Understanding Medical Billing Methodologies

Posted on December 10, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

The Cash Conversion Cycle

[By Staff Reporters]

Most patients and financial advisors don’t have a clue about how doctor’s get paid in our current system; but it’s not by magic. Yet, a number of different steps occur during the processing of a medical claim that can be seen in a flow chart. Each step in the process can be mapped out and each is subject to claim payment-or-claim rejection. A payment time line for a typical FFS or PPO can also be subjected to a number of variables, depending on different factors including staff competency, time, outside vendors, information management, management decisions in general, or regulatory requirements. The total transit times may take weeks for electronic claims or up to two-years for some paper based claims.

First Make the Diagnosis

• ICD-9 alpha numeric code for disease classes, not billing.

• HHS offers ICD-9 [CM] for MDs and facilities.

• WHO-1900, updated every 3-10 years, e-ICD-10 [2013].

• Diagnostic Statistical Manual Mental Disorders, 4th Edition [DSM-IV].

Then Select the Current Procedure Terminology® Code

Medical, surgical and diagnostic task & service billing code numbers [5-digit] of AMA used by payers:

• Thousands updated annually

• Secretive with registered mark ®

• Office Visits: [brief, inter, extended, etc]

• # 99214 physical exam

• # 90658 H1N1 flu shot

• # 12002 one-inch laceration suture

• CDT® and HCPCS codes, too!

Document the Visit in Patient Progress Notes

Subjective:

“I was gardening and noticed my wrist was swollen and itched like crazy”

Objective:

A 4 inch linear red rash with circular oozing papules and swollen skin is present. Patient is wearing a small tennis bracelet which was tight.

Assessment:

Rule out rues dermatitidis versus nickel allergy.

Plan:

Soap soaks, with OTC calamine lotion with Rx oral diphenhydramine or [benadryl].

Submit the “Super Bill”

Not a “big bill” or expensive medical invoice; just an invoice

• Official standard billing form used by doctors submitting MC/MD claims.

• Also used by some private insurers and managed care plans.

• Contains patient demographics, diagnostic codes, CPT®, HCPC codes, etc.

• Generic billing form, like the generic HCFA 1500 claim form.

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Conclusion

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On Increasing Price Transparency in Medicine

Posted on September 23, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

About NewChoiceHealth.com

By Staff ReportersCalculator-Scope

NewChoiceHealth, Inc. is an online comparison shopping marketplace built to provide healthcare consumers a way to save money. With NewChoiceHealth.com, consumers can easily locate medical facilities and compare medical procedure costs for services like MRIs, CT scans, mammograms, and more. Patients may shop nationwide, or right in their own local market from over 20,000 medical facilities for over 400 of the most commonly performed medical procedures.

Employer Portal

The site also features an employer portal to combat the rapidly escalating costs of healthcare. A Medical Cost Action Plan (mCAP) is reported to deliver an independent, unbiased, measurable plan which segments employer’s medical cost consumption categories into measurable Consumer Healthcare Efficiency Indices (CHEI) to deliver an actionable plan that reduces healthcare costs.

The Founder

CEO and Founder Brad Myers is a medical cost expert with 24 years of broad experience and extensive knowledge in medical cost informatics, healthcare insurance, managed care, clinical laboratory, and health and life insurance. His website message to ME-P readers, and others, is “shop & save!”

Assessment

Employee passion drives price transparency to healthcare consumers through the web site www.NewChoiceHealth.com Give it a click, for more information, and tell us what you think!

Conclusion

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Take the DME Inventory Switching Challenge!

Posted on September 9, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

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 Calling all Administrators and Management Consultants – Are You CMP™ Worthy?

 [By Staff Reporters]ME-P Logo.2

The new administrator for the ABC Medical Clinic understood that all inventory costing methods were acceptable to use in his Durable Medical Equipment [DME] department. LIFO, FIFO, specific identification, and the average cost method are all attractive methods under different circumstances in the business cycle, and companies may use the method that best fits their circumstances.

Reducing Taxes

For example, if ABC wished to reduce corporate income taxes in a period of inflation and rising prices, it would use LIFO. If matching DME sales revenue with the current cost of DME goods sold was desired, LIFO would also be used. Unfortunately, LIFO may charge against DME revenue the cost of DME not actually sold, and LIFO may allow the ABC Medical Clinic to manipulate net income by varying the time-periods it makes additional DME purchases. On the other hand, FIFO and specific identification method allows a more precise matching of ABC revenue with historic DME costs. However, FIFO too, can promote “paperless-phantom profits,” while specific identification can promote possible income manipulation.  It is only under FIFO that net income manipulation is not possible.

CEO – 2 – CFO [Case Model]

“Let’s go with FIFO,” the new administrator said to his Chief Financial Officer, Bert. “The profits will make us look good to the home office and we can always switch back to LIFO if inflation starts back-up again, right Bert?” He mused, but he was not amused because freedom of choice does not include changing DME inventory methods every few years, especially if only to report higher income. “The switching of methods violates the basic tenet of consistency, which requires the use of the same inventory cost and accounting methods in preparing financial reports and statements,” Bert emphatically stated.

Key Issues

1) Is this sort of inventory costing and maneuvering permissible?

2) What is its justification?

3) How is it notated in financial reports?

4) Is this sort of thing ethical?

Assessment

“The switching of methods violates the basic tenet of consistency, which requires the use of the same inventory cost and accounting methods in preparing financial reports and statements,” Bert emphatically stated.

Conclusion

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Health Plan Management Navigator

Posted on August 16, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

August 2009 Edition

By Douglas B. Sherlock; CFA, MBALibrary

Linked below is the August 2009 edition of Plan Management Navigator. In this month’s edition, we update readers on the results for the Blue Cross Blue Shield universe, and provide product breakouts, summary functional area breakouts as well as expense trends. Cost increases are lower this year than last, though higher if product mix is considered. Twenty-two Blue Cross Blue Shield Plans serving 31.3 million members participated in this year’s benchmarking study.  Growth in Information Systems and Medical Management costs explained more than 40% of the total increase.

Link: Navigator August 09

Sherlock Expense Evaluation Report

This analysis is based on materials from our Sherlock Expense Evaluation Report (SEER) for Blue Cross Blue Shield Plans. Additional information about SEER is available at http://www.sherlockco.com/seer.shtml or by contacting us.

Assessment

In coming weeks, Plan Management Navigator will summarize other results of this year’s performance benchmarking studies. We expect to publish Medicare and Medicaid editions in late August or early September. Independent / Provider-Sponsored plan results were published two weeks ago in Plan Management Navigator and the associated presentation and transcript are found at  http://www.sherlockco.com/

Conclusion

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Medical Inventory Management Methodologies

Posted on August 7, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

Understanding Traditional Costing Methods

By David J. Piasecki, with
Hope Rachel Hetico; RN MHA, CMP™cmp-logo1

A good inventory management system offers opportunities for improved efficiency in any healthcare organization. The following traditional methods of inventory cost accounting and management are useful when one is calculating the cost of supplies (as opposed to medical items for resale and DME).

a. LIFO

The last-in first-out (LIFO) inventory costing method means the last items purchased are the first to be used (at least for cost calculations if the inventory consists of identical units). In times of rising prices, a lower total cost inventory is produced with a higher cost of goods sold. The last items purchased are most often the most expensive, and used first for the calculation. This happens because LIFO increases an expense (cost of goods sold) and decreases taxable income. Given the same revenue, higher expenses mean less profit. Deflation has the opposite effect.

b. FIFO

The first-in first-out (FIFO) inventory costing method means the first items purchased are the first to be used (at least for cost calculations if the inventory consists of identical units). In times of rising prices, a higher total cost inventory is produced with a lower cost of goods sold. This happens because FIFO decreases an expense (cost of goods sold) and increases taxable income. Deflation has the opposite effect.

Note: Any switch from FIFO to LIFO does not change reality, and although a decrease in reported incomes occurs, it does not increase cash outflows. However, for a taxable healthcare entity, after-tax net cash flow does increase.

c. Specific Identification

Specific identification is used for larger pieces of equipment, as it traces actual costs to an identifiable unit of product and is usually applied with an identification tag, serial plate, or radio frequency identification device (RFID) scanner. It does not involve flow-of-cost analysis. It does, however, permit the manipulation of income because healthcare entities state their cost of goods sold, and ending inventory, at the actual cost of specific units sold.

d. Average Cost

Average costing calculates ending inventory using a weighted average unit cost. When prices are rising, cost of good sold is less than under LIFO, but more than that under FIFO, and hence income manipulation is also possible.

e. Just-in-time Management

Although technically not a costing technique, JIT inventory management means that inventory supplies like DME are delivered as soon as needed by the healthcare organization, the prescribing doctor, or the patient. In JIT, inventory is “pulled” through the flow process. This is contrasted to the “push” approach used by conventional IM. In the push system, DME is already on-site, with little regard to when it is actually needed. In the JIT “pull” system, the overriding concern is to keep a minimum cost inventory, so that means having a system in which inventory is obtained on an as-needed basis.

The key elements of JIT consist of six parts:

1. a few dependable vendors or suppliers willing to ship with little advance notice;

2. total sharing of demand information throughout the supply chain;

3. more frequent orders;

4. smaller size of individual orders;

5. improved physical plant (hospital or clinic) layout to reduce travel flow distance; and

6. use of a total quality control system to reduce flawed medical products.

Using the JIT method, inventory is delivered when needed, rather than in advance, saving handling and storage costs. The healthcare entity never needs to stockpile inventory, and cash flow is enhanced. JIT is further characterized as follows:

  • little or no work orders;
  • little or no tracing of materials;
  • fewer inventory accounts or accounts payables;
  • reduction or elimination of work-in-progress or handling activities; and
  • no tracing of overhead and direct labor costs

JIT requires a dependable working relationship with suppliers and the precise calculation of inventory needs, especially for the following:

  • sterile surgical packs;
  • gastro-intestinal and gastro-urinary instrumentation;
  • orthopedic and OB-GYN inventory;
  • invasive heart and lung equipment;
  • radio isotopes and trace radiographic materials; and
  • equipment for almost all pre-schedule medical interventions and procedures.

Assessment

This means that, when JIT inventory monitoring is used, healthcare managers are better prepared with the proper inputs to control and reduce inventory, including when dramatic bursts or declines occur. This means a more rapid and higher cash flow balance, rather than inventory balance. Each of these traditional methods of inventory cost accounting is adequate for most healthcare facilities, but as inventory orders and costs continue to increase, economic order quantity [EOQ] costing may be the most effective means of accounting for inventory in DME-intensive organizations.

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. Can you think of any other inventory management technologies?  Tell us what you think. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, be sure to subscribe to the ME-P. It is fast, free and secure.

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IRS Warning on Hospital Charity Care

Posted on June 28, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

On Hospital Community Benefit Laws 

By Staff ReportersOslo Port

According to an Internal Revenue Service survey of nearly 500 not-for-profit hospitals in May 2006, only nine percent of total revenues were dedicated to community charity care. The report warned charity [Samaritan] and not-for-profit healthcare entities that attempts to set a percentage threshold for determining tax-exempt compliance may have a:

“disproportionate impact on hospitals, depending upon their size, where they are located their community benefit mix, and other hospital and community demographics.”

In a follow-up, February 12, 2009, the IRS reported on executive compensation of the same tax-exempt hospitals”.

Link: http://greisguide.com/wp-content/uploads/2009/02/eo_interim_hospital_report_072007.pdf

Existence Justification

HO-JFMS-CD-ROMWhile the question whether  tax-exempt hospitals are providing enough charity care to justify their tax exemption remains, the report failed to reach specific conclusions on whether existing community benefit standards are appropriate and if tax-exempt hospital executives are being compensated too richly. The findings also serve as a caution to long term acute care hospital [LTACH] governance and compensation committees.  The CEOs and CFOs of these entities should note that a similar survey may be performed on for-profit hospitals in the near future.

Defining “Community Benefits”

According to Jason Greis, of the Gries Guide on LTACHs, on February 12, 2009:

“The current ‘community benefit’ standard was established by the IRS in 1969 in Revenue Ruling 69-545.  The standard sets out factors to be considered in measuring community benefit, including: (i) a board made up of a broad base of community members; (ii) an open medical staff; (iii) participation in Medicare and Medicaid; (iv) application of surplus funds toward improving facilities, equipment, patient care, medical training, research, and education; and (v) a full-time emergency room open to all regardless of ability to pay (the emergency room standard applies differently to tax-exempt Long Term and Acute Care Hospitals [LTACH] that do not maintain a full array of emergency department services).  Under the current community benefit standard, individual hospitals are given flexibility to determine what services will-best serve their communities.”

Today, some pundits suggest that if Congress doesn’t establish new charity care requirements imminently, the IRS should revert to its community benefit standard above, and revise down or eliminate the tax exemption.

Link: http://greisguide.com/wp-content/uploads/2009/02/eo_interim_hospital_report_072007.pdf

Conclusion

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Medical Accounts Receivable and Related Formulae

Posted on June 16, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

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Understanding Rationale and Formulae

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

[By Dr. Gary L. Bode; CPA, MSA, CMP™]

HO-JFMS-CD-ROMMedical practices, clinics and hospitals generate a patient account or an account receivable (AR) at the same time as they send the patient a bill or the insurance company a claim. ARs are treated as current assets (cash equivalents) on the healthcare entity balance sheet, and usually with a percentage mark-down to reflect historic collection rates.

The Balance Sheet

The balance sheet is a snapshot of a medical practice or healthcare entity at a specific point in time. This contrasts with the income statement (profit and loss), which shows accounting data across a period of time. The balance sheet uses the accounting formula:

Assets (what the entity owns) = Liabilities (what the entity owes) + Entity Equity (left over).

AR Aging Schedules

HDSAccording to the Dictionary of Health Economics and Finance, an AR aging schedule is a periodic report (30, 60, 90, 180, or 360 days) showing all outstanding ARs identified by patient or payor, and month due. The average duration of an AR is equal to total claims, divided by accounts receivable. Faster is better, of course, but it is not unusual for a hospital to wait six, nine, twelve months, or more for payment. Each of these measures seeks to answer two questions:

1) How many days of revenue are tied up in ARs?

2) How long does it take to collect ARs?

More Formulae

An important measure in the analysis of accounts receivable is the AR Ratio, AR Turnover Rate, and Average Days Receivables, expressed by these formulae:

1. AR Ratio = Current AR Balance / Average Monthly Gross Production
(suggested between 1 and 3 for hospitals)

2. AR Turnover Rate = AR Balance / Average Monthly Receipts

3. Average Days Receivable = AR Balance / Daily Average Charges
(suggested < 90 days for medical practices)

And Even More Measures

Other significant measures include:

1. Collection Period = ARs / Net Patient Revenue / 365 days

2. Gross Collection Percentage = Clinic Collections / Clinic Production
(suggested > 40-80% for hospitals)

3. Net Collection Percentage = Clinic Collections / Clinic Production – (minus) Contractual Adjustments (suggested > 80-90% for medical practices)

4. Contractual Percentage = Contractual adjustments / Gross production
(suggested < 40-50% for hospitals).

Assessment

Often, older ARs are often written off, or charged back as bad debt expenses and never collected at all.

Conclusion

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Credit Card Acceptance in Medical Practice

Posted on June 4, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

One-third of Physician Practices Not Accepting CCs

By Staff ReportersGold Coins

The Physician Office Credit-Card Acceptance Survey, by SK&A Information Services, an Irvine, Califironia based provider of healthcare information solutions and research, suggests physician practices are limiting credit card [cc] payments because patients are being adversely affected by high interest rates, maxed out credit limits and a more challenging ability to qualify for unsecured credit.

Assessment

Read this report in HealthcareFinance News, on May 29 2009, by Richard Pizzi,

http://www.healthcarefinancenews.com/news/one-third-physician-practices-do-not-accept-credit-card-payments

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. Do our physician ME-P readers accept CCs? Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, be sure to subscribe to the ME-P. It is fast, free and secure.

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Medical Inventory Supplies and Management

Posted on May 21, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

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Understanding Traditional D.M.E. and Turn-Over Rates

[By Staff Reporters]

Healthcare inventory represents tangible medical items used in the delivery of healthcare services, or for patient use and resale, or durable medical equipment [DME]. A certain quantity of safety stock should always be available. Inventory ranges from normal administrative office supplies to highly specialized chemicals and reagents used in the clinical laboratory.

Capital Supplies

Inventory should be distinguished from capital supplies, such as major equipment, instruments, and other items that are not used up faster than inventory or related inventory wastes.

Understanding Inventory Turnover

Historically, asset utilization ratios provided information on how effectively the enterprise used its inventory assets to produce revenues, or deplete its cash. For example, the inventory turnover ratio (ITR) determines the total volume of inventory turnover (change) during a pre-determined accounting period (month or quarter). It is defined as cost of inventory purchased for the period, divided by average inventory (AI) at cost.

Supply Chain Management

Dunn and Bradstreet, the supply chain management and consulting company; does not provide exact comparatives for private healthcare ITR. Nonetheless, ITR is useful as an internal performance indicator of inventory turnover speed and cash flow enhancement. Currently however, for public hospitals, 60 – 75 days is estimated to be the average time for inventory turnover.

Assessment

The main problem with traditional ITR, similar analyses such as AI, and the usual inventory costing methods (e.g., last-in first-out, first-in first-out, specific identification, average costs), and even just-in-time inventory costing, is that they do not embrace supply chain inventory management models. This occurs because sources of profit or loss are not recognized in the traditional inventory cost accounting equation:

Cost of goods sold = beginning inventory + net purchases – ending inventory. 

Conclusion

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Doctor’s and Tax Deductions

Posted on May 20, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

Physicians Can Take More Tax Deductions

By Staff Reportersfp-book2

Now that tax season is over, it’s time for physician practices to start saving receipts and filing tax records again.

The Report

According to the May 04, 2009 report of Chelsey Ledue, Associate Editor of Healthcare Finance News; there are more than 400 possible deductions that medical practices can take, although most physicians only know of a few common ones.

Link: www.CertifiedMedicalPlanner.org

Assessment

In reality, “most docs are taking somewhere in the neighborhood of 40 deductions”, according to one industry expert.

Link: http://www.healthcarefinancenews.com/news/physicians-can-take-more-tax-deductions

Conclusion

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HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
CLINICS: http://www.crcpress.com/product/isbn/9781439879900
BLOG: www.MedicalExecutivePost.com
FINANCE: Financial Planning for Physicians and Advisors
INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors

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Physician [Fee] Schedule Augmentation

Posted on May 14, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

Organizing and Analyzing Financial Data

[By Christy Clodwick; MHA]

biz-book1After all medical practice management data has been gathered, organize it onto a spreadsheet or chart.  This analysis report will help to determine the codes and/or health plans that should be targeted for process improvement.

Focus … Focus … Focus

The focus should be on the highest volume and dollar value codes. Does this mean patients with unusual conditions or low dollar value codes are not treated? Hopefully it will not; but it will push this process forward and the practice will see the greatest benefit from these categories. When you review the report and find that a fee is being paid at a much lower rate, this would be indicative of a necessary negotiation with the payer for an increase for that procedure. Most health plans are committed to preventing disease. Maybe, but they are still actually aimed at treating diseases; not preventing them. If this is true of many payers then they should be willing to provide the incentives for those services to be carried out. You will find that some payers’ fee schedules are very much out of line with a percentage of Medicare payments, therefore the practice administrator should focus on those payers and bring evidence of the inadequacies to their attention.

The Specialists

Specialists are, for the most part, paid at a higher rate than primary care physicians not usually for the same service! And, with GPs as gatekeepers, the specialty doc incomes may have actually decreased in some instances, while the GPs may have increased. There was a time when Medicare had two conversion factors, and this was the result. This inequity could also be used as a tool for better reimbursement rates.

Finalizing the Fee and Revenue Analysis

When the final preparations of the fee analysis have been completed, it is time to react to the results of the findings. There are several options to choose from when it has been determined that a health plans fee schedule is not in tune with the practice’s financial growth. The practice should act on these results as soon as they are discovered, to avoid the loss of any more revenue.

No longer Accepting Health Plans

During the analysis phase, you may determine that a health plan’s payment levels are extremely low. You will have to determine whether the plan is worth negotiating or the practice administrator should consider dropping out of the plan altogether at the end of the contract period. It will have to be carefully determined by the local market. If the practice is in a highly competitive market, this process should not be considered as first choice. However, if the market is very slim, the health care purchaser will be responsible for complaining to the health insurance plan provider that there is simply not enough physician coverage for their employees for the area. This could be a very effective way to force a negotiation with the health care company. If this were the case, the area would have less managed care and more MC/MD.

Not Accepting New Patients from Low Paying Health Plans

One option would be to not accept any more patients from the health plan that is reimbursing the practice with low rates. Although this may initially lower your patient count, over time the practice will benefit from new patients with health plans that have a better reimbursement policy. Include snapshot of what the final analysis or report should look like and the details of what it should include. This can be used in any specialty to assist in putting together the individual practice analysis to achieve the same results. But is it noble or ethical? What about any willing provider laws?

dhimc-book1The Future for Health Care Reimbursement

The health care purchasers who pay most of the bills, such as employers and the government, will soon be challenging the annual increase and the overall cost of health care. The cost increases of the hospital and pharmacy sectors of healthcare are far higher than that of the physician. However, the pressure for cost containment is being felt across the board. This will eventually depress future reimbursement for all healthcare providers.  In the future it will be hard for practices to keep up with the demands of labor, malpractice and supply cost increase. All medical providers need to plan for this future paradigm. To offset this trend, physicians will need to get the most out of the work that they are doing today as well as look to new revenue generating procedures for their practice that will be cheaper and more convenient to the patient.

Process Improvement

The biggest benefits will come from continually improving the process of the daily operations of the practice, as well as ensuring accurate diagnostic coding. This will enable a practice to keep up with charge capturing through the explanation of benefits (EOB) when the charge has been processed and paid by the health insurance provider. When this process identifies that there is room for negotiation, the provider should proceed for a better reimbursement rate. If the provider is in a dominant market, the payers will be more likely to issue sweeping fee increases and so can you give me an example of this ever happening? By completing a Practice Fee Analysis, any practice should be able to use this tool to demonstrate the inequities and negotiate a better reimbursement rate for the practice.

Assessment

The first step in the negotiation process would be to contact a representative of the health insurance company that is in question. If you can produce compelling evidence to the representative, the negotiation process should be the next meeting. These folks may be fired if they do what you suggest, too frequently. Continually updating the practice fee schedule will help the practice stay on top of the contracts that it practices under. Practices that present a well-documented argument may (almost never) be rewarded with positive payer response. Again, proper planning will make for great future performance in any health care practice.

Conclusion

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Essential Insights on Successful Physician Budgeting

Posted on May 4, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

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Avoiding Common Cash Flow Budget Mistakes

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

[By Hope Rachel Hetico; RN, MHA, CMP™]

[Publisher-in-Chief and Managing Editor]dave-and-hope4

Although some doctors might view a budget as unnecessarily restrictive, sticking to a spending plan can be a useful tool in enhancing the wealth of a practice. We emphasize the keys to smart budgeting and how to track spending and savings in these tough economic times.

Money and Happiness

There is an aphorism that suggests, “Money cannot buy happiness.” Well, this may be true enough but there is also a corollary that states, “Having a little sure reduces the unhappiness.” Unfortunately, today there is more than a little financial unhappiness in all medical specialties; not just the specialty of podiatry – where this article first appeared as a free-lance writing project. The challenges range from the commoditization of medicine, aging demographics, Medicare reimbursement cutbacks and increased competition to floundering equity markets, the home mortgage crisis, the squeeze on credit and declines in the value of a practice. Few doctors seem immune to this “perfect storm” of economic woes.biz-book2

Most Doctors Financially Hurting Today

Far too many physicians, dentists and other medical providers are hurting and it is not limited to these above-average earning professionals. However, one can strive to reduce the pain by following some basic budgeting principles. By adhering to these principles, most physicians can eliminate the “too many days at the end of the month” syndrome and instead develop a foundation for building real wealth and security, even in difficult economic climates like we face today.

Three Budget Types

There are at least three major budget types. [1] A flexible budget is an expenditure cap that adjusts for changes in the volume of expense items. [2] A fixed budget does not. [3] Advancing to the next level of rigor, a zero-based budget starts with essential expenses and adds items until the money is gone. Regardless of type, budgets can be extremely effective if one uses them at home or the office in order to spot money troubles before they develop.

fp-book2

Assessment

For the purpose of wealth building, medical professionals may think of a budget as a quantitative expression of an action plan. It is an integral part of the overall cost-control process for the individual, his or her family unit or one’s medical practice.

Read the entire article: http://www.podiatrytoday.com/essential-insights-on-successful-budgeting

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Conclusion

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About Medlytix.com

Posted on April 22, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

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On Patient Payment Behavior Scoring

[By Staff Reporters]56371606

Medlytix is a healthcare consulting and technology firm specializing in the field of predictive payment analytics. Utilizing sophisticated data mining and scoring strategies, the company reports enhanced hospital revenue cycles and collections for healthcare providers across the country.

The Business of Healthcare

It is a fact that consumers treat medical bills differently than other financial obligations. So, Medlytix customizes revenue-enhancement strategies to target each provider’s individual market.

Suite of Services

All stakeholders benefit from a more efficient operation – from provider to patient. Medlytix offers expertise and technology to enhance the cash conversion and revenue cycle by eliminating inefficiencies while maximizing collections. A customized strategy that’s based on specific needs is crafted. Three offerings include: 1.Medilyzer, 2. Predyx, and 3. Consulting services to improve the bottom line.

Non-Profits Hospitals

Non-profit hospitals exist to serve their communities with quality healthcare accessible to all. By helping hospitals pinpoint charity-care patients who are truly in need, the focus is on the patient.

Assessment 

The mission of Medlytix is to build a healthier bottom line for hospitals. As fiscal strength improves, better hospitals provide better service to patients.

Medlytix

Conclusion

How does this relate to emails? 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.

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Become a Published Print Author with Us

Posted on April 22, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

The Business of Medical Practice [3rd Edition]

By Hope Rachel Hetico RN, MHA, CMP™

[Managing Editor]biz-book7

Dear Colleagues,

As you may know, we are commencing work on the third edition of our best selling book: The Business of Medical Practice

TOC 1st: http://www.amazon.com/Business-Medical-Practice-Maximizing-Doctors/dp/0826113117/ref=sr_1_8?ie=UTF8&s=books&qid=1231111232&sr=1-8

TOC 2nd: http://www.springerpub.com/prod.aspx?prod_id=23759

Invitation to Contribute

Accordingly, we would be honored for you to consider contributing a new or revised chapter, in your area of expertise, for a low-effort but high-yield contribution. Our goal is to help physician colleagues and management executives benefit from nationally known experts, as an essential platform for their success in the healthcare 2.0 business industry. Many topics are still available: [health accounting and costing; law, policy and administration; Medicare fraud and abuse; coding and insurance; HIT, grid and cloud computing; finance and economics, competitive models, collaboration and leadership, etc].

Support Always Available

Editorial support is available, and you would enjoy increasing subject-matter notoriety, exposure and public relations in an erudite and credible fashion. As a reader, or preferably a subscriber to the ME-P, your synergy in this space may be ideal. Time line for submission of a 5,000-7,500 word chapter is ample, and in a prose writing style that is “wide, not deep.” 

A Health 2.0 Initiative

And, be sure to address health 2.0 modernity. Update chapters from the second edition are also available. 

Definition: https://healthcarefinancials.wordpress.com/2008/09/12/emerging-healthcare-20-initiatives

Assessment

Please contact me for more details, if interested. A best selling-book is rare; while a third-edition volume even more so. Join us in this project. Regardless, we trust you will remain apostles of our core ME-P vision, “uniting medical mission and financial profit margin”, promoting it whenever possible.

Front Matter Link: frontmatter1advancedbusinessmedicine4 

Contact Info:

MarcinkoAdvisors@msn.com

770.448.0769

Conclusion

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More about Healthcare Organizations [Financial Management Strategies]

Posted on April 12, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

Our Print-Journal Preface

By Hope Rachel Hetico; RN, MHA, CMP™hetico1

As Managing Editor of a two volume – 1,200 pages – premium quarterly print journal, I am often asked about our Preface.

A Two-Volume Guide

As so, our hope is that Healthcare Organizations: [Financial Management Strategies] will shape the hospital management landscape by following three important principles.

What it is – How it works

1. First, we have assembled a world-class editorial advisory board and independent team of contributors and asked them to draw on their experience in economic thought leadership and managerial decision making in the healthcare industrial complex. Like many readers, each struggles mightily with the decreasing revenues, increasing costs, and high consumer expectations in today’s competitive healthcare marketplace. Yet, their practical experience and applied operating vision is a source of objective information, informed opinion, and crucial information for this manual and its quarterly updates.

2. Second, our writing style allows us to condense a great deal of information into each quarterly issue.  We integrate prose, applications and regulatory perspectives with real-world case models, as well as charts, tables, diagrams, sample contracts, and checklists.  The result is a comprehensive oeuvre of financial management and operation strategies, vital to all healthcare facility administrators, comptrollers, physician-executives, and consulting business advisors.

3. Third, as editors, we prefer engaged readers who demand compelling content. According to conventional wisdom, printed manuals like this one should be a relic of the past, from an era before instant messaging and high-speed connectivity. Our experience shows just the opposite.  Applied healthcare economics and management literature has grown exponentially in the past decade and the plethora of Internet information makes updates that sort through the clutter and provide strategic analysis all the more valuable. Oh, it should provide some personality and wit, too! Don’t forget, beneath the spreadsheets, profit and loss statements, and financial models are patients, colleagues and investors who depend on you.ho-journal9

www.HealthcareFinancials.com

Assessment

Rest assured, Healthcare Organizations: [Financial Management Strategies] will become an important peer-reviewed vehicle for the advancement of working knowledge and the dissemination of research information and best practices in our field. In the years ahead, we trust these principles will enhance utility and add value to your subscription. Most importantly, we hope to increase your return on investment [ROI] in some small increment.

Visit and Order Now

Specialty Technical Publishers

8 – 14th Street

Blaine, WA 98230

1-800-251-0381

orders@stpub.com

http://www.stpub.com/pubs/ho.htm

TOC: http://www.stpub.com/pdfs/toc_ho.pdf

Conclusion

And so, your thoughts and comments on this Medical Executive-Post, complimentary e-companion are appreciated. If you would like to contribute material or suggest topics for a future update, please contact me. Subscribers, have we attained our goals and objectives, as a work-in-progress in this preface statement?

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About: Healthcare Organizations [Financial Management Strategies]

Posted on April 11, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

Our Print Mission Statement

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

Publisher-in-Chief

dem25As Editor-in-Chief of a two volume – 1,200 pages – premium quarterly print journal, I am often asked about our mission statement; or the journal’s raison d’etra.

A Two-Volume Guide

As so, Healthcare Organizations: [Financial Management Strategies], with its quarterly updates, will promote and integrate academic and applied research, and serve as a multi-disciplined communications forum for the dissemination of financial, managerial, business and related economic information to decision makers in hospitals, outpatient centers, clinics, medical practices and all mature and emerging healthcare organizations. 

Target Market and Ideal Reader

Healthcare Organizations [Financial Management Strategies] and its quarterly updates should be in the hands of all:

* CFOs, CEOs, COOs, CTOs, VPs and CIOs from every type of hospital and healthcare organization including: public, federal, state, Veteran’s Administration and Indian Health Services hospitals; district, rural, long-term care and community hospitals; specialty, children’s and rehabilitation hospitals; diagnostic imaging centers and laboratories; private, religious-sponsored, and psychiatric institutions.

*  Physician Hospital Organizations, Management Services Organizations (MSOs), Independent Practice Associations (IPAs), Group Practices Without Walls (GPWWs), Integrated Delivery Systems (IDSs) and their administrators, comptrollers, cost accountants, budget directors, cash managers, auditors, healthcare attorneys and consultants,  and actuaries, and all endowment fund directors, executives, consultants and strategic financial managers.

*  Ambulatory care centers, hospices, and outpatient clinics; skilled nursing facilities, integrated networks and group practices; academic medical centers, nurses and physician executives; business school and health administration students, and all economic decision-makers and directors of allopathic, dental, podiatric and osteopathic healthcare organizations.

Assessment

After publication, my suggestion is to read, study and act upon the guide in this way:

1. First, browse through the entire text.

2. Next, slowly read those chapters and sections that are of specific interest to your professional efforts.

3. Then, extrapolate portions that can be implemented in specific strategies helpful to your healthcare setting.

4. Finally, use its’ ME-P updates as a reference manual to return to time and time again; and enjoy!

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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The Gay Doctor Dilemma

Posted on April 3, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

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Understanding Domestic Partnership Problems

[By Staff Reporters]fp-book16

Legal Strangers

In spite of many changes to state laws and with a few exceptions, for all intents and purposes, unmarried physician couples are still considered strangers to one another. The unmarried partner has no right to make health care decisions, no right to Social Security survivor benefits, and no inheritance rights without proper documentation. An unmarried partner generally has no standing to seek damages for the “wrongful death” of a spouse, nor any standing for any other contractual rights.

Tax Treatment

Unmarried couples do not get the same tax treatment—such as the ability to file a joint tax return—as do married couples. While this may not necessarily mean higher taxes for married couples, it can make deductions difficult to determine for unmarried couples. Nor can an unmarried couple use the spousal Individual Retirement Account deductions for a nonworking spouse. An unmarried couple may not use a family partnership for tax purposes.

Non-Tax Benefits

Unmarried partners do not have the benefits that spouses have when a relationship ends or one partner dies. Domestic partners may not receive alimony or child support, except in special cases. A partner may not receive pension rights, and generally will not receive employer benefits, except in certain companies and municipalities. One partner who is forced to quit practice when the other partner is transferred may not receive unemployment benefits, while a spouse can. Unmarried partners may not qualify to get residency status for a non-citizen partner to avoid deportation.

Estates and Gift Problems

Estate tax law allows married couples an unlimited deduction for estate and gift tax purposes. Unmarried couples do not get this benefit, and may be taxed on what would otherwise be a tax-free transfer. If one partner dies intestate (without a will) the couple’s joint property would not necessarily go to the survivor. A married couple can give away $26,000 per recipient each year without gift tax consequences, but an unmarried individual with a high income is limited to $13,000, per recipient per year, even when living with a partner.

Personal Benefits

Domestic partners may be kept from visiting a partner in a prison or in the hospital or any other place restricted to “immediate family” members. Without specific legal permission, such as a durable power of attorney, the blood relatives of the partner who is ill can keep the domestic partner from seeing his or her mate. Except in a few municipalities and companies, domestic partners may not be eligible for bereavement leave when one partner dies.

Conclusion

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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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Say it Ain’t So Kathy Sebelius

Posted on April 2, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

More HHS Nominee Tax Problems

[By Staff Reporters]56359795

Although it’s sounding more and more like comedian Bill Murray’s movie “Ground Hog Day”, according to Tracy Staton, Health and Human Services department secretary-nominee Kathleen Sebelius, became the second appointee for the agency to admit underpaying her taxes.

Unintentional Problems

Sebelilus fixed three years’ worth of returns due to “unintentional” problems, and paid almost $8,000 in back taxes and interest. The snafu may not be serious enough to jeopardize her nomination, however. Senate Finance Chair Max Baucus issued a statement saying the errors were “minor” and accidental, and that he supported her confirmation (The committee’s ranking Republican Charles Grassley is reserving judgment until after her confirmation hearing).

A Daschle “Do-Over”

We all know that Senator Tom Daschle’s nomination to head up HHS hit the wall after a tax review found he owed some $140,000 in back taxes and interest. Is this a similar KS do-over; aka “mulligan”?

Industry Indignation Index: 45

Assessment

More importantly, are these so-called healthcare demagogues and gurus aware that “perception is reality”; especially in the healthcare space where integrity and trust matters most? Or, as ME-P Publisher Dr. David Edward Marcinko wondered aloud,

“Do politicians and/or those of us in healthcare really believe we are above it all?

Link: http://blogs.wsj.com/health/2009/04/01/sebelius-runs-into-tax-problems-but-daschles-were-bigger

Conclusion

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Asset Allocation Methods for Physician-Investors

Posted on March 25, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

What’s Old … is New Again?

By Dr. David Edward Marcinko; MBA, CMP™

Publisher-in-Chiefdem23

Asset allocation policies, incorporating the risk/return fundamental equation, have traditionally been classified under the following approaches: Principal Stability and Income, Income, Income-Oriented, Balanced, Growth, and Aggressive Growth.

Traditional Concepts

In all forms of traditional asset allocation and diversification policy approaches, the physician-investor is presumed to diversify within the chosen asset class in order to reduce the potential for specific or unsystematic risk.

Principal stability and income approach

Objective: Income, liquidity, and stability of principal.

Investment: Shorter-term fixed income securities with a large concentration in money market exposure to enhance liquidity and price stability. Accounts tend to maintain cash equivalent reserve balance of 30–50% of the portfolio.

Income approach

Objective: Maximum income.

Investment: 100% fixed income exposure.

Income portfolios arise from the traditional notion that an investor should spend only income and reinvest capital gains. Sometimes this is a legal requirement, as in a trust that has an income beneficiary distinct from the principal beneficiary.

Income-oriented approach

Objective: Income and some capital growth.

Investment: Accounts tend to maintain 15–35% in equity investments; balance of investment in fixed income.

Income and growth approach

Objective: Capital growth and income using a balanced approach to limit volatility.

Investment:  Accounts tend to maintain 45–65% equity exposure; balance of investment in fixed income.

Income and growth portfolio policies generally refer to both the fixed income and equity portions of the portfolios. Because of the income bias, the overall stock portion of the portfolio will usually have a dividend yield greater than the market yield. This method allows the portfolio manager to invest in some no- or low-dividend yielding issues.

Growth approach

Objective: Capital growth with income as a secondary objective.

Investment: Accounts tend to maintain between 65%–85% equity exposure; balance of investment in fixed income, usually cash reserves.

Aggressive growth approach

Objective: Long-term capital growth.

Investment: Accounts maintain 100% equity exposure. Exposure to variety of equity types normal (small capitalization, international, emerging markets, etc).

fp-book15

Assessment Of course, the above is much more accurate during stable economic times, than it is today; don’t you think? Are newer concepts required today … or is past … prologue.

Link: https://healthcarefinancials.wordpress.com/2008/10/25/new-wave-thoughts-on-investing/

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated.

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

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Health Administration Terms: www.HealthDictionarySeries.com

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Medical Practice Financial Statement Valuation Adjustments

Posted on March 23, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

Why Benchmarks are Out – and Scrutiny is In

By Dr. David Edward Marcinko; MBA, CMP™

Publisher-in-Chief

CEO: www.MedicalBusinessAdvisors.comdr-david-marcinko11

As discussed elsewhere on this ME-P, the medical practice appraiser’s primary goal is to determine the value of the business based on its expected earnings or cash flow. To accomplish this, the medical practice appraiser looks to the company’s historical financial statements to see how it has been reporting its earnings. Because of differences in accounting practices across organizations, the appraiser must analyze how the medical practice’s financial statements differ from those of other practices and how those differences might have an effect on the practice’s value. This is particularly true when the appraiser is comparing the performance of the medical practice company being valued with those of so-called industry benchmarks. In all instances, it is important that the appraiser compare numbers that have been accounted for in the same way. Below is a discussion of the most common adjustments.biz-book4

Nonrecurring or Extraordinary Items

Nonrecurring or extraordinary items of income or expense reported by the practice will be eliminated from the profit and loss statement. These include the following:

• Insurance settlements (income or expense) or life insurance proceeds on the death of the key physician-partner.

• Large payments in settlement of lawsuits (either as income or as expense).

• The gain or loss on the sale of certain assets or portions of the practice which are not likely to be repeated.

• Expenses related to the start-up or discontinuance of a new or old segment of the practice.

• Moving and related expenses.

• Expenses relating to fire or flood damage not covered by insurance.

• Adjustments to prior years’ financial statements when the practice discontinued an employee benefit (such as eliminating the company’s pension or profit-sharing plan).

• Adjustments for income and/or expenses related to non-operating assets, such as a portfolio of marketable securities not used in the practice or medical real estate held for investment purposes.fp-book12

Valuation Calculations

The appraiser needs to gather the following facts regarding the financial statements of the practice and may need to make adjustments to account for these differences. The information will give the appraiser an understanding of the company’s normalized earnings and will be used to make valuation calculations.

• How does a specialty practice [such as physiatry’s DME] value its inventory—LIFO or FIFO? In certain specialties, inventory is accounted for on the LIFO or “last-in, first-out” basis. When prices are rising, profits are reduced because the DME items being sold are presumably bought most recently at higher prices. The “old” or lower-cost inventory is held in reserve while the higher-cost inventory is sold off. This situation may reverse in times of recession and low or no inflation. At that point, profits will be distorted by the low-cost items. Recognizing these facts, practice owners have more commonly used FIFO or “first-in, first-out,” inventory accounting to value their inventory.

• What kind of reserves has the practice been taking for doubtful accounts receivable? Some doctors will not – or very slowly – write off bad debts or take reserves for them, and thus the income is improperly overstated. The appraiser will look at the actual bad debt expenses relative to the doubtful accounts receivable booked to determine if the practice’s adjustments are reasonable.

• How does the practice depreciate its hard assets? A variety of approved methods are used to depreciate assets over their useful lives. It is important for the appraiser to recognize the impact these methods have on corporate earnings. Some assets can be depreciated over a short time frame, which will mean higher annual write-offs; others, such as real estate, must be depreciated over a much longer period and thus will have a smaller impact on annual expenses.insurance-book6

Asset-Related Issues

The appraiser must address asset-related issues, such as:

• Has the practice’s assets been valued recently? If not, will current appraisals be required?

• Are any non-operating assets carried on the books of the practice? These assets may have to be valued separately and added to the operating value of the business.

Assessment

In our experience valuating medical practices, adjustments made for excess compensation and perquisites paid to the physician-owner and other family members, are the most common items of contention between buyer and seller.

For example, above average physician income usually equates to lower medical practice transferrable enterprise value; and vice versa.

Link: https://healthcarefinancials.wordpress.com/2007/11/30/90

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About Healthcare Employee Cash-Balance Plans

Posted on March 23, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

What they Are – How they Work

By Staff Reportershuman-drones

Motivated by cost savings, an increasing number of hospitals, healthcare systems and large healthcare organizations are converting their traditional legacy defined benefit pension plans to cash balance plans. While the trend seems sudden, it is not surprising. Healthcare related companies are reaping substantial savings from cash balance plans. And for the most part, younger doctors and other employees are enthusiastic about the plans.

However, older employees (age 50 or above) realize  that in switching from a traditional defined benefit [legacy] plan to a cash balance plan, their retirement benefits decreased, initiating an onslaught of overwhelmingly negative publicity. Indeed, several years ago, Congress rushed to pass legislation requiring employers to provide benefits computations to affected employees.

Overview

Even though many defined-benefit plans are under/over-funded, they are calculated on an actuarial basis and are quite costly to maintain. And because plan costs can vary from one year to the next, budgeting is difficult.

However, if a healthcare company terminates a pension plan, replacing it with a defined contribution plan such as a profit sharing plan, all employees must be 100% vested, any surplus is subject to income tax, and a portion of the surplus is subject to an additional excise tax even if all of it is transferred to a succession plan. A cash balance plan is a pension plan, so the change is viewed as an amendment to the pension plan. This is true even though in many respects the cash balance plan operates like a defined contribution plan.

The Cash Balance Planfp-book13

A cash balance plan works in the following manner: The sum accrued in a hospital’s employee’s defined benefit plan is converted to a lump sum cash value; the employer agrees to make specified contributions to the employee’s account based on compensation; and the account earns a specified rate of interest, say 5%. The employee receives regular statements showing the current cash value of his or her account. [The amount is listed as a lump sum amount even though it is usually paid as an annuity].

If the hospital or other employer already has a defined benefit pension plan and converts it to a cash balance plan, there is no tax on the surplus. The reason, as noted above, is that a cash balance plan is treated as a pension plan. Thus, the employer merely amended its pension plan and can use the existing surplus to provide the required contributions, which are usually less than the actuarial costs of maintaining a traditional pension plan. And, in the former bull market this recent decade, many employers did not have to make contributions at all. Today, of course, the opposite may be true.

Example

Let’s say the average earnings on an investment is 15%, and the rate of interest payable to the plan is 5%. In recent years, many funds have earned 15% or more if they invested in an index fund. It was thought that, if continued, it would be quite some time before some employers are required to make any contributions out of their own funds. Not so today, however.

Clearly, the savings can be substantial, and the costs of maintaining the plan are easily budgeted for. These advantages convinced some public utilities, telephone companies, financial, hospitals and healthcare institutions to convert their plans to cash balance plans.  

Impact on Employees

The cash balance plan is actually a hybrid plan—a cross between a traditional defined benefit pension plan and a defined contribution plan. But one of the key differences between the cash balance plan and a defined benefit plan is the manner in which the benefits are calculated. In a traditional defined benefit plan, an employee’s retirement benefit grows slowly in the early years and more rapidly as he or she approaches retirement. By contrast, a cash balance plan increases growth in the early years and decreases growth in later years of employment.

Youngsters

Younger healthcare employees usually liked the change; before the recent financial meltdown. Their accounts were portable; they grew quickly; and could be rolled over into an IRA or into a new employer’s plan. And, their account balances were listed as lump sums, so they know precisely how much they’ve accumulated. Today unfortunately, they have mostly been decimated.

Oldsters

Older healthcare employees initially liked the concept because the values of their pensions (on an actuarial basis) were converted to dollar amounts so they could see how much had accrued in their accounts without having to calculate an anticipated pension award. But, after further review, it was evident that upon retirement the cash bonus plans would yield smaller pensions than the defined benefit plans. Opinions differ today?

Health Workers in the Middle

When a hospital or similar entity converts from a defined benefit plan to a cash balance plan, employees their late 40s may see their pensions reduced by 25% or more while older employees see reductions of up to 50%. If the formula for calculating benefits under the defined benefit plan is 2% times years of service, and high-five compensation, then each year of service increases an employee’s pension. More importantly each time high-five compensation increases, the amount is accrued back to the employee’s original date of employment. So, as a hospital employee gets older, the high five-has tremendous impact. An employee who is age 60 can actually accrue most of his or her pension in the last five years of employment.

www.HealthDictionarySeries.com

dhimc-book5

No “Mo”

Cash balance plans don’t have that type of momentum [“Mo”]. The company contributes a certain amount based upon compensation and a specified interest rate. Usually, the interest rate is based on the 30-year treasury rate (approximately 2.5%).

Closing the Gap

Some employers are offering a grandfathered benefit designed to reverse the penalty for older workers. For example, employees within 10 years of retirement (usually age 65) will receive the greater of the cash balance plan or the pension under the original plan. This reduces the cost savings for the company.

Some employers increase the contribution percentage for employees based on age (i.e., 7% of compensation is contributed for employees aged 40—rather than the standard 5%—and 9% of compensation for those aged 50).

Assessment

Finally, some hospital employees are offered special “sweetners” in the form of additional lump sum credits when converting from an existing plan to a cash plan. The best benefit provides that all existing employees will receive the greater of the old plan or the new plan upon retirement. Only a small number of employers typically adopt this approach.

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. Nurses, hospital workers and hospitalists – please opine and subscribe to the ME-P here – it’s fast free and secure:

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Avoiding an IRS Appraisal Audit

Posted on March 20, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

Valued Friends and Colleagues

By Linda Trugman; CPA, CVAtrugman-logo

We hope this e-mail post finds you well. We have attached our most recent newsletter “Valuation Trends” for your perusal and hope you find something of interest in it; especially “20 Ways to Avoid an IRS Appraisal Audit.”

Link: trugman-valuation

Assessment

As a reminder, our updated website at www.trugmanvaluation.com includes a resource center which provides additional information that might be useful to you including sample reports, various conference presentations and podcasts.

Conclusion

We are available to assist you, and your clients, with your valuation and litigation support needs and look forward to hearing from you. And so, your thoughts and comments on this Medical Executive-Post are appreciated.

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

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Upcoming Health Economics Interview with Dr. David Marcinko

Posted on March 3, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

Coming Soon from Medical Business News, Inc

By Ann Miller; RN, MHA

ME-P Executive-Directordr-david-marcinko22

Medical Business News, Inc., the publisher of Medical News of Arkansas, is a leading source for healthcare industry news that is truly useful. With a professional readership comprised of physicians and key industry decision makers, Medical News publications are devoted entirely to healthcare issues that impact both clinical and administrative best practices. Written and edited specifically for healthcare professionals, MBN writers work with experts at the local, regional and national level to keep stakeholders informed about the ever-evolving healthcare system.

Out Reach

It is no wonder then, why local market MNA editor Jennifer Boulden recently contacted us to arrange an interview with Dr. David Edward Marcinko, our Publisher-in-Chief, who is also a former insurance agent, registered investment advisor, health economist and Certified Financial Planner™

Link: www.MedicalBusinessAdvisors.com  

Interview Topics

The wide open topic in this environment of medically specific lethargy and macro economic insecurity – personal and business planning for physicians. Of course, since this is a broad field, we will use the rating and ranking system of this blog to help Jennifer and her staff, winnow down categories to top-of-mind concerns of our ME-P subscribers and her MNA readers.

Link: www.HealthcareFinancials.com

Assessment

But, we also ask you to send in any particular issues that you may have in order to make the interview helpful and exciting for all concerned.

Link: www.HealthDictionarySeries.com

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated.

Link: www.CertifiedMedicalPlanner.com

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

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Meet Dr. Gary L. Bode CPA MSA CMP™ [Hon]

Posted on March 2, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

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Introducing our Newest Thought-Leader

Dr. Gary Bode; CPA, MSA, CMP

[By Ann Miller RN MHA]

The Medical Executive-Post is proud to introduce Dr. Gary L. Bode as our newest thought-leader for healthcare financial modernity. Dr. Bode was the Chief Financial Officer [CFO] for a private mental healthcare facility, and previously the Chief Executive Officer [CEO] of Comprehensive Practice Accounting, Inc, in Wilmington, NC. The firm specialized in providing tax solution to medical professionals. Dr. Bode was a board certified practitioner and managing partner of a multi-office medical group practice for a decade before earning his Master’s of Science degree in Accounting [MSA] from the University of North Carolina. He is a nationally known forensic health accountant, financial author, educator and speaker.

A Multi-Faceted Healthcare Financial Expert

Areas of expertise include producing customized managerial accounting reports, practice appraisals and valuations, restructurings and innovative financial accounting, as well as proactive tax positioning and tax return preparation for healthcare facilities. Currently, Dr. Bode is Chief Accounting and Valuation Officer (CAVO) for the Institute of Medical Business Advisors, Inc. He is also a Certified Medical Planner™ http://www.CertifiedMedicalPlanner.org  He provides litigation support in his areas of expertise and has been previously accepted as a legal expert witness www.MedicalBusinessAdvisors.com

Assessment

Gary has promised to publish his most exciting ideas and innovative work on our blog. He is also available for private consulting engagements and related professional work on an ad-hoc, or interim basis. So, let’s give a warm ME-P “shout-out” to Dr. Gary L Bode; our newest thought-leader.   

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Conclusion

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Economics of Medical Fraud

Posted on February 25, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

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Healthcare Leads the Pack

[By Staff Reporters]mardi-gra-skulls

All Medical Executive-Post readers and subscribers are aware of the Federal False Claims Act. Since 1986, False Claims Act [FCA] judgments and settlements totaled over $20 billion dollars. 

Of Miscreants and Feasors

According to outside unverified resources, below are the top 20 alleged FCA recoveries to date. Notice that all twenty, of the top 20, are healthcare and big Pharma related.

The Top 20

  1. Tenet Heath Care – $900,000,000
  2. HCA – $731,400,000
  3. Merck – $650,000
  4. HCA – $631,000,000
  5. Serono – $567,000,000
  6. Taketa Abbott Pharmaceutical Products Inc – $559,483,560
  7. Schering Plough – $255,000,000
  8. Abbott Labs – $400,000,000
  9. Fresenius Medical Care (National Medical Care) – $385,000,000
  10. Cephalon – $375,000,000
  11. Bristol Myers Squib – $328,000,000
  12. SmithKline Beecham [DBA] GlaxoSmith Kline – $325,000,000
  13. HealthSouth – $325,000,000
  14. National Medical Enterprises – $324,200,000
  15. Gambro Healthcare – $310,000,000
  16. Schering-Plough – $292,969,482
  17. AstraZeneca Pharmaceuticals – $266,127,844
  18. St. Barnabas Hospitals – $265,000,000
  19. Bayer Corporation – $257,200,000
  20. Schering Plough – $255,000,000

More: You can read all the details regarding these fraud judgments & settlements here 

Assessment

The above are the very companies that doctors, patients and many stakeholders rely upon. They bombard us every hour with TV advertisements and information on the latest drugs and newest procedures. They often promote cures for the exaggerated illnesses and nebulous ailments they seek to treat. Is this expense model just business-as-usual; or the cost-of-doing business?

Link: http://www.taf.org 

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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.

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Medical Practice Financial Accounting

Posted on February 22, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

The Three Methods of Medical Office Accounting

 By Dr. Gary L. Bode; CPA, MSA

gary-bode2

Did you know that there are three recognized methods of financial accounting used in medical offices today? If not, this brief rundown on all three methods will help: 

1) Cash method  

Here, money is counted only as you deposit it, and “spent” only when write a check.  Simplistic, but intuitively obvious, this resembles your check register.

Unfortunately, the true cash flow method is seldom seen.  Most accountants use a tax-modified version of the cash flow method, as required by the IRS for tax reporting purposes.

2) Accrual method 

Here, income is counted as you earn it, so your accounts receivable is counted as income when you treat patients, despite receiving no cash for it as yet. Expenses get entered as you incur them.

In other words you enter a supply order as an expense as it’s placed, not just when you pay for it.  This method affords logical treatment of a wider variety of accounting issues than does the cash method and the IRS requires it once certain criteria are met.  

3) Modified cash (tax) method 

This is the cash method modified by depreciation and amortization as required by the IRS. 

Now, which accounting method is used in your situation, and why?

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated.

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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Dubious Medical Practice Accounting

Posted on February 21, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

gary-bodeWhy Financial Statements are Sometimes Suspect?

 By Dr. Gary L. Bode; CPA, MSA, CMP

Medical practice financial statements have potential problems and are often suspect for several reasons.  

First, they rely on unverified information from the practitioner. A practice’s internal bookkeeping, even with the highest of intentions, is often sloppier than an accountant might hope for.  Professional liability with the IRS, and time constraints, keep the average accountant from doing anything but merely compiling figures given them.  The standard disclaimer on their financial statements states this fact.   

Second, most accountants are generalists in that they service other industries, like hog farms and flower shops; besides health care.  Specialization developed in medicine and health care for a good reason – it became too complex for a single person to have a comprehensive grasp on all of it.  The accounting industry has not followed suite.  Thus, CPAs often have little direct experience in the health care professional space.

Finally, accountants generally limit their scope of service to interfacing with the government for you on tax issues.  Therefore, their statements reflect tax position, which is only one component of the practice’s total financial condition. While important, this is hardly all your accountant is capable of doing.

Now, have you ever experienced a problem relative to the above post?

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About FDIC.gov

Posted on February 11, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

What it is – How it works

Staff Reporters

handcuffsThe Federal Deposit Insurance Corporation (FDIC) preserves and promotes public confidence in the US financial system by insuring deposits in banks and thrift institutions for up to $250,000 (through December 31, 2009); and by identifying, monitoring and addressing risks to the deposit insurance funds; and by limiting the effect on the economy and the financial system when a bank or thrift institution fails

Mission

The FDIC is an independent agency created by the Congress that maintains the stability and public confidence in the nation’s financial system by insuring deposits, examining and supervising financial institutions, and managing receiverships.

Vision

The FDIC is a leader in developing and implementing sound public policies, identifying and addressing new and existing risks in the nation’s financial system, and effectively and efficiently carrying out its insurance, supervisory, and receivership management responsibilities.

The Website

The website www.FDIC.gov has these tabs-of-interest:

  • Deposit Insurance
  • Consumer Protections
  • Industry Analysis and Analysis
  • Regulations and Examinations
  • Failed Bank Information
  • Institutional Asset Sales
  • Breaking News and Events

Assessment

This site is an excellent resource for physicians, financial advisors, medical executives and all investors in this time of national economic crisis:

For more information:

Federal Deposit Insurance Corporation
Consumer Response Center
2345 Grand Boulevard, Suite 100
Kansas City, MO 64108-2638
Fax Number (703) 812-1020

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated.

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

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Hospital Financial Capital Capacity

Posted on February 10, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

An Economic Risk Measurement

By Calvin Weise; MBA, CPAho-journal5

Hospital capital capacity is all about risk.

A Risk Measurement

Since capital investments have risks associated with them, capital capacity is a measurement of how much risk a hospital can bear. Capital capacity is not simple to determine. Capital investments introduce varying levels of risk, depending on the relative uncertainty of the benefits to be derived.

For example, one million dollars invested in an MRI at a hospital that has a two-month backlog for scheduling MRIs has much lower risk than $1 million invested in a new service like a PET scanner.

Profit Margins

Profit margins affect capital capacity. Larger profit margins create larger capacity for uncertainty which implies more risk and that means more capital capacity. Higher liquidity means more capital capacity. Lower debt leverage means more capital capacity. Liquidity and leverage are balance sheet ratios. Both imply capacity to absorb uncertain outcomes; both affect capital capacity.

Capital Determinations

Determining capital capacity is more art than science because of the variability in risk presented by various capital investments and the subjectivity associated with trying to measure that uncertainty.

That having been said, it is important to build models that estimate capital capacity. Most capital capacity models ignore the variability in risk presented by capital investments. They are typically built from published rating agency financial ratio medians. These models are based on the view that financial ratios of similar rating categories represent equivalent risks.

Of course, this is a simplistic view as it suggests that credit analysts simply categorize risk on the basis of financial ratios. It is not the case as the recent financial meltdown has demonstrated. Even the major credit rating agencies have been implicated as suspect; of late

Assessment

Published medians are the result of credit analysis, not the basis for credit analysis. Importantly, what is not usually published is the range or distribution around these medians. Models that estimate risk need to differentiate among risks presented by capital investments. Capital investments with little risk should consume less capital capacity than capital investments with a lot of risk.

Link: www.HealthcareFinancials.com

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. How does your practice, medical clinic or hospital measure and report capital risk; does it?

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

Our Other Print Books and Related Information Sources:

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

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

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

Healthcare Organizations: www.HealthcareFinancials.com

Health Administration Terms: www.HealthDictionarySeries.com

Physician Advisors: www.CertifiedMedicalPlanner.com

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About Healthcare Financials.com

Posted on February 6, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

Healthcare Organizations [Financial Management Strategies]

By Hope Rachel Hetico; RN, MHA
Managing Editorhetico3

This 2-volume, quarterly subscription print publication will reshape the hospital management landscape by following three important principles www.HealthcareFinancials.com

1. World Class Advisory Board

First, we have assembled a world-class editorial advisory board and independent team of contributors and asked them to draw on their experience in economic thought leadership and managerial decision making in the healthcare industrial complex. Like many readers, each struggles mightily with the decreasing revenues, increasing costs, and high consumer expectations in today’s competitive healthcare marketplace.  Yet, their practical experience and applied operating vision is a source of objective information, informed opinion, and crucial information for this manual and its quarterly updates.

2. Writing Style

Second, our writing style allows us to condense a great deal of information into each quarterly issue.  We integrate prose, applications and regulatory perspectives with real-world case models, as well as charts, tables, diagrams, sample contracts, and checklists.  The result is a comprehensive oeuvre of financial management and operation strategies, vital to all healthcare facility administrators, comptrollers, physician-executives, and consulting business advisors.

3. Compelling Content

Third, as editors, we prefer engaged readers who demand compelling content. According to conventional wisdom, printed manuals like this one should be a relic of the past, from an era before instant messaging and high-speed connectivity. Our experience shows just the opposite. Applied healthcare economics and management literature has grown exponentially in the past decade and the plethora of Internet information makes updates that sort through the clutter and provide strategic analysis all the more valuable. Oh, it should provide some personality and wit, too! Don’t forget, beneath the spreadsheets, profit and loss statements, and financial models are patients, colleagues and investors who depend on you.

Assessment

ho-journal1

Rest assured, Healthcare Organizations [Financial Management Strategies] will become an important peer-reviewed vehicle for the advancement of working knowledge and the dissemination of research information and best practices in our field. In the years ahead, we trust these principles will enhance utility and add value to both your print and this e-companion subscription.

Conclusion

Most importantly, we hope to increase your return on investment. If you have any comments or would like to contribute material or suggest topics for a future update, please contact us.

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

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Filed under: Accounting, Drugs and Pharma, Glossary Terms, Health Economics, Health Insurance, Health Law & Policy, Healthcare Finance, iMBA, Inc., Information Technology, Insurance Matters, Managed Care, Media Mentions and PR, Practice Management, Professional Liability, Quality Initiatives, Research & Development | Tagged: , , , , , , , , , | 1 Comment »

Enhancing Revenue Cycles with Recondo

Posted on February 5, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

About SurePayHealth™ Payment Processing

Staff Reporters

stk305087rknConsumer-driven health care [CDHC], high-deductible health plans [HDHPs], medical and health savings accounts [MSAs/HSAs] are changing the rules of revenue cycle management for medical practices, clinics, retail facilities and hospitals. In fact, compared to other industry segments, health care payment processing remains extremely inefficient; for example, the retail segment settles payments for less than two percent of revenue, and financial services settles payments for less than one percent. Some health economists even estimate that if health care could settle payments even for 10 percent of revenue, savings would exceed $100 billion.

Graphs: http://www.recondotech.com/pdf/HSA-AHIP-January-2008.pdf

About Recondo Technolgy

According to the website, Recondo Technology was formed by a veteran team of experienced software developers with a singular goal: to build tools that help hospitals, offices and medical clinics accelerate patient payments and streamline claims to payers; especially in the emerging Consumer Directed Health Care model of US health care.

Product Offerings

Recondo is an early pioneer in verifying patient information, financially approving and clearing patients, predicting payment accurately, and automating the Medicaid/charity approval process. Recondo offers: 

· Real-time access to information that ensures payment sources for services are properly identified prior to, during, and after care delivery.

· Statement processing that handles approximately 300 million patient documents annually for healthcare providers throughout the country. 

Link: http://www.recondotech.com

Assessment

Accelerating the healthcare cash conversion cycle is a desirable business goal, especially if collection occurs at the point-of-contact. Nevertheless, all medical professionals should realize that their guiding principle should always be: Omnia pro Aegroto [all for the patient].   

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated; especially from our retail and concierge medical practitioners and subscribers.

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

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Proposed Disallowance of Fair Market Value for FLPs

Posted on February 4, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

On the HR 436 Proposal for FLPs

By Linda Trugman; CPAtrugman, MBA, ABV, ASA, MCBA

On January 9, 2009 the US House of Representatives introduced HR 436. The Bill would establish the federal estate tax exemption at $3,500,000, and set the tax rate for estates exceeding that amount at 45 percent, eliminating the currently scheduled 2010 phase-out and subsequent reversion to pre-Bush tax cut levels with the $1 million exclusion and a 55 percent tax rate.

Estate Planning Technique Elimination

Importantly, the Bill, if enacted as proposed, would remove a popular estate planning technique by eliminating most discounts associated with what is referred to generically as family limited partnerships [FLPs, a general term applied to closely held asset holding companies often holding non-business assets].

FLP Non-Controlling Interests

Currently, when a physician-investor or any other individual transfers a non-controlling interest in a FLP, whether by gift or at death, the interest is valued at the price that a willing buyer would pay for the partnership interest, or fair market value. Since such FLP interests are not publicly traded, and do not represent a controlling interest in the partnership, business appraisers often assign substantial discounts in valuing these interests.

Case Model:

For example, a 10 percent limited partnership interest in a partnership that holds $1 million worth of securities would not be valued at $100,000 under current law. Rather, because a buyer of the partnership interest cannot sell the interest on the open market, nor exert control prerogatives on the partnership, he or she would pay materially less for the interest [perhaps 30 percent to 50 percent less]. 

Elimination of FMV Standards

The Bill as drafted would be effective for transfers occurring after the date of enactment. However, there is always the possibility that any final statute might be applied retroactively. While the fate of this piece of legislation is uncertain, it may reflect the attitude of the new administration towards keeping and strengthening the estate tax. 

If HR 436 becomes law, appraisers would no longer be allowed to apply Fair Market Value standards to valuing these non-control FLP interests; they would not be able to apply any discounts to “non-business” assets held by partnerships or other entities. Instead, those assets would be valued as though they were transferred directly to the recipient. 

Assessment

The Bill as drafted would be effective for transfers occurring after the date of enactment. However, there is always the possibility that any final statute might be applied retroactively. While the fate of this piece of legislation is uncertain, it may reflect the attitude of the new administration towards keeping and strengthening the estate tax. I have attached the proposed legislation to this post.

File:  hr-436 

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated.

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

Our Other Print Books and Related Information Sources:

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

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

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

Healthcare Organizations: www.HealthcareFinancials.com

Health Administration Terms: www.HealthDictionarySeries.com

Physician Advisors: www.CertifiedMedicalPlanner.com

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RIA Merger Mania and the Medical PPMC Fiasco

Posted on January 26, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

What is Old is New Again -or- Lessons Learned

By Dr. David Edward Marcinko; MBA, CMP™

 dr-david-marcinko9According to the article Great Expectations-Disappointing Realities that recently appeared in Registered Representative, a trade magazine for the financial services industry, by John Churchill, the booming stock market of the last five years saw many Registered Investment Advisory [RIA] firms sell a portion of their future cash flows in return for cash and stock in an acquiring consolidating firm. This is known as a roll-up, or consolidator, business model. I am quite familiar with it, as both a doctor and financial advisor. I believe my dual perspective of both camps is somewhat unique, as well.

The NYSE Collapse

As the stock market collapsed in 2008-09, many RIAs who previously sold stakes to these “roll-up” consolidator firms began scrambling to pay quarterly preferred disbursements.  What gives, many implored? As a reformed Certified Financial Planner™, RIA representative, financial advisor and insurance agent, I can draw many parallels from these present day RIA consolidators to the similar Physician Practice Management Corporation roll-up fiasco of 1999-2000? Indeed, I can, and will [www.HealthcareFinancials.com]

My Experience with Medical Practice Consolidators

As a clinician and surgeon, I was the past president of a privately held regional Physician Practice Management Corporation [PPMC] in the Midwest. I assumed this route about a decade ago, by happenstance and background, when I helped consolidate 95 solo medical practices with about $50 million in revenues. But, our small company’s IPO roll-up attempt was aborted due to adverse market conditions, in 1999. Fortunately, a conservative business model based on debt, not the equity which was all the rage at the time, saved us right before the crash of 2000. So, we harvested fiscally conservative physicians who lost only a few operational start-up bucks; but no significant dollars.

On the other hand, those PPMCs roll-ups based on equity lost much more. In fact, according to the Cain Brothers index of public PPMCs, more than 95% of all equity value was lost by doctor-investors hoping to cash in on Wall Street’s riches they did not rightly deserve; not by practicing medicine but by betting on rising stock prices. So, projecting a repeat disaster from medicine, to the contemporary RIA consolidator business model, was not a great leap for me. And unfortunately, this was one of the few times I was all too correct in my prognostications.

PPMC’s Today

The type of medical consolidator or roll-up, formally called the Physician Practice Management Corporation [PPMC], was left for dead by the year 1999. Even survivors like Pediatrix Medical Group saw its stock drop precipitously. And, more than a few private medical practices had to be bought back by the same physicians that sold out to the PPMCs originally.

RIA Example

I sure hope this does not occur with FAs, as well. But, if an entity is being bought back and accounts receivables are being purchased, FAs should be careful not to pick this item up as income twice. The costs can be immense to the RIA practice, as later clients of mine learned the hard way.

Buy-Backs

For example, let’s say a family practice [or RIA?] purchased itself back from a PPMC, or RIA consolidator. Part of the mandatory purchase price, approximately $200,000 (the approximate net realizable value of the accounts receivable), was paid to the PPMC to buy back accounts receivable [ARs] generated by the physicians buying back their practice. Now, if an office administrator unknowingly begins recording the cash receipts specifically attributable to the purchased accounts receivable as patient fee income; trouble begins to brew. If left uncorrected, this error can incorrectly added $200,000 in income to this practice and cost it (a C Corporation) approximately $70,000 in additional income tax ($200,000 in fees x 35% tax rate). The error in the above example is that the PPMC [or RIA consolidator] must record the portion of the purchase price it received for the accounts receivable as patient [advisory] fee income. The buyer practice has merely traded one asset – cash – for another asset, the accounts receivable [ARs].  When the practice collects these particular receivables, the credit is applied against the purchased accounts receivable (an asset), rather than to patient [RIA] fees.  

RIA Revolution Follows PPMC Evolution

Today, surviving medical PPMCs are evolving from first generation multi-specialty national concerns, to second generation regional single specialty groups [my type], to third generation regional concerns, and finally to fourth generation Internet enabled service companies providing both business to business [B2B] solutions to affiliated medical practices, as well as business like consumer health solutions to plan members [healthcare 2.0]. I trust this sort of positive morphing will occur, over time, with the RIA consolidators. Perhaps yes, or no [www.HealthDictionarySeries.com]

RIA Consolidators

Among the most distressed RIA roll-up entities today may be the publically traded National Financial Partners and its more than 180 acquired firms, with more than 320 members in 41 states and Puerto Rico. NFP specializes in life insurance and wealth transfers, corporate and executive benefits, and financial planning and investment advisory services. Jessica M. Bibliowicz has been NFP’s President and CEO since inception in 1999. She is the daughter of Sandy Weill, and a member of the Board of Overseers for the Weill Medical College and Graduate School of Medical Sciences of Cornell University. NFP’s stock has declined from a high of $56 more than a year ago, to a current trading range of $3-4.           

And the Question Is?

And so, the question that MDs and RIAs should have asked when contemplating this business model was simply this: would I but the stock of an acquiring roll-up company if I were not part of the deal?

Valuable Consideration

Why? When MDs and RIAs sell to a consolidator, part of their “valuable consideration” is stock equity, so confidence and a conscientious work ethic is important. But, these “‘sell-out” entities are not retirement vehicles according to former financial advisor Hope Rachel Hetico; RN, MHA, CMP™ – a nurse executive and managing partner for www.MedicalBusinessAdvisors.com. Hope is also managing editor of this blog forum.

Assessment

More pointedly, according to one seller mentioned in the Churchill article,

“the whole [consolidator] pyramid is built on cash flows based on incremental growth and hugely optimistic projections of that growth”.  

Conclusion

Rest assured, the consolidator business model can be very successful; just think H. Wayne Huizenga’s Blockbuster Video and Waste Management, Inc. And so, your thoughts and comments on this Medical Executive-Post are appreciated? Why didn’t consolidation work in medicine, or with the RIAs? Or, reframed, why did consolidation work in the garbage collections industry and video store space? Can the fiercely independent RIA space learn something from the fiercely independent medical space?

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

Our Other Print Books and Related Information Sources:

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

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

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

Healthcare Organizations: www.HealthcareFinancials.com

Health Administration Terms: www.HealthDictionarySeries.com

Physician Advisors: www.CertifiedMedicalPlanner.com

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The Health Dictionary Series

Posted on January 20, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

What it is – How it works

By Dr. David Edward Marcinko; MBA, CMP™

By Hope Rachel Hetico; RN, MHA, CMP™

dhimc-book11

Each useful and up-to-date printed reference dictionary in the 3 volume comprehensive “Health Dictionary Series” Wiki project lists and defines more than ten thousand plus words, abbreviations, acronyms, slang-terms, initialisms and specialized non-clinical health terms; alphabetically.

First conceived as an ambitious and much needed project by the Institute of Medical Business Advisors Inc, in 2007, www.MedicalBusinessAdvisors.com, the “Health Dictionary Series” will contain more than 50,000 items upon completion in 2010; to be updated periodically thereafter. Three dictionaries have been released, to date 

For All Medical Specialties

Physicians, dentists, medical practitioners and allied healthcare professionals; clinic, practice and hospital administrators, managers and executives; nurses, business, graduate and medical school students; benefits managers, TPAs, HMOs and payers; financial planners, accountants, insurance agents and IT consultants; government officials, policy and decision makers, and all savvy patient consumers will find a wealth of information in these 4 volumes.

An iMBA Wiki Project

Your contributions are invited as a modern health 2.0 initiative.

Assessment

The series has even been electronically coupled as an interactive Wiki-like Collaborative Lexicon Submission Service; or social network to maintain continuous subject-matter expertise and peer-reviewed user input. And so, you too are invited to submit terms and join us.

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

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Medical Office Expensing v. Depreciating

Posted on January 8, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

Some Tax Basics for Medical Professionals

By Edwin P. Morrow; III, JD, LLM

56371606Astute financial advisors and healthcare focused accountants know that there are simple and overlooked strategies that can significantly add to the bottom line of any business or medical practice; as much as increasing practice revenues or reducing expenses. Physicians and medical professionals themselves should also understand some basic accounting and simple tax strategies that do not require five figure consulting fees or excessive risks of audit. Here are some basic concepts of financial accounting to know.

Tax Deductible Expenses

Medical professionals should understand the basic concept of a tax-deductible expense, which can be used to offset income in the year paid or accrued, and a capital expenditure.

Capital Expenditures

 A capital expenditure must either be depreciated (similar terms are amortized or depleted), meaning that there is a deduction made over several years, or the expenditure may be required to be added to the tax basis of the property, meaning that there is only a tax benefit upon sale of the property.

An expense that adds to the value or useful life of medical office property is a capital expense.  Capital expenses include expenditures for buildings, significant improvements or instrumentations and related medical machinery. For instance, a repair on an office roof may be a deductible expense, but a new roof will be a capital expenditure.  Although both may be expensive, the repair reduces income dollar for dollar in year one, and the new roof reduces income only gradually over many years.

Understanding Accounting Concepts

 This is a very important tax accounting concept. In essence, any significant asset purchased or expenditure that has a useful life of more than one year cannot be expensed, but may be eligible to be depreciated over the life of the asset. This means you have to wait many years to get the full tax benefit from the expenditure.

Depreciation Useful Life

Some common assets and their default useful life according to the IRS are:

  • Computers and Peripherals – 5 years
  • Office Machinery and Equipment – 5 years
  • Transportation Equipment – 5 years
  • Office Furniture and Fixtures – 7 years
  • Certain Watercraft – 10 years
  • Farm Buildings – 20 years
  • Residential Rental Property – 27.5 years
  • Leasehold Improvements – 39 years
  • Non-residential Real Property – 39 years
  • Land without improvements – cannot be depreciated
  • Items held for inventory or ultimate sale – cannot be depreciated

Assessment

Note that even if your office computer hardware becomes obsolete in one or two years that the IRS may make you use the five-year depreciation schedule, but see the following section on Section 179 elections for exceptions. Computer software bundled and included with hardware must use the same rule. Software that has a useful life of less than a year, such as tax preparation software, may be a deductible expense, but other software costs may be amortized over 3 years.  IRC § 167(f)(1).  There may also be exceptions to the depreciation requirement for environmental cleanup costs, which may be eligible to be expensed as a deduction IRC § 198.

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. How have you used these strategies in the past?

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

Our Other Print Books and Related Information Sources:

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

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

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

Healthcare Organizations: www.HealthcareFinancials.com

Health Administration Terms: www.HealthDictionarySeries.com

Physician Advisors: www.CertifiedMedicalPlanner.com

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Independent Contractors versus Doctor Employees

Posted on January 5, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

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Some Tax Basics for Medical Professionals

[By Edwin P. Morrow; III, JD, LLM]

Staff Writersfp-book

Medical professional should be careful overusing this technique, in the office or other business.

IRS Attacks

Why? The IRS has successfully attacked many companies that tried to classify their workers as independent contractors rather than employees. The back taxes and penalties can be fierce. 

Delegation not Employment

However, many tasks may be successfully delegated to independent contractors or consultants without fear of such characterization. For example, a company does not have to withhold payroll taxes for an independent contractor, but must file a 1099-MISC whenever payments exceed $600 a year. To distinguish between the two, there are several factors to consider.  In general, the more you have control over a worker, the more the worker looks like an employee. Two brief tables below note a few of the differences:

Employee:                                                        

  • Works at site of employer                                              
  • Uses company tools or equipment                                  
  • Cannot delegate or hire others for job                              
  • Method/timing of job specified/controlled             
  • Expenses reimbursed                                                    
  • Little invested by worker                                    
  • Payment weekly, bi-weekly or monthly               
  • Only works for one employer                                          
  • No risk of non-payment if poor job                                   
  • Profit/bonus limited                                                       
  • No advertising                                                               
  • Contract states employee relationship                
  • Position seems permanent                                            
  • Work done is essential to business                                

Independent Contractor:

  • Works off-site
  • Uses own tools and equipment
  • Can hire others or delegate
  • Method/timing of job uncontrolled
  • Expenses borne by worker
  • More invested by worker
  • Payment by the job or flat fee
  • Works for several clients
  • Opportunity for profit
  • Advertising to general public
  • Contract says independent contractor
  • Position temporary
  • Work done is non-core function

Multi-Factorial Analysis Needed

No single one of these factors determines status. The IRS has a 20-factor test outlined in Revenue Ruling 87-41 and discussed in Publication 1976, “Independent Contractor or Employee”.  When you have a relationship that is unclear, you should consult with the IRS guidelines and publications. If your intent is to hire an independent contractor, try to make sure the relationship has more of the factors indicative of that status, checking the latest IRS publication for all relevant factors. Because of the large amounts at stake, you should err on the side of employee status if uncertain. You may wish consult a tax attorney or accountant as well, especially if you have multiple workers in a gray area. In addition, you can request that the IRS make a determination of worker classification by submitting Form SS-8, “Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding.

***

***

Assessment

The IRS guidelines on this topic are rather lengthy. And, $600 is still the threshold amount this year unless it is royalties ($10).  Non-employee compensation, rent, royalties, prizes or awards, and services are only a few of the situations giving rise to a 1099-MISC. Doctors may also find this link of additional benefit:

http://www.ehow.com/how_13664_know-issue-1099.html

Conclusion

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Posted on January 1, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

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Profits as Distribution – Not Wages

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

56371606Payroll Tax Strategies for Doctors

By Edwin P. Morrow; III, JD, LLM

[Staff Writers]

Any business, like a medical practice with employees, has to concern itself with payroll taxes.  This includes any C or S Corporation with a sole owner/employee. 

Payroll Taxes

Payroll taxes include: 1) income tax withholding for any employee for federal, state and local taxes; 2) the employer portion of federal social security and Medicare taxes (also called OASDI – old age, survivors and disability insurance); 3) the employee portion of federal social security and Medicare taxes; 4) state and federal unemployment tax [See IRS Publication 15, Employer’s Tax Guide]. These include a social security tax of 12.4% on earned income up to $106,800 (2009 number increases annually) and Medicare taxes of 2.9%. And, although there are not nearly as many tax “loopholes” with payroll taxes as with income taxes, impacting issues like this should be noted.

Distribution of Profits

And so, profits as distributions are a valid strategy for passive physician-investors not working in a business entity. If no work was done to earn the distribution and the profits earned based only on the owner’s capital contribution, then the distribution should not be subject to social security and Medicare taxes as wages. 

An Aggressive Strategy

However, this may be a more aggressive strategy for owners working in a business; or practice.  Yet, some tax practitioners are comfortable characterizing a certain amount of payment to owner/workers as a distribution of profits to owners rather than as wages, which could save up to 15.3% employment tax. 

Avoiding Wage Re-Characterization

This may be done through a partnership or S Corporation (this technique would lead to potential double tax in a C Corporation), though many practitioners feel treatment of S Corporation distributions is more likely to safely avoid re-characterization as wages due to older IRS proposed regulations that are more negative on this point to tax partnerships.  Proposed Regulation § 1.1402(a)-2(h)(2).  This regulation has not been passed and is not law, but is the closest thing to guidance on IRS thinking in this area.  The IRS will not likely subject a distribution of a tax partnership to self-employment taxes unless one of the following apply:

 

  • the partner or member has personal liability for debts of the partnership (common in a general partnership or LLP, but not in an LLC, and not for a limited partner in a LP);
  • the partner or member has authority to contract on behalf of the partnership (common in member managed LLP or LLC, but not for a limited partner in a LP or a non-managing member in a manager managed LLC); or
  • the partner or member participates in the business more than 500 hours a year.

As can bee seen, at least one of these criteria will often apply to many partners or owners of LLP or LLC interests, but will not apply to a limited partner or an LLC owner whose interest closely resembles that of a limited partner.  That said; some practitioners go beyond these regulations because they are not binding interpretations.  

A Warning

Remember the adage, however, that “pigs get fat and hogs get slaughtered”. If you try to declare everything you make as a dividend style distribution and not wages, the IRS will use the “reasonable salary” guideline to re-characterize the distribution as truly wages. The company or practice must pay its owner/employee a reasonable salary for work done based on the nature of the job.  Basically, what would it cost to hire someone to do what you do? 

Assessment

The IRS may be more successful in treating a distribution as wages where a company is primarily a service business, like a medical practice, and capital investment is not a factor in production of income, or where there are no other employees that one can claim as helping to produce the excess income.

Conclusion

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Retained Earnings and Employed Children

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

Payroll Tax Strategies for Doctorsdv2034034

By Edwin P. Morrow; III, JD, LLM

Staff Writers

Any business, like a medical practice with employees, has to concern itself with payroll taxes. This includes any C or S Corporation with a sole owner/employee. 

Payroll Taxes

Payroll taxes include: 1) income tax withholding for any employee for federal, state and local taxes; 2) the employer portion of federal social security and Medicare taxes (also called OASDI – old age, survivors and disability insurance); 3) the employee portion of federal social security and Medicare taxes; 4) state and federal unemployment tax [See IRS Publication 15, Employer’s Tax Guide]. These include a social security tax of 12.4% on earned income up to $106,800 (2009 number increases annually) and Medicare taxes of 2.9%. And, although there are not nearly as many tax “loopholes” with payroll taxes as with income taxes, impacting issues like these two should be noted.

1] Employ your children under 18

A sole proprietor physician may not be required to pay social security taxes on wages of his or her child under the age of 18.  This exception does not apply to an incorporated business IRC § 3121(b)

2] Understanding Retained Earnings

As some doctors are aware, earnings retained in a C or S Corporation and not distributed to shareholders are not subject to social security and Medicare taxes. This may be a substantial savings of 15.3% when you have owners working in the company. This technique is not as likely to work in a tax partnership and will certainly not work in a sole proprietorship.

Conclusion

And so, your thoughts and comments on this brief Medical Executive-Post are appreciated.

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

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Understanding Payroll Taxes

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

Accounting Issues for Doctors56371606

By Edwin P. Morrow; III, JD, LLM

Staff Writers

Any business, like a medical practice with employees, has to concern itself with payroll taxes.  This includes any C or S Corporation with a sole owner / employee. 

Payroll Taxes

Payroll taxes include: 1) income tax withholding for any employee for federal, state and local taxes; 2) the employer portion of federal social security and Medicare taxes (also called OASDI – old age, survivors and disability insurance); 3) the employee portion of federal social security and Medicare taxes; 4) state and federal unemployment tax [See IRS Publication 15, Employer’s Tax Guide].

Non-Employees

A non-employee business or medical practice owner (which may be a partner in a tax partnership) must pay the equivalent of these taxes, called Self-Employment Taxes, in lieu of the above taxes  IRC § 1401. These include a social security tax of 12.4% on earned income up to $106,800 (2009 number increases annually) and Medicare taxes of 2.9%. Instead of income tax withholding, the owner doctor pays Estimated Taxes on a quarterly basis. A non-employee owner is unlikely to be required to pay unemployment taxes.

Impacting Issues 

Both the employer and the employee must pay a social security tax of 6.2% of wages up to $106,800, and a Medicare tax of 1.45% of all wages. This totals 15.3% of the first $106,800, and 2.9% of all wages above that. You will notice that when combined, the employee and employer tax rates equal the self-employment tax rates. 

Assessment

Although tax planners often only discuss income tax planning, payroll taxes may sometimes be greater than the corporate income tax (starting at 15%) or individual income tax (which may be as low as 0, 10 or 15%), and should be considered just as important in planning to avoid excessive taxation.  Unlike income taxes, there is no standard deduction, exemption or delayed starting point for these taxes. The tax starts on the first dollar.  Although there are not nearly as many tax “loopholes” with payroll taxes as with income taxes, impacting issues should be noted.

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated.

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

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Health Entity-Related Tax Credits

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

Some Unique Tax Basics for the Industry

By Edwin P. Morrow; III, JD, LLM

Staff Writers

In addition to the usual business deductions, medical professionals and those in healthcare should be aware of certain unique investment related tax credits. Much like personal credits, most of these credits are non-refundable, but may be allowed as carry forwards to the next year, or carry backs to prior years. 

Welfare to Work Credit

This credit is for medical employers who hire long-term family assistance recipients. It may be for up to 35% credit on applicable first year wages and 50% credit on second year wages. [See Form 8861] “Welfare to Work Credit”, for more details

Increased Research Expenditures Credit

This credit is applicable to health entity owners and startups. Research expenditures eligible for this credit must be to discover information that is technological in nature and intended for development of a new or improved business component. The research must relate to new or improved function, performance, reliability or quality. [See IRS Form 6765] “Credit for Increasing Research Activities”, for more details 

Disabled Access Credit

This credit is for eligible small medical and health entities that make a business accessible to disabled people. The credit may be 50% of qualifying expenditures. To be eligible, a small business must have gross receipts of $1 million or less, or have had no more than 30 employees during the preceding tax year. Eligible expenditures may include physical changes to the building, changes to the communication system, providing interpreters, acquiring or modifying equipment, or other accommodations for disabled access. [See Form 8826] “Disabled Access Credit”, for more details.

Empowerment Zone Employment Credit

This credit is to encourage employment in “empowerment zones” established by the Secretary of Housing and Urban Development (HUD) and the Secretary of Agriculture. [See Form 8844] “Empowerment Zone Employment Credit”, for more details.

Indian Employment Credit

A credit of up to 20% of applicable in wages and health insurance benefits paid to qualified health employees who are enrolled members of an Indian tribe or their spouses.  Substantially all of the services performed must be within an Indian reservation and the employee must live on or near the reservation [See Form 8845] “Indian Employment Credit”, for more detail

Orphan Drug Credit

This credit is for qualified clinical drug testing expenses.  This credit may be for up to 50% of expenses incurred [See Form 8820] “Orphan Drug Credit”, for more details.

Assessment

What credits did we miss; please advise?

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. Have you used any of these tax credit strategies in the past?

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

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Physician Travel Expenses

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

Some Tax Basics for Medical Professionals

By Edwin P. Morrow; III, JD, LLM

Staff Writers

Astute financial advisors and healthcare focused accountants know that there are simple and overlooked strategies that can significantly add to the bottom line of any business or medical practice; as much as increasing practice revenues or reducing expenses. Physicians and medical professionals themselves should also understand some basic accounting and simple tax strategies that do not require five figure consulting fees or excessive risks of audit. Here are some basic deduction concepts of financial accounting to know.

Business Expenses

Expenses incurred while traveling away from home in the pursuit of medical business activities are deductible, but require good record keeping IRC § 162(a)(2).  This may include reasonable transportation costs such as airfare or taxi service, meals and lodging, telephone and fax, rental car or other costs. This may also include gratuities and tips.

Personal Side-Trips

But, if a personal side trip is taken, those expenses are not deductible, but the airfare and other expenses taken for the business part of the trip may still be deductible if the primary purpose of the trip is business.  Even dry cleaning and laundering, which would not be a deductible expense at home, are deductible if incurred on a business trip.

Spousal Issues

Expenses for a non-employee spouse are not directly deductible, but expenses such as a hotel room or rental car that may be shared might still be deductible if required for the employee.  Deductions for conventions, seminars or meetings held on cruise ships are subject to more stringent limitations, as are conventions or seminars held outside of North America (which includes much of the Caribbean, Canada and Mexico) IRC § 274(h). Expenses for travel outside of the United States for more than one week are also subject to more limitations if combined with a personal trip IRC § 274(c).

Assessment

Physicians and all taxpayers should keep records showing the nature of the expense, when it was incurred, the amount, and the business purpose.

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. How have you used these strategies in the past?

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

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Healthcare Organizations: www.HealthcareFinancials.com

Health Administration Terms: www.HealthDictionarySeries.com

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Accounting Deductions for Physicians

Posted on December 11, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Some Tax Basics for Medical Professionals

By Edwin P. Morrow; III, JD, LLM, and ME-P Staff Writersfp-book1

Astute financial advisors and healthcare focused accountants know that there are simple and overlooked strategies that can significantly add to the bottom line of any medical practice; just as much as increasing practice revenues or reducing expenses. Physicians and medical professionals themselves should also understand some basic accounting and simple tax strategies that do not require five figure consulting fees or excessive risks of audit. Here are some basic deduction concepts of financial accounting to know.

Commuting and Local Transportation Expenses 

Normally, standard commuting expenses to and from the home are personal expenses and not deductible. You cannot deduct the cost of your daily commute to work. There are exceptions, however. Commuting expenses to a temporary location outside of the normal business metro area may be deductible; such as the hospital or ASC. Expenses traveling from one medical office business location to another are also deductible. 

Life Insurance

Payments for life insurance are generally not excludible from income unless part of a medical group term life insurance policy with face amounts up to a maximum of $50,000 IRC § 79. Amounts of insurance greater than this amount will be taxable income to the employee (also subject to employment taxes).

Political Contributions

Political contributions in the recent elections cycle, for example, and lobbying expenses are not deductible, even if you can substantiate a direct medical business interest.

Professional Dues

Dues paid to professional organizations, like the AMA, ADA, AOA or APMA, are generally deductible. However, you may notice a disclaimer on some dues notices that indicate a portion of the dues used for political lobbying purposes, which are not deductible.  Dues to country clubs, athletic facilities, etc … will not be deductible, unless eligible for the 50% entertainment deduction mentioned earlier.

Assessment

Physicians and all taxpayers should keep records showing the nature of the expense, when it was incurred, the amount, and the business purpose.

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. How have you used these strategies in the past?

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

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

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Healthcare Organizations: www.HealthcareFinancials.com

Health Administration Terms: www.HealthDictionarySeries.com

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Sterling Search Group, LLC

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

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