Internal Controls

  • Perry D’Alessio CPA
  • Dr. Gary L. Bode MSA CPA LLC
  • Dr. David Edward Marcinko MBA CMP

Internal controls are simply those systems, processes, procedures, and mechanisms controlled by management that make it possible for a medical practice, clinic or any health entity to successfully achieve its goals and objectives.

Internal controls designed and implemented by the practice physician-owner, help prevent bad things from happening. Embezzlement protection is the classic example.

However, internal controls also help ensure good things happen, at least most of the time. A procedural manual that teaches employees how to deal effectively with common patient complaints is one example.  Operating efficiency, safeguarding assets, quality patient care, compliance with existing laws, and accuracy of financial transactions are common goals of internal controls.

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Common Office Schemes

  • The physician-owner pocketing cash “off the books”. To the IRS, this is like embezzlement to intentionally defraud it out of tax money.
  • Employee’s pocketing cash from cash transactions. This is why you see cashiers following protocol that seems to take forever when you’re in the grocery check out line. This is also why you see signs offering a reward if he/she is not offered a receipt. This is partly why security cameras are installed.
  • Bookkeepers or your accountant writing checks to themselves. This is easiest to do in flexible software programs like QuickBooks, Peachtree Accounting and financial software [www.Peachtree.com]. It is one of the hardest schemes to detect. The bookkeeper self-writes and cashes the check to their own name; and then the name on the check is changed in the software program to a vendor’s name. So a real check exists which looks legitimate on checking statements unless a picture of it is available.
  • Accountants or bookkeepers paying bills of others and posting the disbursements as if they were for a practice obligation. Checks payable to the Internal Revenue Service for example can bill used to pay tax obligations of another and are described in the bookkeeping as practice taxes due.
  • Employees ordering personal items on practice credit cards.
  • Bookkeepers receiving insurance company checks or patient checks, demonstrating the receipt of such in the EMR software and not posting in the practice bookkeeping software. Instead checks are illegally depositing them in an unauthorized, pseudo practice checking account, set up by them-selves in a bank different from yours. They then withdraw funds at will. If this scheme uses only a few patients, who are billed outside of the practice’s accounting software, this is hard to detect. Executive-management must have a good knowledge of existing patients to catch the ones “missing” from practice records. Monitoring the bookkeeper’s lifestyle might raise suspicion, but this scheme is generally low profile, but protracted. Checking the accounting software “audit trail”, this shows the required original invoice deletions or credit memos in a less sophisticated version of this scheme.
  • Bookkeepers writing payroll checks to non-existent employees. This scheme works well in larger practices and medical clinics with high seasonal turnover of employees, and practices with multiple locations the physician-owner doesn’t visit often.
  • Bookkeepers writing inflated checks to existing employees, vendors or subcontractors. Physician-owners should beware if romantic relationships between the bookkeeper and other practice related parties.
  • Bookkeepers writing checks to false vendors. This is another low profile, protracted scheme that exploits the physician-owner’s indifference to accounts payable.

More:

  1. Understanding the Healthcare Fraud and Abuse Control Program

Assessment

Beware these “od-school” schemes that are making a comeback, today.

Conclusion

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

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[PHYSICIAN FOCUSED FINANCIAL PLANNING AND RISK MANAGEMENT COMPANION TEXTBOOK SET]

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

[Dr. Cappiello PhD MBA] *** [Foreword Dr. Krieger MD MBA]

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About the “Surface Transportation and Veterans Health Care Choice Improvement Act of 2015”

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Changes and Updates in Tax Return Due Dates

By Bobby Whirley CPA, Alpharetta, GA

[Whirley & Associates, LLC + Proactive Advisory]

On July 31st, 2015, President Obama signed into law P.L. 114-41, the “Surface Transportation and Veterans Health Care Choice Improvement Act of 2015.”

Although this new law was primarily designed as a 3-month stopgap extension of the Highway Trust Fund and related measures, it includes a number of important tax provisions, including revised due dates for partnership and C corporation returns and revised extended due dates for some returns. This letter provides an overview of these provisions, which may have an impact on you, your family, or your business.

Revised Due Dates for Partnership and C Corporation Returns

Domestic corporations (including S corporations) currently must file their returns by the 15th day of the third month after the end of their tax year. Thus, corporations using the calendar year must file their returns by March 15 of the following year. The partnership return is due on the 15th day of the fourth month after the end of the partnership’s tax year. And, partnerships using a calendar year must file their returns by April 15th of the following year. Since the due date of the partnership return is the same date as the due date for an individual tax return, individuals holding partnership interests often must file for an extension to file their returns because their Schedule K-1s may not arrive until the last minute.

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Under the new law, in a major restructuring of entity return due dates, effective generally for returns for tax years beginning after December 31st, 2015:

  • Partnerships and S corporations will have to file their returns by the 15th day of the third month after the end of the tax year. Thus, entities using a calendar year will have to file by March 15th of the following year. In other words, the filing deadline for partnerships will be accelerated by one month; the filing deadline for S corporations stays the same. By having most partnership returns due one month before individual returns are due, taxpayers and practitioners will generally not have to extend, or scurry around at the last minute to file, the returns of individuals who are partners in partnerships.
  • C corporations will have to file by the 15th day of the fourth month after the end of the tax year. Thus, C corporations using a calendar year will have to file by April 15th of the following year. In other words, the filing deadline for C corporations will be deferred for one month.
  • Keep in mind that these important changes to the filing deadlines generally won’t go into effect until the 2016 returns have to be filed. Under a special rule for C corporations with fiscal years ending on June 30th, the change is deferred for ten years — it won’t apply until tax years beginning after December 31st, 2025.

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Veterans Day 2015

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Revised Extended Due Dates for Various Returns

  • Taxpayers who can’t file a tax form on time can ask the IRS for an extension to file the form. Effective for tax returns for tax years beginning after December 31st, 2015, the new law directs the IRS to modify its regulations to provide for a longer extension to file a number of forms, including the following:
  • Form 1065 (U.S. Return of Partnership Income) will have a maximum extension of six-months (currently, a 5-month extension applies). The extension will end on September 15th for calendar year taxpayers.
  • Form 1041 (U.S. Income Tax Return for Estates and Trusts) will have a maximum extension of five and a half months (currently, a 5-month extension applies). The extension will end on Sept. 30th for calendar year taxpayers.
  • The Form 5500 series (Annual Return/Report of Employee Benefit Plan) will have a maximum automatic extension of three and a half months (under currently law, a 2½ month period applies). The extension will end on November 15 for calendar year filers.

FinCEN Report Due Date Revised

  • Taxpayers with a financial interest in or signature authority over certain foreign financial accounts must file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR). Currently, this form must be filed by June 30 of the year immediately following the calendar year being reported, and no extensions are allowed.

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Assessment

Under the new law, for returns for tax years beginning after December 31, 2015, the due date of FinCEN Report 114 will be April 15 with a maximum extension for a 6-month period ending on October 15th. The IRS may also waive the penalty for failure to timely request an extension for filing the Report, for any taxpayer required to file FinCEN Form 114 for the first time.

Conclusion

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OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

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

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