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[By Ann Miller RN MHA]

Dear Physician Focused Financial Advisors;

Did you know that desperate doctors of all ages are turning to knowledgeable financial advisors and medical management consultants for help? Symbiotically too, generalist advisors are finding that the mutual need for knowledge and extreme niche synergy is obvious.

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

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“The informed voice of a new generation of fiduciary advisors for healthcare”

Think Different

 [Think Different – Be Different – Thrive]

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So, if you are looking to supplement your knowledge, income and designations; and find other qualified professionals you may want to consider the CMP® program.

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

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FINANCIAL PLANNING: Strategies for Doctors and their Advisors

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BY DR. DAVID E. MARCINKO MBA CMP®

SPONSOR: http://www.CertifiedMedicalPlanner.org

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REVIEWS:

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

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

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

In today’s healthcare environment, in order for providers to survive, they need to understand their current and future market trends, finances, operations, and impact of federal and state regulations. As a healthcare consulting professional for over 30 years supporting both the private and public sector, I recommend that providers understand and utilize the wealth of knowledge that is being conveyed in these chapters. Without this guidance providers will have a hard time navigating the supporting system which may impact their future revenue stream. I strongly endorse the contents of this book.
—Carol S. Miller BSN MBA PMP,President, Miller Consulting Group, ACT IAC Executive Committee Vice-Chair at-Large, HIMSS NCA Board Member

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

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

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

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

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

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

This is a constantly changing field for rules, regulations, taxes, insurance, compliance, and investments. This book assists readers, and their financial advisors, in keeping up with what’s going on in the healthcare field that all doctors need to know.
Patricia Raskob CFP® EA ATA, Raskob Kambourian Financial Advisors, Tucson, Arizona

I particularly enjoyed reading the specific examples in this book which pointed out the perils of risk … something with which I am too familiar and have learned (the hard way) to avoid like the Black Death. It is a pleasure to come across this kind of wisdom, in print, that other colleagues may learn before it’s too late— many, many years down the road.
Dr. Robert S. Park MD, Robert Park and Associates Insurance, Seattle, Washington

Although this book targets physicians, I was pleased to see that it also addressed the financial planning and employment benefit needs of nurses; physical, respiratory, and occupational therapists; CRNAs, hospitalists, and other members of the health care team….highly readable, practical, and understandable.
Nurse Cecelia T. Perez RN, Hospital Operating Room Manager, Ellicott City, Maryland

Personal financial success in the PP-ACA era will be more difficult to achieve than ever before. It requires the next generation of doctors to rethink frugality, delay gratification, and redefine the very definition of success and work–life balance. And, they will surely need the subject matter medical specificity and new-wave professional guidance offered in this book. This book is a ‘must-read’ for all health care professionals, and their financial advisors, who wish to take an active role in creating a new subset of informed and pioneering professionals known as Certified Medical Planners™.
—Dr. Mark D. Dollard FACFAS, Private Practice, Tyson Corner, Virginia

As healthcare professionals, it is our Hippocratic duty to avoid preventable harm by paying attention. On the other hand, some of us are guilty of being reckless with our own financial health—delaying serious consideration of investments, taxation, retirement income, estate planning, and inheritances until the worry keeps one awake at night. So, if you have avoided planning for the future for far too long, perhaps it is time to take that first step toward preparedness. This in-depth textbook is an excellent starting point—not only because of its readability, but because of his team’s expertise and thoroughness in addressing the intricacies of modern investments—and from the point of view of not only gifted financial experts, but as healthcare providers, as well … a rare combination.
Dr. Darrell K. Pruitt DDS, Private Practice Dentist, Fort Worth, Texas

This text should be on the bookshelf of all contemporary physicians. The book is physician-focused with unique topics applicable to all medical professionals. But, it also offers helpful insights into the new tax and estate laws, fiduciary accountability for advisors and insurance agents, with investing, asset protection and risk management, and retirement planning strategies with updates for the brave new world of global payments of the Patient Protection and Affordable Care Act. Starting out by encouraging readers to examine their personal ‘money blueprint’ beliefs and habits, the book is divided into four sections offering holistic life cycle financial information and economic education directed to new, mid-career, and mature physicians.

This structure permits one to dip into the book based on personal need to find relief, rather than to overwhelm. Given the complexity of modern domestic healthcare, and the daunting challenges faced by physicians who try to stay abreast of clinical medicine and the ever-evolving laws of personal finance, this textbook could not have come at a better time.
—Dr. Philippa Kennealy MD MPH, The Entrepreneurial MD, Los Angeles, California

Physicians have economic concerns unmatched by any other profession, arriving ten years late to the start of their earning years. This textbook goes to the core of how to level the playing field quickly, and efficaciously, by a new breed of dedicated Certified Medical Planners™. With physician-focused financial advice, each chapter is a building block to your financial fortress.
Thomas McKeon, MBA, Pharmaceutical Representative, Philadelphia, Pennsylvania

An excellent resource … this textbook is written in a manner that provides physician practice owners with a comprehensive guide to financial planning and related topics for their professional practice in a way that is easily comprehended. The style in which it breaks down the intricacies of the current physician practice landscape makes it a ‘must-read’ for those physicians (and their advisors) practicing in the volatile era of healthcare reform.
—Robert James Cimasi, MHA ASA FRICS MCBA CVA CM&AA CMP™, CEO-Health Capital Consultants, LLC, St. Louis, Missouri

Rarely can one find a full compendium of information within a single source or text, but this book communicates the new financial realities we are forced to confront; it is full of opportunities for minimizing tax liability and maximizing income potential. We’re recommending it to all our medical practice management clients across the entire healthcare spectrum.
Alan Guinn, The Guinn Consultancy Group, Inc., Cookeville, Tennessee

Dr. David Edward Marcinko MBA CMP™ and his team take a seemingly endless stream of disparate concepts and integrate them into a simple, straightforward, and understandable path to success. And, he codifies them all into a step-by-step algorithm to more efficient investing, risk management, taxation, and enhanced retirement planning for doctors and nurses. His text is a vital read—and must execute—book for all healthcare professionals and physician-focused financial advisors.
Dr. O. Kent Mercado, JD, Private Practitioner and Attorney, Naperville, Illinois

Kudos. The editors and contributing authors have compiled the most comprehensive reference book for the medical community that has ever been attempted. As you review the chapters of interest and hone in on the most important concerns you may have, realize that the best minds have been harvested for you to plan well… Live well.
Martha J. Schilling; AAMS® CRPC® ETSC CSA, Shilling Group Advisors, LLC, Philadelphia, Pennsylvania

I recommend this book to any physician or medical professional that desires an honest no-sales approach to understanding the financial planning and investing world. It is worthwhile to any financial advisor interested in this space, as well.
David K. Luke, MIM MS-PFP CMP™, Net Worth Advisory Group, Sandy, Utah

Although not a substitute for a formal business education, this book will help physicians navigate effectively through the hurdles of day-to-day financial decisions with the help of an accountant, financial and legal advisor. I highly recommend it and commend Dr. Marcinko and the Institute of Medical Business Advisors, Inc. on a job well done.
Ken Yeung MBA CMP™, Tseung Kwan O Hospital, Hong Kong

I’ve seen many ghost-written handbooks, paperbacks, and vanity-published manuals on this topic throughout my career in mental healthcare. Most were poorly written, opinionated, and cheaply produced self-aggrandizing marketing drivel for those agents selling commission-based financial products and expensive advisory services. So, I was pleasantly surprised with this comprehensive peer-reviewed academic textbook, complete with citations, case examples, and real-life integrated strategies by and for medical professionals. Although a bit late for my career, I recommend it highly to all my younger colleagues … It’s credibility and specificity stand alone.
Dr. Clarice Montgomery PhD MA,Retired Clinical Psychologist

In an industry known for one-size-fits-all templates and massively customized books, products, advice, and services, the extreme healthcare specificity of this text is both refreshing and comprehensive.
Dr. James Joseph Bartley, Columbus, Georgia

My brother was my office administrator and accountant. We both feel this is the most comprehensive textbook available on financial planning for healthcare providers.
Dr. Anthony Robert Naruska DC,Winter Park, Florida

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Establishing Your Medical Practice’s Fair Market Value

Part One of Medical Practice Valuation

Product Details

By Dr. David Edward Marcinko, MBA, CMP

www.CertifiedMedicalPlanner.org

In recent years, the physician practice market has experienced a noticeable increase in practice merging and acquisitions. Medicalpractices are being acquired by health systems in anticipation of Accountable Care Organization (ACO) delivery models.

For physicians, the decision to buy, sell, or merge a medical practice is more complicated than ever, and determining a medical practice’s worth is crucial to this process. Over the next two months, we’ll review the why, when, and how of the contemporary medical practice valuation.

Value Isn’t an Absolute Number

A medical practice’s tangible and intangible assets can be grouped into two broad categories:

  • Physical assets: Examples are real estate, medical records, leaseholds, medical equipment and furnishings, and accounts receivable (A/R).
  • Non-physical assets: These include goodwill, restrictive covenants, buy/sell agreements, managed care contracts, and an assembled workforce.

Estimates of value differ markedly, depending on the purpose of the appraisal, the acumen of the appraiser, etc. To help determine the value, some important questions to consider are:

  • What is the value of the practice for purchase or sale?
  • What is the value of a practice for merger?
  • What is the value of practice assets for joint venture with a corporate partner?
  • What is the value to establish buy-in or buy-out arrangements for partners?
  • What is the value of practice assets for purchase or sale, apart from ongoing operations?

To answer these questions, physicians (buyers and sellers) must understand how practices are valuated—beginning with the following informal, and then more formal, definitions:

Informal Terms of Valuation

  • The “asking price” is often arbitrary and difficult to substantiate, and typically is reduced 25-50 percent after negotiations.
  • The “creative price” is derived by way of creative financing. For example, the practice may provide the down payment.
  • The “emotional price” may involve either a motivated buyer or seller, who pays an under- or overinflated price for the practice.
  • The “friendly price” is reserved for associates, partners, or other colleagues.
  • The “realistic price” is one that both buyer and seller believe is fair.

Formal Terms of Valuation

  • Most appraisers use “fair market value” (FMV) as the standard to derive a reasonable value for a practice. FMV means an arm’s length transaction between an unpressured, informed buyer and an unpressured, informed seller.
  • The “business enterprise value” of a practice equals a combination of all assets (tangible and intangible), and the working capital, of a continuing business.
  • The value of “owner’s equity” equals the combined values of all practice assets (tangible and intangible), less all practice liabilities (booked and contingent).
  • The “working capital value” equals the excess of current assets (cash, A/R, supplies, inventory, prepaid expenses, etc.) over current liabilities (accounts payable, accrued liabilities, etc.).

Realizing that there is no absolute sales price is the essence of FMV. When determining valuation, look for a price range with a reasonable floor and ceiling.

Understand The Lingo

If you are a practice buyer or seller, make sure you understand terms and appraisal definitions.

That’s a lesson George Farmer, a primary care physician inFlorida, learned the hard way. He asked his accountant to appraise his business. When he was ready to sell, his attorney (who also happens to be his brother-in-law) drew up the sales contract. Farmer was pleased that the practice sold quickly for its full asking price.

What he didn’t know (but would discover) is that accounting or “book” value—the figure his accountant gave him—is far different than the FMV that he could have received.

Was the CPA wrong? Not really. Was the doctor incorrect? No. But each was operating under a different set of terms and definitions, without knowledge of each other’s perspectives.

How to Begin Valuation

The following steps should occur before the practice appraisal process begins:

  • Retain an appraiser (for each side) who understands the changing health care industry.
  • Aggregate historic practice business information and consolidated financial statements, operating statistics, payer mix, CPT® utilization, acuity rates, etc.
  • Eliminate one-time, non-recurring expenses, adjusted or normalized for excessive or below normal expenses.
  • Understand key assumptions used in financial projections.

To determine value, appraisers should follow the American Society of Appraisers’ Principles of Appraisal Practice and Code of Ethics. The IRS issued guidelines in 1995 further suggesting that appraisers use the general methods of the Uniform Standards of Professional Appraisal Practices (USPAP), which recognize three approaches to medical practice valuation.

1. Income Methods

There are two methods to value a practice by income:

(a) Capitalization Method: The excess earnings or capitalization method estimates value by dividing normalized historical or current income by an appropriate rate of return for the buyer. This method does not require assumptions.

(b) Discounted Method: Discounted Cash Flow (DCF): Analysis requires assumptions to estimate practice value by discounting future net cash flows to their present worth based on market rates of return required by an investor. Understanding the key assumptions produces a meaningful estimate of practice value. These assumptions may include:

  • projections of future practice revenue, productivity, reimbursement trends, and shifts in payer mix
  • projections of practice cost structures and projected physician compensation
  • after-tax practice cash flows
  • reinvestments to replace equipment or other assets
  • residual practice value at the end of the forecast period
  • discount rate based on the practice specific weighted average cost of capital
  • practice efficiencies, operations, and competitive market conditions

The DCF analysis consistently produces higher values than other methods of estimating practice value because there may be supportable reasons to forecast improvements in future practice performance.

2. Marketplace Multiples

Market transaction multiples are ratios developed by correlating actual practice sale prices to key practice performance measurements. Common multiples include comparisons of sale price to revenue, sale price to earnings before interest and taxes (EBIT), sale price to earnings before interest, taxes, and depreciation allowance (EBITDA), gross revenue, net revenue, and the sale price to number of physicians.

Market transaction multiples are typically limited to serving as a benchmark for testing the reasonableness of the other approaches. They are becoming less common and less useful.

3. Cost Approach

The cost approach calls for identification and separate valuation of all the practice assets, including goodwill, depreciated over 15 years.

The cost approach is more labor intensive than using the enterprise analysis to estimate practice value; especially for a new practice, which typically includes the expenses to acquire space, office furnishings, equipment, marketing, advertising, staff development, and losses incurred during the startup period. This estimate of “replacement cost or cost avoidance” value represents an upper limit (or ceiling) of value, and generally is not considered useful in estimating the value of an established medical practice.

Net Income Statement Adjustments

When analyzing a set of financial statements to determine practice value, adjustments (normalizations) generally are needed to produce a clearer picture of likely future income and distributable cash flow. It also allows more of an “apples to apples” line item comparison. This normalization process usually consists of making three main adjustments to a medical practice’s net income (profit and loss) statement.

1. Non-Recurring Items: Estimates of future distributable cash flow should exclude non-recurring items. Proceeds from the settlement of litigation, one-time gains/losses from the selling of assets or equipment, and large write-offs that are not expected to reoccur, each represent potential nonrecurring items. The impact of nonrecurring events should be removed from the practice’s financial statements to produce a clearer picture of likely future income and cash flow.

2. Perquisites: The buyer of a medical practice may plan to spend more or less than the current doctor-owner for physician executive compensation, travel and entertainment expenses, and other perquisites of current management. When determining future distributable cash flow, income adjustments to the current level of expenditures should be made for these items.

3. Non-cash Expenses: Depreciation expense, amortization expense, and bad debt expense are all non-cash items which impact reported profitability. When determining distributable cash flow, you must analyze the link between non-cash expenses and expected cash expenditures.

The annual depreciation expense is a proxy for likely capital expenditures over time. When capital expenditures and depreciation are not similar over time, an adjustment to expected cash flow is necessary.

Some practices reduce income through the use of bad debt expense rather than direct write-offs. Bad debt expense is a non-cash expense that represents an estimate of the dollar volume of write-offs that are likely to occur during a year. If bad debt expense is understated, practice profitability will be overstated.

Balance Sheet Adjustments

Adjustments also can be made to a practice’s balance sheet to remove non-operating assets and liabilities, and to restate asset and liability value at market rates (rather than cost rates).

Assets and liabilities that are unrelated to the core practice being valued should be added to or subtracted from the value, depending on whether they are acquired by the buyer. Examples include the asset value less outstanding debt of a vacant parcel of land, and marketable securities that are not needed to operate the practice. Other non-operating assets, such as the cash surrender value of officer life insurance, generally are liquidated by the seller and are not part of the business transaction.

Assessment

With a basic understanding of practice valuation and the steps involved, buyers and sellers will be better prepared for next steps. So, next time in Part 2, we will discuss the art of the deal, and how to structure the practice sale.

Conclusion

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

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

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

AdditionalReading:

Cimasi, Robert James: Valuation of Hospital in a Changing Reimbursement and Regulatory Environment. In,Marcinko,DE(Editor): Healthcare Organizations (Financial Management Strategies). Institute of Medical Business Advisors Inc.,Atlanta,Ga., 2011

Marcinko,DE: “Getting it Right,” How Much is a Plastic Surgery Practice Really worth? Plastic Surgery Products, August 2006.

Marcinko,DEand Hetico, HR: The Business of Medical Practice (third edition). Springer Publishing,New York,N.Y., 2011.

Marcinko,DEand Hetico; HR: Risk Management and Insurance Planning for Physicians and Advisors, Jones andBartlettPublishers,Sudbury,Mass., 2007.

Marcinko,DEand Hetico; HR: Financial Planning for Physicians and Advisors, Jones andBartlettPublishers,Sudbury,Mass., 2007.

Marcinko,DEand Hetico, HR: Dictionary of Health Insurance and Managed Care, Springer Publishing,New York,N.Y., 2007.

Marcinko,DEand Hetico, HR: Dictionary of Health Economics and Finance, Springer Publishing,New York,N.Y., 2007.

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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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INDUSTRY STATURE: Certified Medical Planner®

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OUR OEUVRE’ OF TEXT BOOKS IS GROWING WITH OUR INDUSTRY STATURE

We believe that by writing and sharing our experiences in standard textbook, white-paper and new media electronic format, our experts are able to address most areas of physician-focused financial planning, business or medical practice management needs in an understandable and unbiased manner.

But, we recognize that some consultants and financial advisors may appreciate reading current medical business management theory, healthcare economics, technology or financial planning information privately, prior to becoming a Certified Medical Planner® professional.

However, there is a virtual information overload out there, little of which addresses the pragmatic concerns of the modern medical provider or healthcare industry. None imparts the wisdom to become a better financial advisor or medical management consultant. All motivate the purchase of products.

Therefore, as part of the iMBA Research Library for the Certified Medical Planner® program, we highly recommend the following in-house produced books. You may even recognize some of our nationally known contributing authors and CMPs®.

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

TEXT BOOKS AND HAND BOOKS

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FAs & CPAs Wanted -BUT- Certified Medical Planners® Needed?

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Career Development, Products and Services for Medical Specificity

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FINANCIAL ADVISER WANTED: New York’s Belfer family, which gained riches from oil, is racking up quite an investing losing streak. They lost billions in Enron’s collapse and were clients of Bernie Madoff, and now it’s come to light that they were shareholders in FTX.

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CPAs WANTED: Just as tax season kicks off, US firms are facing a national shortage of accountants, forcing them to look overseas for workers to look over your W-2. More than 300k accountants and auditors have quit in the last two years, per the WSJ.

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CMPs NEEDED: The Certified Medical Planner® program was created in response to the frustration felt by doctors in small and mid-sized practices that dealt with top financial, brokerage and accounting firms. These non-fiduciary behemoths often prescribed costly wholesale solutions that were applicable to all, but customized to few, despite ever changing needs.

Enter the CMPs

Learn why brokerage sales-pitches and/or internet resources will never replace the knowledge and deep advice of a collegial Certified Medical Planner® professional.

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Alphabet Soup: Financial Designations & Certificates

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financial-designationsjuly

AUTHOR: Dr. David Edward Marcinko; MBA, CMP™

POSITION: Publisher-in-Chief

dem26

TOPIC: Financial Designations and Certifications [Alphabet Soup of Industry Obfuscation and Self-Promotion, or Real Gravitas – You Decide?]

EXCERPT: “Until recently, most financial advisors were regulated by the NASD, the National Association of Securities Dealers. Now the Financial Industry Regulatory Authority or FINRA is the largest non-governmental regulator for all securities firms doing business in the United States. It is a self-regulatory agency comprised of the nation’s brokerage firms. Upon completion of a required exam the FINRA will issue a variety of licenses. The most common are the Series 6, 7, and 24.

The Series 6 is essentially a license to sell packaged products, namely mutual funds. It is most commonly held by insurance agents and bank representatives. It is considered a very easy test. Holding such a license allows the holder to collect commission income through its member firm.

The Series 7 exam is a bit more difficult and includes issues relating to individual securities such as stocks, bonds and limited partnership interests. The pass rate is lower than the Series 6. The probable culprit is the extensive questioning on margin and options, topics most are unfamiliar with prior to entering the securities business.

The Series 24 covers issues of compliance and supervision and is required of Branch Managers of brokerage firms. All registered representatives (the proper name for a broker) must be supervised by someone with a Series 24, also known as a principal’s license.

Checking the background of a registered representative, a branch manager or a member firm is easily done through NASD and/or FINRA Regulation, Inc. NASDR/FINRA maintains the Central Registration Depository (CRD). The CRD can be checked for a description of a disclosed event by phone or by Internet. One should request information on an advisor’s firm as well as the individual. A reputable advisor at a disreputable firm has its own set of potentially dangerous implications.

Regardless of the above, these tests produce licenses to sell financial products. They are not educational achievements. There is virtually no academic barrier to entry for them. Stock-brokers today – hate the term – and prefer “financial advisor”; yet the term has no real meaning other than as a sales license.

Some are college graduates, and beyond; while some other experts argue that too many are not!”

Hence, the need to “raise the bar to fiduciary accountability with deep knowledge of healthcare modernity.”

For more info: http://www.CertifiedMedicalPlanner.org

READ JULY HERE: financial-designationsjuly

Conclusion

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

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

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REAL ESTATE Investing for Physicians

SOME GUIDELINES FOR COLLEAGUES

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By Dr. David Edward Marcinko MBA CMP®

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According to Rick Kahler MS CFP® ChFC CCIM [www.KahlerFinancial.com] real estate is one of the largest asset classes in the world. The family home is the largest asset many middle-class Americans own. And, real estate makes up a significant portion of the net worth of many wealth accumulators. Directly owning real estate is not an investment for the faint of heart, the armchair investor, or the uneducated. Most wealth accumulators would do well to leave direct ownership of real estate to the pros and invest in real estate investment trusts (REITs) instead [personal communication].

Still, as we have seen, the lure of investing in a tangible asset like real estate is enticing for high risk tolerant physician-investors who need a sense of control and interaction with their investments. If you are among them, here are a few guidelines that may keep you on a profitable path.

1. Don’t attempt to purchase investment real estate without the help of a commercial real estate specialist who is a fiduciary bound to look out for your best interest. Engage a Certified Commercial Investment Member (CCIM) with years of training and experience in analyzing and acquiring investment real estate. To find a CCIM near you, go to http://www.ccim.com.

2. You will sign a disclosure agreement that will tell you who the Realtor represents. Be sure the Realtor you engage represents you and not the seller, both parties, or neither party.

3. Never trust the income and expense data provided by the seller’s Realtor. While a seller represented by a CCIM will have a greater chance of supplying you with accurate data, most will significantly understate expenses and overstate the capitalization rate. Selling Realtors often understate the average annual cost of repairs and maintenance. I estimate this annual expense at 10%.

4. Another often understated expense is management. Many owners manage their own properties, so the selling broker doesn’t include an estimate for management expenses. They should. Real estate doesn’t manage itself, ever. You will either need to hire professional management or do your own management (always a scary proposition). Even if you do it yourself, you have an opportunity cost of your time, so you must include a management fee in the expenses. Most small residential apartments and single-family homes will pay 10% of their rents to a manager.

5. You must verify all the costs presented to you by the seller’s Realtor. Demand copies of at least the last three and preferably five years of tax returns. Research items like utility bills, property taxes, legal fees, insurance costs and repairs, maintenance costs, replacement reserves, tax preparation and all management fees. As a rule of thumb, expenses will average 40% of rental income on average-aged properties where the tenants pay all utilities except water. Newer properties may have expenses as low as 35%, while older properties can be as high as 50%.

6. By subtracting the vacancy rate and stabilized expenses from the rent, you will find the net operating income. This is the income you will put in your pocket—assuming the property is paid for. By dividing the net operating income by the purchase price, you will find the return you will receive on your investment, called the capitalization or “cap” rate. In Rapid City SD, for example, the cap rate tends to be 4% for single-family homes, 5% to 8% for duplexes to eight-plexes, and 8% to 12% for larger residential and commercial properties.

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

ASSESSMENT: Yes, physician-investors and all of us can build wealth with real estate. You just need to educate yourself, work hard, start conservatively, think long-term, and be prepared for lean years. This is not a quick or easy path to riches.

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The FIDUCIARY OATH for “Financial Advisors”

“Will you sign a fiduciary oath?”

PHYSICIAN COLLEAGUES AND MEDICAL PROFESSIONALS ASK

By Dr. David Edward Marcinko MBA CMP®

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“SIGN IT -OR- FORGET IT”

Asking a “Financial Advisor” if they’re a fiduciary isn’t always enough to hire them. People can “ice skate” around that terminology and give fuzzy or unclear answers to that question. Instead, you may consider asking them to sign a fiduciary oath.

“If someone is fee-only, not “fee-based”, they shouldn’t have a problem signing a document stating how they get compensated.” “If someone is, for example, a broker dealer, insurance agent or investment advisor who works on commissions, they probably wouldn’t be allowed to sign it.” Just say NO to contract arbitration clauses, too! As well as “Dual Registration.” Remember Bernie Lawrence Madoff.

THE FIDUCIARY OATH

This one-page document outlines five fiduciary principles a financial adviser must follow to put the client’s interests ahead of their own. They include acting with prudence, not misleading the client, avoiding conflicts of interest, and disclosing and managing unavoidable conflicts.

The oath, meant to be printed out and signed by an adviser, has been around for several years. But recent events, such as the 5th Circuit Court of Appeals striking down the DOL rule, have increased the urgency to get it into circulation.

“With the 5th Circuit ruling, it is just so important to have this oath out there because it states fiduciary principles,” said Ms. P. Houlihan, president of Houlihan Financial Resource Group. “The oath is the answer, given that the DOL rule is gone.”

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What is a CENTRAL BANK DIGITAL CURRENCY?

By Staff Reporters

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DEFINITION: A CBDC is a digital form of central bank money that is widely available to the general public.

CITE: https://www.r2library.com/Resource/Title/082610254

“Central bank money” refers to money that is a liability of the central bank. In the United States, there are currently two types of central bank money: physical currency issued by the Federal Reserve and digital balances held by commercial banks at the Federal Reserve.

While Americans have long held money predominantly in digital form—for example in bank accounts, payment apps or through online transactions—a CBDC would differ from existing digital money available to the general public because a CBDC would be a liability of the Federal Reserve, not of a commercial bank.

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VALUE STOCKS: Now Seeking Bargains?

Dr. David Edward Marcinko MBA CMP

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The bargain-hunting value style is looking for shares that are under priced in relation to the company’s future potential. A value investor will invest in a company in the expectation that its shares will increase in value over time. Value investing is based essentially on quantitative criteria; asset values, cash flow, and discounted future earnings. The key properties of value shares are low Price/Earnings, Price/Sales ratios, and normally higher dividend yields. 

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No Christmas Rally this year!

So, on observing a company’s earnings growth, a value manager will decide whether to buy shares based on the company’s consistency or recovery prospects. The key research questions are: 1) Does the current P/E ratio warrant an investment in a slow growth company or, 2) Is the company a higher growth candidate that has dropped in price due to a temporary problem.  If this is the case, will the company’s earnings growth recover, and if so, when? The key to value investing is to find bargain shares (priced low historically or for temporary and/or irrational reasons), avoiding shares that are merely cheap (priced low because the company is failing).

The buying opportunity is identified when a company undergoing some immediate problems is perceived to have good chances of recovery in the medium to long term.  If there is a loss in market confidence in the company, the share price may fall, and the value investor can step in. Once the share price has achieved a suitable value, reflecting the predicted turnaround in company performance, the shareholding is sold, realizing a capital gain. A potential risk in value investing is that the company may not turn around, in which case the share price may stay static or fall.

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What is an ADR / SPDR Receipt?

AMERICAN DEPOSITORY RECEIPTS AND S&P RECEIPTS

By Dr. David E. Marcinko MBA CMP®

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AMERICAN DEPOSITORY RECEIPT (ADR) = A receipt evidencing shares of a foreign corporation held on deposit or under the control of a U. S. banking institution; it is used to facilitate transactions and expedite transfer of beneficial ownership for a foreign security in the U.S. Everything is done in dollars and the ADR holder doesn’t have voting rights; essentially the same as an American Depository Share (ADS).

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

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A Standard & Poor’s Depositary Receipt, or SPDR, is a type of exchange traded fund that began trading on the American Stock Exchange (AMEX) in 1993 when State Street Global Advisors’ investment management group first issued shares of the SPDR 500 Trust (SPY).

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How Stock-Brokers Execute Trades

What Every Physician-Investor Should Know

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And … Why Trade Execution Isn’t Instantaneous!

By Dr. Gary L. Bode MSA CPA CMP [Hon]; PC

Dr. Gary Bode; CPA, MSA, CMP

Many physician investors who trade through online brokerage accounts assume they have a direct connection to the securities markets.

But, they don’t. When you press “enter,” your order is sent over the Internet to your broker – who in turn decides which market to send it to for execution. A similar process occurs when you call your broker to place a trade.

While trade execution is usually seamless and quick, it does take time. And prices can change quickly, especially in fast-moving markets. Because price quotes are only for a specific number of shares, MD investors may not always receive the price they saw on their screen or the price their broker quoted over the phone. By the time your order reaches the market, the price of the stock could be slightly – or very – different.

Note: No SEC regulations require a trade to be executed within a set period of time. But if firms advertise their speed of execution, they must not exaggerate or fail to tell investors about the possibility of significant delays.

Tip: To avoid buying or selling a stock at a price higher or lower than you wanted, place a limit order rather than a market order. A limit order is an order to buy or sell a security at a specific price. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. When you place a market order, you can’t control the price at which your order will be filled.

Example: You want to buy the stock of a “hot” IPO that was initially offered at $9, but don’t want to end up paying more than $20 for the stock. Place a limit order to buy the stock at any price up to $20. By entering a limit order rather than a market order, you will not be caught buying the stock at $90 and then suffering immediate losses as the stock drops later in the day or the weeks ahead.

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Caution: Your limit order may never be executed because the market price may quickly surpass your limit before your order can be filled. But by using a limit order you also protect yourself from buying the stock at too high a price. 

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ABOUT

Dr. Gary L. Bode was Chief Executive Officer of Comprehensive Practice Accounting, Inc., a firm specializing in providing tax solutions to medical professionals. Originally, he was a board certified podiatrist and managing partner of a multi-office medical practice for a decade before earning his Master of Science degree in Accounting from the University of North Carolina. He then served as Chief Financial Officer [CFO] for a private mental healthcare facility. Today, Dr. Bode is a nationally known Certified Public Accountant, financial author, educator, and speaker. 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. He has been quoted in Newsweek.

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BOOK REVIEW

It is not uncommon for practicing physicians to have more than a dozen separate insurance policies to protect their medical practice and personal assets. Yet, most doctors understand very little about their policies.BOOK REVIR

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™explains to physicians and insurance professionals the background, theory, and practicalities of medical risk management, asset protection methods, and insurance planning.

The book presents information in a manner that is convenient and highly useful for busy medical practitioners. It discusses the medical records revolution and addresses concerns regarding cloud computing, data security, and technological threats.

The book covers modern health law and policy, including fraud and abuse, workplace-violence, Medicare compliance, HIPAA regulations, AR protection strategies with internal controls, P4P and value based care, insurance and reputation management, and how the ARA legislation is impacting physician practices. It also includes case models and examples that provide you with a real-world understanding of how to recognize and reduce personal and medical practice risks.

With time at a premium for all, and so much information packed into one well-organized resource, this book is a must-read for every physician and financial advisor that serves the health care sector. The book will help physicians make better decisions about the risks they face and will help financial advisors improve the value they provide to their clients who are doctors.

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Musings on a Famous Portfolio Asset Allocation Study

Some Critics Claim Brinson, Hood, and Beebower Conclusions Wrong

[By Dr. David Edward Marcinko MBA CMP™]

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Frequently, we hear the axiom that asset allocation is the most important investment decision, explaining 93.6% of portfolio returns. The presumption has been that once the risk tolerance and time horizon have been established, investing is simply a matter of implementing a fixed mix of stocks, bonds, and cash using mutual funds selected for this purpose. This axiom is based on a famous study by Brinson, Hood, and Beebower (BHB) published in the Financial Analysts Journal in July/August 1986. It is the stuff of most modern business school and graduate students in economics and finance.

Enter the Critics

One critic claims that BHB’s conclusions and the interpretation of their conclusions are wrong, stating that because of several methodological problems, BHB needed to make certain assumptions for their analysis to go forward. They assumed that the average asset-class weights for the 10-year period studied are the same as the actual normal policy weights; that investments in foreign stocks, real estate, private placements, and venture capital can be proxied by a mix of stocks, bonds, and cash; and that the benchmarks for stocks, bonds, and cash against which fund performance was measured are appropriate. The author believes that each of these assumptions can lead to a faulty measurement of success or failure at market timing and stock selection.

The Jahnke Study

William Jahnke claims that BHB erred in their focus on explaining the variation of quarterly portfolio returns rather than portfolio returns over the 10-year period studied. According to the study, asset allocation policy explains only a small fraction of the range of 10-year portfolio returns earned by the pension funds reported in the study. The author concluded that this discrepancy is caused by the effect of compounding returns. He adds that BHB were wrong to use variance of quarterly returns rather than the standard deviation. Use of standard deviation would reduce the often cited 93.6% to about 79%. Moreover, BHB did not consider the cost of investing, such as operating expenses, management fees, brokerage commissions, and other trading costs, which are more significant for individual investors than for the pension plans studied. Jahnke claims that excessive costs can reduce wealth accumulation by 50%.

Note: (“The Asset Allocation Hoax,” William W. Jahnke, Journal of Financial Planning, February 1997, Institute of Certified Financial Planners [303] 759-4900).

Assessment

Finally, the author takes issue with establishing long-term fixed asset class weights. Asset allocation should be a dynamic process. Higher equity return expectations should in turn produce larger equity allocations, other things being equal.

Certified Medical Planner

Conclusion

Are doctors different than the average investor noted in this essay?

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How to NAME Your New Medical Practice?

PRAGMATIC BUSINESS – NOT PERSONAL – MANAGEMENT ADVICE

By Dr. David E. Marcinko MBA CMP®

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THE MEDICAL PRACTICE NAME

Did you know that most experts recommend against naming a practice with your own name because it limits future growth and you may lose the benefits that a more descriptive name would bring?

Your business name will likely be incorporated using your practice’s name, although larger (multi-specialty group) practices may use a more general name for the entire enterprise; and then having multiple “dba’s” (”Doing Business As”) for the individual practices under the umbrella. It is important to discuss these options with an attorney if you believe this arrangement has advantage; others find it confusing.

Healthcare Marketing: How to Name Your Medical Practice - The Medically

Usually, your medical specialty can be used as a base-name, and then some descriptor to differentiate it from local competing practices. Selecting a name like “The Allegiance Partners” does not indicate that medicine is your service. On the other hand, naming your practice “Podiatry Associates of Your Town” won’t be helpful to patients looking for you in the yellow pages, health insurance provider network list, or internet search engines, and finding your practice listed just before “Your Town Podiatry Partners”. It is therefore good to be cognizant of your competitors’ names when choosing your own. And, you should select a name that will hopefully grow with you into a larger enterprise.

For example, are you a solo doctor, but are pretty sure you’ll take on one or more partners in the future? Then besides not naming your practice after yourself, you may choose to add “Group” or “Partners” to your name initially even if you’re the only doctor. Is there any possibility you’ll open a second office in another town? Naming your medical practice something like the ”Apple Street Internal Medicine Group” may not make sense when your second office is opened on Main Street in a nearby city, in a few years.

Order Forms and Practice Stationary

Orders forms, invoices, purchase and estimate forms, business cards, envelopes, stationary and specialty labels can all be personalized for your medical practice name, script, colors and logo. Often, local or regional printers are the most cost effective and you support another entrepreneur, as well.

Well-know internet companies that print stationary are: www.nebs.com; www.paperdirect.com; and www.vistaprint.com

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Preferred VERSUS Common Stock?

Is there a Difference?

What is the Difference?

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By Dr. David Edward Marcinko MBA CMP®

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A common stock is the least senior of securities issued by a company. 

A preferred stock, in contrast, is slightly more senior to common stock, since dividends owed to the preferred stockholders should be paid before distributions are made to common stockholders. 

However, distributions to preferred stockholders are limited to the level outlined in the preferred stock agreement (i.e., the stated dividend payments).  Like a fixed income security, preferred stocks have a specific periodic payment that is either a fixed dollar amount or an amount adjusted based upon short-term market interest rates. 

However, unlike fixed income securities, preferred stocks typically do not have a specific maturity date and preferred stock dividend payments are made from the corporation’s after tax income rather than its pre-tax income.  Likewise, dividends paid to preferred stockholders are considered income distributions to the company’s equity owners rather than creditors, so the issuing corporation does not have the same requirement to make dividend distributions to preferred stockholders. 

So, preferred stock is generally referred to as a “hybrid” security, since it has elements similar to both fixed income securities (i.e., a stated periodic payments) and equity securities (i.e., shareholders are considered owners of the issuing company rather than creditors). 

Convertible preferred stocks (and convertible corporate bonds) are also considered hybrid securities since they have both equity and fixed income characteristics.   A convertible security whether a preferred stock or a corporate bond, generally includes a provision that allow the security to be exchanged for a given number of common stock shares in the issuing corporation. The holder of a convertible security essentially owns both the preferred stock (or the corporate bond) and an option to exchange the preferred stock (or corporate bond) for shares of common stock in the company. 

ASSESSMENT: Thus, at times the convertible security may behave more like the issuing company’s common stock than it does the issuing company’s preferred stock (or corporate bonds), depending upon how close the common stock’s market price is to the designated conversion price of the convertible security.

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

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The MEDICAL EXECUTIVE-POST [Join Us]

By Staff Reporters

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Over Heard in the DOCTOR’S LOUNGE

On “Hard Working” HMO Physicians

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By Dr. David E. Marcinko MBA CMP®

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One of my favorite patients told me this anecdote as he recalled the story of the old man who spent a day watching his physician son treating HMO patients in the office. 

The doctor had been working at his usual feverish pace all morning, and although he was working hard, bitterly complained to his dad that he was not making as much money as he used to.

Finally, the old man interrupted him and said,

“Son, why don’t you just treat the sick patients?” 

The doctor-son looked annoyed at his father, and responded,

“Dad, can’t you see, I don’t have time to treat just the sick ones.”

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FINANCE: https://www.amazon.com/Comprehensive-Financial-Planning-Strategies-Advisors/dp/1482240289/ref=sr_1_1?ie=UTF8&qid=1418580820&sr=8-1&keywords=david+marcinko

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BUSINESS: https://www.amazon.com/Business-Medical-Practice-Transformational-Doctors/dp/0826105750/ref=sr_1_9?ie=UTF8&qid=1448163039&sr=8-9&keywords=david+marcinko

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Wither DROP-IN Group Medical Appointments?

THE RE-EMERGING RE-VOLUTION!

By Dr. David Edward Marcinko MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

HISTORY

DIGMAs (Drop-In Group Medical Appointments) are medical office appointments with a patient’s physician that take place in a supportive group setting. The model, developed in 1996 by Kaiser Permanente psychologist Dr. Ed Noffsinger, is a combination of an extended medical appointment with the patient’s own physician and effective group learning and support.

The group consists of the physician, a behavioral health professional, and patients from the physician’s panel. DIGMAs are best suited for routine appointments. Unfortunately, the nascent concept was met with mockery and great derision after the PP-ACA era.

PRANKSTERS: https://medicalexecutivepost.com/2016/01/31/group-drop-in-doctor-visits-evolving/

Today, after the pandemic and with the rise of tel-health and tele-medicine, Shared Medical Appointments (SMAs), also known as Group Medical Visits [GMVs], are again a growing topic of discussion among providers and health economists, looking for ways to increase access to care and improve efficiency. The group visit format is also getting more attention in recent years as a strategy to add value for the patient. They typically involve up to a dozen patients or so and offer various efficiencies as well as benefits of shared discussion and experiences.

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Behavioral Changes

Moreover, physicians and medical providers know that simply telling patients what to do often does not improve their health. The basic premise of DIGMAs, SMAs and GMVs is to build more patient engagement and inspire lasting behavior change by offering patients the opportunity to share their personal experiences not only with their provider but also with other patients dealing with similar issues.

NEWER REALITY: https://www.hqontario.ca/Portals/0/Documents/qi/learningcommunity/Roadmap%20Resources/Advanced%20Access%20and%20Efficiency/Step%205/pc-nha-group-medical-appointments-manual-en.pdf#:~:text=DIGMAs%20%28Drop-In%20Group%20Medical%20Appointments%29%20are%20medical%20appointments,that%20take%20place%20in%20a%20supportive%20group%20setting.

BILLING: https://www.aafp.org/family-physician/practice-and-career/getting-paid/coding/group-visits.html

QUERY: Might this be an approach for tele-health visits as well as rural healthcare, etc.

ASSESSMENT: Your thoughts are comments are appreciated.

Product Details

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What is a Financial CDO and CMO?

Collateralized Debt Obligations

versus

COLLATERALIZED MORTGAGE OBLIGATIONS

https://healthcarefinancials.files.wordpress.com/2018/06/david-edward-marcinko.png

BY DR. DAVID E. MARCINKO MBA CMP®

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A collateralized debt obligation (CDO) is a type of structured asset-backed security (ABS). Originally developed as instruments for the corporate debt markets, after 2002 CDOs became vehicles for refinancing mortgage-backed securities (MBS).

Like other private label securities backed by assets, a CDO can be thought of as a promise to pay investors in a prescribed sequence, based on the cash flow the CDO collects from the pool of bonds or other assets it owns. Distinctively, CDO credit risk is typically assessed based on a probability of default (PD) derived from ratings on those bonds or assets.

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

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Collateralized Debt Obligation (CDO) - Assignment Point

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Collateralized Mortgage Obligation

A CMO is a debt security backed by mortgages. These mortgage pools are usually separated into different maturity classes called tranches (from the French word for “slice”). The securities were issued by private issuers, as well as the Federal Home Loan Mortgage Corporation (Freddie Mac). As the mortgages were usually government-guaranteed, CMOs usually carried AAA ratings until their current financial meltdown. The early versions of CMOs were known as “plain vanilla,” but recent developments gave us PACs (planned amortization certificates) and TACs (targeted amortization certificates); among too many others. They were all variations on how principal repayments in advance of maturity date were treated.

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

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CMO vs CDO | What is the difference between them? - Fintelligents

RELATED: https://medicalexecutivepost.com/2011/07/06/merrill-lynch-investigated-for-cdo-deal-involving-magnetar/

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

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About the Richard Feynman Learning Technique

What it is – How it works?

[By staff reporters]

I’ve taught at the undergraduate, graduate, business and medical school levels. And, I’ve used and modified the Feynman technique at every level.

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Learning From the Richard Feynman Technique

  1. Identify the subject. Write down everything you know about the topic.
  2. Teach it to a child. If you can teach a concept to a child, you’re way ahead of the game.
  3. Identify your knowledge gaps. This is the point where the real learning happens.
  4. Organize + simplify + Tell a story. Start to tell your story.

VIDEO: https://collegeinfogeek.com/feynman-technique/

Assessment: Some time the Feynman Technique even reminds me of the 70-20-10 Leadership Model.

LINK: https://medicalexecutivepost.com/2018/05/18/what-is-the-70-20-10-leadership-model/

Conclusion: Your thoughts are appreciated.

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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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Invite Dr. Marcinko

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What is E-Learning?

What it is – How it works?

[By Staff Reporters]

Invite Dr. Marcinko

Live Interactive iMBA Education

Electronic Classes can require intense interaction between live faculty members and adult-learners, often more so than in many traditional on-ground courses; and most automated Computer Based Training (CBT) programs.

Students [adult learners] are typically expected to log-in and contribute three to five times each week. With this frequency of interaction, students and faculty all get to know one another, well. There are few opportunities for passivity.

In fact, in the iMBA CERTIFIED MEDICAL PLANNER™ program, students tend to interact with instructors much more than in traditional settings; thus promoting future peer-based discussions and real world applications.

Moreover, in the electronic iMBA classroom, everyone must write; particularly for the R&D loaded CERTIFIED MEDICAL PLANNER™ program. All assignments are typed, creating a permanent record of each person’s contribution. Faculty members find this promotes careful, reflective submissions from most students.

Additionally, instructors can easily monitor student progress and communicate with those who need help, or who have trouble keeping up. This is usually done privately by e-mail, fax or phone after certain online expectations have been clarified.

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More:

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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Become a CMP

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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

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

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

PODCAST: What is the “Diluted” Stock Effect?

WHAT IT IS – HOW IT WORKS

BY DR. DAVID E. MARCINKO MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

The lowering of the book or market value of the shares of a company’s stock as a result of more shares outstanding. A company’s initial registration may include more shares than are initially issued when the company goes public for the first time.

Later, an issue of more stock by a company (called a “primary offering,” distinguished from the “initial public offering”) dilutes the existing shares outstanding. 

Also, earnings-per-share calculations are said to be “fully diluted” when all common stock equivalents (convertible securities, rights, and warrants) are included. “Fully diluted” numbers are used in analysis when there is a likelihood of conversion or exercise of rights and warrants.

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

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How does dilution affect my shares? | Startupxplore Blog

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PODCAST: https://duckduckgo.com/?q=Dilutive%22+Stock&t=newext&atb=v275-2&iax=videos&ia=videos&iai=https%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3DtjQzJ7GY0GY

ASSESSMENT: Your thoughts are appreciated.

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

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

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OCTOBER: “Financial Planning” Month for Doctors

History for Us All

By Staff Reporters

http://www.CertifiedMedicalPlanner.org

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History of Financial Planning Month

Financial planning as a concept has been around for a long time, but not as we know it today. When Loren Dunton set up the Society for Financial Counseling Ethics in 1969, or when the first graduating class of the College of Financial Planning graduated in 1973, financial planning was very different. It was centered around selling limited partnerships, which came to end with the Tax Reform Act of 1986.

However, financial planning re-emerged — all thanks to Richard Averitt III. The certified financial planner gave new meaning to financial planning, this time with a focus on who the client is and what their needs are. This approach was purely methodological in nature.

Soon after, financial planning picked up again. According to the Certified Financial Planner (C.F.P.) Board of Standards in Denver, today, there are more than 94,000 C.F.P.s worldwide, including over 48,000 in the U.S. Additionally, there are also organizations that have been set up for C.F.P.s, such as the Financial Planning Association (FPA), which has approximately 22,000 members.

Financial planning, as we know it now, includes investing, tax planning, retirement planning, and basically other ways to get your finances in order and create mindful budgets to ensure a safe and secure future. Getting a step ahead of your spending and finances is beneficial in the long run and Financial Planning Month in October is the perfect time to do that.

MORE: https://medicalexecutivepost.com/2022/10/27/october-national-financial-planning-month/

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October is “Financial Planning” Month [Especially for Medical Professionals]

By Staff Reporters

SPONSOR: http://www.CertifiedMedicalPlanner.org

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U.S. Financial Planning Month is observed nationwide during October.

With the holiday season coming up (aka hefty gifting expenses) and the new year just around the corner, Financial Planning Month is a great opportunity to get your finances and budgets in order before life gets too busy.

CALL US TODAY TO GET STARTED: https://medicalexecutivepost.com/coach/

CALL FOR A SECOND OPINION: https://medicalexecutivepost.com/schedule-a-consultation/

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

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PODCAST: AMA to Teach Medical Students Health Economics?

AMA TO TEACH MEDICAL STUDENTS ABOUT HEALTH ECONOMICS?

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Courtesy: www.CertifiedMedicalPlanner.org

DICTIONARY: https://medicalexecutivepost.com/2009/06/08/dictionary-of-health-economics-and-finance/

Did you know that the American Medical Association is calling on medical schools and residency programs to include specific information about healthcare economics and financing in their curricula.

But, is health economics heterodoxic, or not? And; what about demand-derived economics in medicine?

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economic freedom

LINKS

ESSAY: https://medicalexecutivepost.com/2019/08/31/is-health-economics-heterodoxic-or-not/

ESSAY: https://www.modernhealthcare.com/education/ama-adopts-new-policy-training-physicians-healthcare-economics

MORE: https://medicalexecutivepost.com/2019/11/10/ricardian-derived-demand-economics-in-medicine/

MORE: https://medicalexecutivepost.com/2014/08/27/financial-and-health-economics-benchmarking/

MORE: https://healthcarefinancials.files.wordpress.com/2019/01/big-data.pdf

PODCAST: https://vimeo.com/ihe

Your thoughts are appreciated.

BUSINESS, FINANCE, INVESTING AND INSURANCE TEXTS FOR DOCTORS:

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What is GAAP?

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HOW IT WORKS

By Dr. David E. Marcinko MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

Generally Accepted Accounting Principles

As a new physician investor, it’s important to know the distinctions between like measurements because the market allows firms to advertise their numbers in ways not otherwise regulated. Often companies will publicize their numbers using either GAAP or non-GAAP measures. GAAP, or generally accepted accounting principles, outlines rules and conventions for reporting financial information. It is a means to standardize financial statements and ensure consistency in reporting.

When a company publicizes its earnings and includes non-GAAP figures, it means it wants to provide investors with an arguably more accurate depiction of the company’s health (for instance, by removing one-time items to smooth out earnings). However, the further a company deviates from GAAP standards, the more room is allocated for some creative accounting and manipulation.

When looking at a company that is publishing non-GAAP numbers, new physician investors should be wary of these pro forma statements, because they may differ greatly from what GAAP deems acceptable.

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

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The Core GAAP Principles

GAAP is set forth in 10 primary principles, as follows:

  1. Principle of consistency: This principle ensures that consistent standards are followed in financial reporting from period to period.
  2. Principle of permanent methods: Closely related to the previous principle is that of consistent procedures and practices being applied in accounting and financial reporting to allow comparison.
  3. Principle of non-compensation: This principle states that all aspects of an organization’s performance, whether positive or negative, are to be reported. In other words, it should not compensate (offset) a debt with an asset.
  4. Principle of prudence: All reporting of financial data is to be factual, reasonable, and not speculative.
  5. Principle of regularity: This principle means that all accountants are to consistently abide by the GAAP.
  6. Principle of sincerity: Accountants should perform and report with basic honesty and accuracy.
  7. Principle of good faith: Similar to the previous principle, this principle asserts that anyone involved in financial reporting is expected to be acting honestly and in good faith.
  8. Principle of materiality: All financial reporting should clearly disclose the organization’s genuine financial position.
  9. Principle of continuity: This principle states that all asset valuations in financial reporting are based on the assumption that the business or other entity will continue to operate going forward.
  10. Principle of periodicity: This principle refers to entities abiding by commonly accepted financial reporting periods, such as quarterly or annually.

Thank You

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FINANCE: https://www.amazon.com/Comprehensive-Financial-Planning-Strategies-Advisors/dp/1482240289/ref=sr_1_1?ie=UTF8&qid=1418580820&sr=8-1&keywords=david+marcinko

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HOSPITALS: https://www.amazon.com/Financial-Management-Strategies-Healthcare-Organizations/dp/1466558733/ref=sr_1_3?ie=UTF8&qid=1380743521&sr=8-3&keywords=david+marcinko

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What is Medical Practice FINANCIAL RATIO ANALYSIS?

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See the source image

BY DR. DAVID E. MARCINKO MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

Financial ratio analysis typically involves the calculation of ratios that are financial and operational measures representative of the financial status of a clinic or medical practice enterprise.  These ratios are evaluated in terms of their relative comparison to generally established industry norms, which may be expressed as positive or negative trends for that industry sector. The ratios selected may function as several different measures of operating performance or financial condition of the subject entity.

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

Common types of financial indicators that are measured by ratio analysis include:

  • Liquidity. Liquidity ratios measure the ability of an organization to meet cash obligations as they become due, i.e., to support operational goals. Ratios above the industry mean generally indicate that the organization is in an advantageous position to better support immediate goals.  The current ratio, which quantifies the relationship between assets and liabilities, is an indicator of an organization’s ability to meet short-term obligations.  Managers use this measure to determine how quickly assets are converted into cash.
  • Activity. Activity ratios, also called efficiency ratios, indicate how efficiently the organization utilizes its resources or assets, including cash, accounts receivable, salaries, inventory, property, plant, and equipment.  Lower ratios may indicate an inefficient use of those assets.
  • Leverage. Leverage ratios, measured as the ratio of long-term debt to net fixed assets, are used to illustrate the proportion of funds, or capital, provided by shareholders (owners) and creditors to aid analysts in assessing the appropriateness of an organization’s current level of debt.  When this ratio falls equal to or below the industry norm, the organization is typically not considered to be at significant risk.
  • Profitability. Indicates the overall net effect of managerial efficiency of the enterprise. To determine the profitability of the enterprise for benchmarking purposes, the analyst should first review and make adjustments to the owner(s) compensation, if appropriate.  Adjustments for the market value of the “replacement cost” of the professional services provided by the owner are particularly important in the valuation of professional medical practices for the purpose of arriving at an ”economic level” of profit.

The selection of financial ratios for analysis and comparison to the organization’s performance requires careful attention to the homogeneity of data. Benchmarking of intra-organizational data (i.e., internal benchmarking) typically proves to be less variable across several different measurement periods.

However, the use of data from external facilities for comparison may introduce variation in measurement methodology and procedure. In the latter case, use of a standard chart of accounts for the organization or recasting the organization’s data to a standard format can effectively facilitate an appropriate comparison of the organization’s operating performance and financial status data to survey results.

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

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

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What is ABSOLUTE [Intrinsic] VALUE?

A MATH AND FINANCIAL-INVESTING TERM

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By Dr. David E. Marcinko MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

In mathematics, the absolute value or modulus of a real number x, denoted |x|, is the non-negative value of x without regard to its sign. Namely, |x| = x if x is positive, and |x| = −x if x is negative (in which case −x is positive), and |0| = 0. For example, the absolute value of 3 is 3, and the absolute value of −3 is also 3. The absolute value of a number may be thought of as its distance from zero.

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In finance, absolute value, also known as an intrinsic value, refers to a business valuation method that uses discounted cash flow (DCF) analysis to determine a company’s financial worth. The absolute value method differs from the relative value models that examine what a company is worth compared to its competitors. Absolute value models try to determine a company’s intrinsic worth based on its projected cash flows.

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

In investing, the key issues are as follows:

  • Absolute value refers to a business valuation method that uses discounted cash flow analysis to determine a company’s financial worth.
  • Investors can determine if a stock is currently under or overvalued by comparing what a company’s share price should be given its absolute value to the stock’s current price.
  • There are some challenges with using the absolute value analysis including forecasting cash flows, predicting accurate growth rates, and evaluating appropriate discount rates.
  • Absolute value, unlike relative value, does not call for the comparison of companies in the same industry or sector.

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What is an “INSIDER” Company Shareholder?

TERMS AND DEFINITIONS PHYSICIAN INVESTORS SHOULD KNOW

By Dr. David E. Marcinko MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

Insider transactions shouldn’t be used primarily to make an investing decision, however an insider transaction can be an important factor in the investing decision.

In legal terms, an “insider” refers to any shareholder who owns at least 10% of a company. This can include executives in the c-suite and large hedge funds. These insiders are required to let the public know of their transactions via a Form 4 filing, which must be filed within two business days of the transaction.

SEC: https://www.sec.gov/about/forms/form4data.pdf

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

INSIDER TRANSACTIONS

When a company insider makes a new purchase, that is an indication that they expect the stock to rise.

Insider sells, on the other hand, can be made for a variety of reasons, and may not necessarily mean that the seller thinks the stock will go down.

MORE: https://smartasset.com/financial-advisor/insider-trading

EXAMPLE:

Mark Zuckerberg, CEO at Facebook (NASDAQ:FB), just made a large buy and sell of company shares on November 3, according to a new SEC filing. A Form 4 filing from the U.S. Securities and Exchange Commission states that Mark Zuckerberg exercised options to purchase 62,300 Facebook shares for $0 on November 3. They then sold their shares on the same day in the open market. They sold at prices ranging from $324.04 to $332.02 to raise a total of $25,463,482 from the stock sale.

Zuckerberg still owns a total of 232,400 shares of Facebook worth, $78,226,142.

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

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What is Corporate “ENTERPRISE” Financial Value?

THE E.V. MATH FORMULA

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By Dr. David E. Marcinko MBA CMP®

SPONSOR: http://www.CertifiedMedicalPlanner.org

The enterprise value [EV] tends to be thought of as a theoretical takeover price if a company were to be bought. It is calculated as market capitalization plus debt, minority interest and preferred shares, minus total cash and cash equivalents.

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

Enterprise value = common equity at market value (this line item is also known as “market cap”) + debt at market value (here debt refers to interest-bearing liabilities, both long-term and short-term) + minority interest at market value, if any + preferred equity at market value + unfunded pension liabilities and other debt-deemed provisions – value of associate companies – cash and cash equivalents.

MORE: https://en.wikipedia.org/wiki/Enterprise_value

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THANK YOU

***

HOSPITALS: https://www.amazon.com/Financial-Management-Strategies-Healthcare-Organizations/dp/1466558733/ref=sr_1_3?ie=UTF8&qid=1380743521&sr=8-3&keywords=david+marcinko

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What is the SELLING AWAY of Securities?

Information All Physician Investors Should Know

By Dr. David Edward Marcinko MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

According to Wikipedia, selling away in the U.S. securities brokerage industry is the inappropriate practice of an investment professional who sells, or solicits the sale of, securities not held or offered by the brokerage firm with which he is associated.

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

An example of the term expressed in a sentence is, “The broker was selling investments away from the firm.” Brokers marketing securities must have obtained the appropriate securities licenses for various types of investments. Brokers in the U.S. may be “associated” with one or more Brokerage firms and must obtain licenses by passing standardized Financial Industry Regulatory Authority exams such as the Series 6 or Series 7 exam.

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In the past I’ve held these as well as a Series 63 and 65 license [SEC].

CFI: https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/selling-away/

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The Three [3] Types of Banks

Join Our Mailing List Understanding Differences

[By Dr. David Edward Marcinko MBA CMP™]

SPONSOR: http://www.CertifiedMedicalPlanner.org

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dem-thinkingThere are several different kinds of banks.

A general understanding of these types is suggested for any medical professional prior to launching a self-directed [ME, Inc], or even a guided investment strategy or wealth building portfolio effort with a financial advisor [FA], stock broker or wealth manager, etc.

This banking information is usually not included in any text on financial planning, or related, until now.

CITE: https://www.r2library.com/Resource/Title/082610254

Definition of Retail Bank

A retail bank is a typical small mass-market financial institution in which individual customers use local branches; usually of larger commercial banks. Services offered include savings and checking accounts, mortgages, personal loans, debit/credit cards and certificates of deposit (CDs).

Definition of Commercial Bank

A financial institution that provides services, such as accepting deposits, giving business loans and auto loans, mortgage lending, and basic investment products like savings accounts and certificates of deposit. The traditional commercial bank is a brick and mortar institution with tellers, safe deposit boxes, vaults and ATMs.

However, some commercial banks do not have any physical branches and require consumers to complete all transactions by phone or Internet. In exchange, they generally pay higher interest rates on investments and deposits, and charge lower fees.

Definition of Investment Bank

Investment banking activities are different than those of retail and commercial banking and include underwriting securities, acting as an intermediary between an issuer of securities and the investing public, facilitating mergers and other corporate reorganizations, and also acting as a broker for institutional clients.

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Bankers

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Assessment

This brief review provides a retrospective on implications for modernity.

More:

Conclusion

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RIGHT NOW: 12 INVESTING MISTAKES of Physicians to Avoid in Late 2022!

A MEDICAL “TREATMENT PLAN” APPROACH

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By David Edward Marcinko, MBA, CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

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Product Details

MEDICAL TREATMENT PLAN: A detailed plan with information about a patient’s disease, the goal of treatment, the treatment options for the disease and possible side effects, and the expected length of treatment.

CITE: https://www.r2library.com/Resource/Title/082610254

COMMON INVESTING MISTAKES

Fees are down, expenses are up and the days of fat profit margins for physicians are over. Managed care in some form is here to stay. The tidal wave of baby boomers approaching retirement suggests the pendulum will not swing back to the “good old days” of fee-for-service medicine. Even the venture capitalists are laying off doctors because of the corona virus pandemic. And, the ACA and U.S. government, the payer for more than 50 percent of the covered population, continues to ratchet down reimbursement. Accordingly, many doctors are now working harder than ever. Unfortunately, they are also prone to irrational investing behavior and making more investment mistakes than ever before.

Here are the Institute of Medical Business Advisors’ “dirty dozen” investing blunders of physicians. Indeed, we see these common miscues among a variety of medical professionals.

Mistake 1: Having No Investment Policy Statement
Just as one would not think of treating a patient without a careful history and physical examination, you should not embark on investing your hard earned capital without an investment policy statement (IPS). This important document separates do-it-yourself investors, financial salesmen, stockbrokers and amateurs from true financial professionals.

An IPS is a document specifically detailing what you want your money to do for you with an understanding of who is to do what and how they are supposed to do it. It may be three to five pages long for an individual physician, 10 to 15 pages for a small medical group retirement plan or dozens of pages for a clinic or hospital endowment fund.

Treatment plan: A properly written IPS should contain the following:
• Statement of purpose
• Statement of responsibilities
• Investment goals and objectives
• Proxy voting policy
• Trading and execution guidelines
• Asset mix guidelines
• Social policies or other restrictions
• Portfolio limitations
• Performance review benchmarks
• Administration and fee policy
• Communication policy
• Reporting policy

Mistake 2: Not Diversifying Portfolio Objectives
Although the media frenzy of a few years ago has subsided, anecdotes of easy money still abound and doctors may forget that investment portfolios serve a specific purpose (e.g., retirement, college funding, etc.) within the content of a broader financial plan. Moreover, a single investment may become too large or too small a portion of the portfolio. This may be due to market growth in one component or slack in another.

Treatment plan: Diversify, monitor your holdings and select components with your risks and goals in mind. Time horizon and risk tolerance are likely to change as will the investment environment. One key contribution of modern portfolio theory (MPT), according to the 1990 Nobel Prize winner Professor Harry Markowitz, PhD, is the understanding that diversification can reduce portfolio risk. Indeed, the specific risk of a single stock may overwhelm any justification for failing to diversify.

Consider investing in sectors like basic materials, capital goods, communications and services, technology, consumer cyclicals and non-cyclicals, healthcare, energy, financial services and utilities. Investors can purchase most as individual securities, in mutual funds or as exchange traded funds (ETFs) or worldwide equity benchmark shares. Do not forget about cash equivalents, treasuries, zero coupon and municipal bonds and international securities.

FINANCE: https://www.amazon.com/Comprehensive-Financial-Planning-Strategies-Advisors/dp/1482240289/ref=sr_1_1?ie=UTF8&qid=1418580820&sr=8-1&keywords=david+marcinko

Mistake 3: Forgetting The Investing Risk/Return Tradeoff
Some physicians fall into the trap of chasing “hot” securities like hedge funds, limited partnerships, non-registered securities or alternate investments promising high returns. High returns are associated with increased investment risk. Accordingly, it is important to understand the risks embedded in an investment before it becomes an exposed reality.

Treatment plan: Beware of projecting historic averages going forward. The stock market is inherently volatile. While it is easy to rely on past historic averages, there are long periods of time where returns regress from their long-term historic mean. On the other hand, slumps eventually correct themselves so you should continue a prudent investing plan.

Do not confuse investing with trading or speculation. According to Gene Schmuckler, PhD, the Director of Behavioral Finance for the Institute of Medical Business Advisors, Inc., there are momentum-driven market periods when investors start to believe profits are easy and there is always a “greater fool” to buy at a higher price. Such trading has more in common with gambling than investing. Avoid market timing and the urge to jump in or out at every economic hiccup.

Mistake 4: Not Factoring In The Impact Of Taxes
The desire to avoid capital gains and other taxes as a result of solid investment returns may lull some doctors into a false sense of security. An attractive investment and a slick sales pitch sometimes hide the underlying tax costs of the investment, especially when the investment is questionable. This leads doctors to give up a significant portion of the long-term growth of their assets.

Treatment plan: Income tax brackets, rates and estate taxes are almost at an all-time low in the U.S. This good fortune is due in part to the Taxpayer Relief Act of 1997, the Economic Growth and Tax Relief Reconciliation Act of 2001, and the Job and Growth Tax Relief Reconciliation Act of 2003, among other tax credits and deductions. Some mutual funds, for example, are not tax efficient while some ETFs may be tax efficient. Strive for legitimate tax reductions and avoidance but remember that tax evasion is illegal.

Mistake 5: Not Factoring In Fees And Expenses
Front-end loads, back-end loads, disappearing and hidden loads, 12-b1 fees and commissions, and advertising and sales expenses can all have a significant impact on a particular investment program.

Treatment plan: Monitor the costs of your investment program to ensure that total costs are known, reasonable for the services provided and are not consuming a disproportionate amount of the investment returns. Carefully consider full-service versus discount brokerages.

Take care using discretionary assets under management (AUM) accounts where you pay a percentage for personalized money management. More often than not, these one-size-fits-all accounts are aggregated under a larger automated umbrella to harvest economies-of-scale automatically. Indeed, the mistaken notion that the advisor “is sitting on the same side of the investment table as you” starts deteriorating on critical reflection. Do not fall for the siren sales pitch (“If I make money, you make money”). Excessive risk taking, purchases and sales activity may be at your expense.

Carefully consider whether golf balls, seminars, football game tickets, pens or quarterly meetings with your “advisor” are worth the price you may ultimately pay for these minor trinkets and services.
For example, in a 2 percent AUM program of $1 million, you may pay $20,000 annually, which is automatically deducted from the account. Are these “perks” worth $200,000 over the course of a decade? During the “golden age of medicine” in the ‘80s or the ranging bull market of the ‘90s, some doctors may have thought it was worth it. What about during a bear market or the projected market of lower than average returns that may be upon us?

Other problems with AUMs include: a higher fee to managed stocks than bonds, creating an equity bias; bias against paying of the mortgage, practice or acquiring real estate; bias against gifting initiatives or charitable intent. These are all problematic for the same reason that over-weighted equity classes increase advisor compensation while these other equally important considerations do not.

Mistake 6: Inappropriate Risk-Management Techniques
Traditionally, physicians protected their families with life, disability, malpractice and business interruption insurance yet insurance products are not investment vehicles. They merely indemnify against catastrophic economic losses that are typically extinguished over time. Behavioral economists like Daniel Kahneman, PhD, of Princeton University, and Vernon L. Smith, PhD, of George Mason University, warn us to use these insurance products carefully since we tend to experience financial losses more intensely than gains and evaluate risks in isolation.

Additionally, a comprehensive risk management plan for doctors must acknowledge risks such as sexual harassment risks; workplace violence risks; Medicare documentation, recoupment and compliance risks; and the economic risks of divorce. There is also a plethora of acronymic risks such as the Health Insurance Portability and Accountability Act (HIPAA), the Occupational Safety and Health Administration (OSHA) Act, and many others.

Treatment plan: Be willing to abandon ancient thoughts and remain open to new ideas that identify and provide solutions to the contemporaneous insurance problems of physicians. As an example, in 2001, economist Christian Gollier, PhD, of the University of Geneva, asked, “Should one even buy personal insurance since the industry itself is so skilled at exploiting human foibles?”

Mistake 7: Inappropriate Insurance Agent
It is no surprise that goaded physicians might prefer insurance vehicles like the guaranteed minimum death benefit of variable annuities or traditional cash value life insurance policies despite their high costs, huge commissions and lower returns. Agents sell these products and they work for the insurance company, not for you. Basic insurance agent credentials include the chartered financial consultant and chartered life underwriter designations, but they may remain product salesmen.

Treatment plan: Always beware the fear-mongering insurance agent salesman as the flowing coverages may be unnecessary, too expensive, provide only minimal benefits or be duplicated in other insurance policies. These include credit life or home mortgage insurance (decreasing term), life insurance for children or the elderly, accident policies for students, hospital indemnity policies, dread disease insurance, credit card insurance, pet, flight or funeral insurance, prepaid legal insurance, trip cancellation, flood, earthquake and termite insurance, and most appliance extended warranties.

Instead, consider a licensed insurance advisor or insurance counselor who sells no products, accepts no commissions and charges by the hour, all while shopping for the best companies and rates for the risk being researched. A fiduciary focused Certified Medical Planner® may be even better.

Mistake 8: Selecting The Wrong Accountant
When asking for the value of a practice, ask specifically for the fair market value (FMV). One podiatrist who consulted us asked her accountant for the “value” of her practice and received its lower “book value” rather than the higher fair market value as a profitable ongoing concern. The MD lost tens of thousands of dollars in a subsequent sales transaction. Unfortunately, although the CPA produced correct figures for exactly what she requested, the doctor did not differentiate between the two terms. Later legal mediation determined that neither was responsible for the linguistic error as both parties acted in good faith. Of course, the doctor paid dearly for her mistake.

Treatment plan: Dr. Gary L. Bode, CPA, MSA, a former medical practitioner and CFO for iMBA, Inc., suggests that you take the time to discuss wants and needs with your accountant. Those from the National CPA Healthcare Advisors Association (www.hcaa.org) or the Healthcare Financial Management Association (www.hfma.org) may also increase your comfort level through additional medical expertise. Better yet, contact an experienced medical practice valuation expert or healthcare economist.

FINANCE: https://www.amazon.com/Business-Medical-Practice-Transformational-Doctors-ebook/dp/B015QMZDYE/ref=sr_1_15?crid=2239D4AO87FQZ&keywords=david+marcinko&qid=1641734428&sprefix=david+marcinko%2Caps%2C119&sr=8-15

Mistake 9: Not Having Your Practice Professionally Valuated [not appraised]
The sale or purchase of a medical practice may be the most important investment decision of your life. We have observed neurotic purchasers who spend far too much time, money and energy researching a fairly priced and modest practice to no avail (paralysis of analysis). Others have purchased exorbitantly priced practices for over $1 to $2 million on a handshake and promise. Accordingly, give this complex task the gravitas due, and run from those who would broker your sale with a “free” or “Internet-based valuation,” or provide “finance participation” schemes for purchase as a young practitioner.

According to IRS Revenue Ruling 59-60, the value of any medical practice is generally based upon the following:
• level of expected distribution and future cash flows;
• time of expected distributions and cash flows; and
• uncertainty of the expected cash flows and distributions.

Moreover, one should recall that a valuation is not a source document audit. Know specialty and industry economic conditions, trends, operating history, physician bonuses, dividends, distributions and comparable practice sales. A commission or percentage-based fee is considered unethical and may be illegal.

Accounting book value is not the same as a fair market valuation. Do not use back-of-the envelope trade magazine “multiplier methods” and obtain only Uniform Standards of Professional Appraisal Practice (USPAP)-styled valuations, which were first issued by the IRS in 1994-1995.

Combine the recognized USPAP-IRS valuation methods: income method with discounted cash flow analysis, market method and cost approach. Be sure to adjust financial statements in order to normalize each line entry. You must do the discounted cash flow analysis (DCFA) on an after-tax basis and base proper assumptions on physician compensation market rates.

Understand the intangible difference between personal and business goodwill, major premiums and minority control discounts.

Doing a walk through of the practice is mandatory for your protection. Trust but verify tangible assets and liabilities, estimates of practice risks, economic assumptions and future earning capacity.
Obtain a separate and independent real estate appraisal if necessary.

Make sure the valuation is written, substantiates value, supports conclusions and is signed by an appraiser who will defend the valuation in court as a qualified expert witness if necessary. This certification is formally known as an “opinion of value” and the only type we perform.

Remember to obtain two independent valuations, one for the buyer and one for the seller, and pay for each separately.

Treatment plan: Have the financing lined up before you buy a practice. The three major impediments to loan acquisition are school loan debt, a home mortgage and an automobile note in that order So, strive to reduce or eliminate them before applying for a loan. Hire licensed appraisal professionals with publishing, teaching and/or academic experience. Do not hire brokers or commissioned agents.
Organizations that accredit businesses but not necessarily medical practice appraisers include:

• The Institute of Business Appraisers (www.go-iba.org) awards the certifications of certified business appraiser and business valuators accredited in valuation.
• The National Association of Certified Valuation Analysts (www.nacva.com) awards the designations of certified valuation analysts and accredited valuation analysts.

Well-known medical practice and healthcare system appraisers include the big 10 consulting firms for hospitals and national healthcare systems. However, the Arthur Andersen debacle confirms that “bigger is not always better.” Medical practice niche players include Health Capital Consultants, LLC, (www.healthcapital. com), which provides large- and medium-sized practice valuations.

The Institute of Medial Business Advisors Inc, (www.MedicalBusinessAdvisors.com) specializes in small to medium practices, emerging healthcare organizations, clinics and ambulatory surgery center valuations and confers the designation Certified Medical Planner® on its independent consultants, appraisers and advisors.

Mistake 10: Selecting The Wrong Attorney
Consider the bizarre tale of the two fledgling internist partner/classmates who signed an attorney-prepared, buy-sell agreement upon creation of their nascent practice 30 years beforehand. The agreement stipulated that upon departure or dissolution, the remaining partner’s ownership would be determined not by some periodically updated valuation formula or appraisal process, Instead, it would be determined by a “matched and lost” process, also known as the “flip of a coin” for a medical conglomerate now worth over $1 million.

Treatment plan: Select a health law attorney and not your brother-in-law. More importantly, experience in the medical arena counts. Consult iMBA, Inc. or the American Health Lawyers Association (www.healthlawyers.org) as a referral resource.

Mistake 11: Blind Trust Of Wall Street And Financial Advisors
Stockbroker salesmen and the big brokerage houses that underwrite and recommend stocks may have credibility problems and some physicians get burned with the adrenaline rush of “self-directed” portfolios. Presently, both the Security Exchange Commission (SEC) and National Association of Securities Dealers are investigating far too many insurance companies and major wire houses for reverse churning (charging a fee on assets for which the stockbroker is providing virtually no services) and/or double dipping (charging an ongoing fee on mutual funds on which the client already paid a substantial commission).

No one knows for sure how to mitigate such shenanigans since human nature and self-interest are involved. Rest assured that the economic cycle will never be repealed and you must beware the four most dangerous words on Wall Street: “This time, it’s different.” Yet some believe the answer may lay with the independent fee-only advisor who charges by the hour, by the engagement, or pro re nata for advice.
Beware of taking the advice of a financial advisor carte blanche. The prime duty of a financial advisor should be to clients. Yet the very term “financial advisor” has no real academic or consistent meaning in the industry. The only hurdle to becoming one is passing a simple securities industry or state insurance sales licensing examination. Most are brokerage and agency employees with a duty to their respective firms, not you.

Treatment plan: Commissioned stockbrokers are fine to use if their fees are transparent and they offer value to you. However, be aware that Wall Street sales mavens and large broker-dealers (wire-houses) recently lobbied Congress not to be responsible to you after the sale. The Financial Planning Association is suing the SEC over this proposal to exempt the nation’s largest wire-house brokerages from certain fiduciary responsibilities associated with investment advisory regulations.

To avoid selecting the wrong financial advisor, choose an independent advisor who takes pride in fiduciary responsibility, knows the medical profession and eschews product sales commissions whenever possible. Such a professional is more than deserving of a fee. Do not hesitate to pay it.

To determine if your current advisor is the right choice, just ask to see the documents below:
• form ADV parts I and II;
• sample investment policy statement;
• registered investment advisor or series #65 investment advisory license
• CMP® license number;
• ethics requirement or attestation statements; and
• advanced degrees and designations, etc.

Some CMPs® and fee-only financial advisors possess these professional certifications as required. Stockbrokers, salesmen, intermediaries and insurance agents may not. All monikers suggest but do not guarantee impartiality and a lack of bias. Also make sure your financial advisor is experienced in the rapidly changing healthcare industrial complex.

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

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

Mistake 12: Lack Of A Complete Financial Plan
While many doctors have an investment portfolio, few have a comprehensive personal financial plan, especially one designed for medical professionals.

Treatment plan: Typically such plans consider the risk tolerance and time frame of several standard components such as insurance, taxation, investing, retirement and estate planning. Today’s practicing physicians should direct attention toward practice enhancement, economic risk management, valuations, charitable giving and succession planning. All should be interrelated in an economically sound manner and not be counterproductive to individual components of the plan.

In Conclusion
Often, successful investing and avoiding a life of economic servitude is simply a matter of delayed gratification and mistake avoidance rather than investing acumen. A good rule of thumb is to pursue fundamentals over fads and seek wise counsel when required.

About the Author

Dr. Marcinko is a Certified Financial Planner and Certified Medical Planner® and CEO for www.MedicalBusinessAdvisors.com, sponsor of the Certified Medical Planner charter designation program. He can be reached by phone at (770) 448-0769 or by e-mail at MarcinkoAdvisors@msn.com.

References:

References
1. Marcinko DE. Financial planning for Physicians and Advisors. Jones and Bartlett Publishers, Sudbury, Mass., 2005.
2. Marcinko DE. Insurance and Risk Management Strategies for Physicians and Advisors. Jones and Bartlett Publishers, Sudbury, Mass., 2005.

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Understanding the Cost of Not-for-Profit Hospital Capital

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A “Must-Know” Economic Concept for Not-for-Profit Hospital Executives

Hospital[By Calvin W. Wiese; MBA, CPA]

It is critical to understand and to measure the total cost of capital for any hospital or healthcare organization. Lack of understanding and appreciation of the total cost of capital is widespread, particularly among not-for-profit hospital executives.

The capital structure includes long-term debt and equity; total capital is the sum of these two. Each of these components has cost associated with it. For the long-term debt portion, this cost is explicit: it is the interest rate plus associated costs of placement and servicing.

Equity Cost

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

Equity Greater than Cost of Debt

In general, the cost attributed to equity is the return expected by the equity markets on hospital equity. This can be observed by evaluating the equity prices of hospital companies whose equity is traded on public stock exchanges. Usually the equity prices will imply cost of equity in the range of 10% to 14%; or lower recently. Almost always, the cost of equity implied by hospital equity prices traded on public stock exchanges will substantially exceed the cost of long-term debt.

Thus, while many hospital executives will view the cost of equity to be substantially less than the cost of debt (i.e., to be zero), in nearly all cases, the appropriate cost of equity will be substantially greater than the cost of debt.

The Weighted Average Cost of Capital

Hospitals need to measure their weighted average cost of capital (WACC). WACC is the cost of long-term debt multiplied by the ratio of long-term debt to total capital plus the cost of equity multiplied by the ratio of equity to total capital (where total capital is the sum of long-term debt and equity).

Assessment

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

Conclusion

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More on Medical Practice Business Costs for Entrepreneurial Physicians

Unknown and Under-Appreciated by Many

By Rick Kahler CFP®

I recently talked with an administrator of a private medical practice about some of the financial challenges she faces in dealing with the medical system, insurers, and patients.

Some of the insights she gave me into the realities that private physicians face in providing medical care were rather disturbing.

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Here are a few of them.

Let’s start with the insurers who account for the bulk of their revenue. Many payments for procedures from insurance companies (including Medicare) are below the cost of providing the service. This forces physicians to make up the difference on other procedures or find other sources of income to sustain the profitability of the practice.

Conversely, in markets that have just one hospital, the insurance companies have no leverage. If the insurers won’t pay what the hospitals demand, the hospitals can threaten to drop out of the network, leaving the insurers with nowhere to send their insureds in those markets. The insurers end up agreeing to pay the hospitals more.

Charges for services provided in-house at the hospital can end up being substantially higher than those same services done by outside providers.

Example:

She gave me an example of a lab test that cost $1,500 to $2,000 at the hospital lab but $35 to $80 at an independent lab. Patients do have the option to direct the hospital to use an independent lab. But, how many people know that and will have the presence of mind to make the request? While it makes financial sense to price-shop if you have a high deductible HSA plan, there isn’t much incentive if your plan has low deductibles.

Collections

Another challenge is collecting from patients. She says a surprising percentage of Americans maintain checking accounts with no money or keep checks from accounts which have long been closed. While writing bad checks is a crime, those who game the system know they can probably get by with writing a low-dollar check because the cost of pursuing justice is much more than the check is worth.

Most companies would never do business with such a person again. Healthcare professionals tend to have a bias toward giving everyone services, so these same people do return requesting care. She said she and her physician employer have had huge internal arguments about this. Her position is that these people take advantage of the physician in a premeditated fashion and don’t deserve to be extended services. The physician argues that everyone, even deadbeats, deserves healthcare. Since the practice doesn’t provide life-and-death services, she was able to get the physician to agree that if someone has an outstanding bill they need to settle it upfront, in cash, before any new services are provided.

Then there are those who use credit cards and then fraudulently dispute the charges. Some providers let this go because of the difficulty of proving that the charge is legitimate. It requires photographs of customers during the transaction, copies of driver’s licenses, customers’ signatures on the paperwork, and notarized statements from the provider verifying that this was the person who received services and presented the credit card.

***

http://www.CertifiedMedicalPlanner.org

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SSNs

A final interesting point concerned patients’ Social Security numbers. She said the only time these are ever needed is when an outstanding bill is sent for collection. Otherwise, they are never accessed or used.

Assessment

Finally, she was quick to add that only a small fraction of their patients premeditate stealing from them. She also stressed that not all insurance companies or hospitals behave unethically, and some do wonderful, humane acts of kindness. Nevertheless, the lack of integrity that does occur on both sides is infuriating and adds to the cost of health services.

Conclusion

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

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

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What is the FOREX MARKET?

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By Dr. David E. Marcinko MBA CMP®

SPONSOR: http://www.CertifiedMedicalPlanner.org

The foreign exchange market is a global decentralized or over-the-counter market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all aspects of buying, selling and exchanging currencies at current or determined prices.

In terms of trading volume, it is by far the largest market in the world, followed by the credit market.

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

The forex market is not dominated by a single market exchange, but a global network of computers and brokers from around the world. Forex brokers act as market makers as well and may post bid and ask prices for a currency pair that differs from the most competitive bid in the market.

The forex market is made up of two levels—the interbank market and the over-the-counter (OTC) market. The interbank market is where large banks trade currencies for purposes such as hedging, balance sheet adjustments, and on behalf of clients. The OTC market, on the other hand, is where individuals trade through online platforms and brokers.

INDICATORS: https://medicalexecutivepost.com/2014/02/08/top-forex-indicators/

NOTE: FOREX.com is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # 0339826). Forex trading involves significant risk of loss and is not suitable for all physicians or investors.

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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™ book cover

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What is a DIVIDEND ARISTOCRAT Stock?

By Dr. David Edward Marcinko MBA CMP®

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A Dividend Aristocrat is a stock that has exhibited a remarkable level of consistency, measured by the fact that only those S&P 500 companies that have increased their annual dividend for 25 straight years — or more — can be called one. The name was coined by cable TV personality and investor Jim Cramer

These companies have raised their dividends through good times and bad, including recessions, crashes, and pandemics. Being able to continue doing so is a tribute to their stability and strength. Now, the past 18 months have been a particularly difficult economic environment to operate in, and some companies were forced to slash or hold the line on their dividends as a result.

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

But others are just fine, like investment manager T. Rowe Price (NASDAQ: TROW), which increased its dividend for the 35th straight year in 2022. It is located in Baltimore Maryland not far from where I grew up. In fact, I used to play stick ball, as a kid, in the parking lot.

UPDATE: https://www.msn.com/en-us/money/markets/down-between-15-and-53-3-top-dividend-aristocrats-that-are-too-cheap-to-ignore/ar-AA10oFN9?cvid=962479fd28494731a0cd106028a00940

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

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

FINANCE: https://www.amazon.com/Comprehensive-Financial-Planning-Strategies-Advisors/dp/1482240289/ref=sr_1_1?ie=UTF8&qid=1418580820&sr=8-1&keywords=david+marcinko

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Understanding the Mental Healthcare Regulatory Environment

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Appreciating the Rules

[By Carol Miller; RN, MBA]

Carol S. MillerLocal counties and municipalities are the primary providers of state mental healthcare for patients who lack private insurance coverage for such care.

Both children and adults may be eligible to receive assistance.

These counties provide a wide range of psychiatric and counseling services to the residents in their community as well as other types of assistance such as:

  • treatment services related to substance abuse;
  • housing;
  • employment services;
  • information and education service;
  • referrals;
  • consultative services to schools, courts and other agencies;
  • after-care services; and other related activities.

mental

Rules and Regulations

Accordingly, regulations from federal, state, and county governments have an impact on the day-to-day operations, procedures and processes of a county mental health center. Traditionally, there are three main types of regulations.

Federal Regulations — The United States healthcare system is guided by programs such as those established under the Centers for Medicare and Medicaid (in the case of county mental health programs, Medicaid is especially important), Americans with Disabilities Act (ADA), Occupational Safety and Health Administration (OSHA), Health Insurance Portability and Accountability Act (HIPAA), and others.

State Regulations — These include general legislative guidelines, state management of benefits and reimbursement of the Medicaid program, and state allocations of budgets, which impact the centers’ operations.

County Regulations — Each county defines its own County Mental Health Program and decides which services will be provided or excluded.

Assessment

County facilities generally include outpatient clinics, county mental health programs, short-term psychiatric facilities, day-care centers, de-toxification centers, residential rehabilitation centers for substance abuse, long-term care psychiatric facilities, and Veterans Affairs (VA) psychiatric centers. The county centers may be co-located with other county services such as social services, occupational rehabilitation services, information technology services, human resources, maintenance services, and others or may be independently located.

Conclusion

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

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

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What is EBITDA?

A TERM ALL PHYSICIAN INVESTORS MUST KNOW

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What Is Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)?

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EBITDA, or earnings before interest, taxes, depreciation, and amortization, is a measure of a company’s overall financial performance and is used as an alternative to net income in some circumstances. EBITDA, however, can be misleading because it strips out the cost of capital investments like property, plant, and equipment.

This metric also excludes expenses associated with debt by adding back interest expense and taxes to earnings. Nonetheless, it is a more precise measure of corporate performance since it is able to show earnings before the influence of accounting and financial deductions.

Why EBITDA is still a Great Financial Management Metric

Simply put, EBITDA is a measure of profitability. While there is no legal requirement for companies to disclose their EBITDA, according to the U.S. generally accepted accounting principles (GAAP), it can be worked out and reported using the information found in a company’s financial statements.

The earnings, tax, and interest figures are found on the income statement, while the depreciation and amortization figures are normally found in the notes to operating profit or on the cash flow statement. The usual shortcut to calculate EBITDA is to start with operating profit, also called earnings before interest and tax (EBIT) then add back depreciation and amortization.

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

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

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What is “Shelf Registration” for Securities?

What is “Shelf Registration” for Securities?

By Dr. David E. Marcinko MBA CMP™

http://www.CertifiedMedicalPlanner.org

A relatively new method of registration under the Act of ’33 is known as shelf registration.

Under this rule, an issuer may register any amount of securities that, at the time the registration statement becomes effective, is reasonably expected to be offered and sold within two years of the initial effective date of the registration.

Once registered, the securities may be sold continuously or periodically within 2 years without any waiting period for a registration to clear issuers generally like shelf registration because of the flexibility it gives them to take advantage of changing market conditions.

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

In addition, the legal, accounting, and printing costs involved in issuance are reduced, since a single registration statement suffices for multiple offerings within the 2 year period. In effect, what the issuer does is register securities that will meet its financing needs for the next 2 years.

It issues what it needs at the current time, and puts the balance on the “shelf” to be taken off the shelf as needed.

Conclusion:

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

Contact: MarcinkoAdvisors@msn.com

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

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What is a “DEAD CAT” BOUNCE?

HOW IT WORKS

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By Dr. David E. Marcinko MBA CMP®

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In finance, a dead cat bounce is a small, brief recovery in the price of a declining stock.

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Derived from the idea that “even a dead cat will bounce if it falls from a great height”, the phrase, which originated on Wall Street, is also popularly applied to any case where a subject experiences a brief resurgence during or following a severe decline.

  • The dead cat bounce is a sudden and temporary increase in stock price caused by investors erroneously believing that the stock price’s reached its lowest.
  • The dead cat bounce can only be fully accurately determined with concrete data in hindsight.
  • Both falsely identifying a stock price trough (i.e., falling victim to a dead cat bounce) and falsely identifying a true price trough as a dead cat bounce will result in negative financial consequences.

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

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