I Jealously “Shake my Fist” at Somnath Basu PhD

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

On CFP® Mis [Trust] – One Doctor’s Painful Personal Experience

[“So Sorry to Say it … but I Told You So”]

By: Dr David Edward Marcinko; FACFAS, MBA, CMP™

[Publisher-in-Chief]

According to Somnath Basu, writing on April 6, 2009 in Financial Advisor a trade magazine, the painful truth is that many financial practitioners are merely sales people masquerading, as financial planners [FPs] and/or financial advisors [FAs] in an industry whose ethical practices have a shameful track record. Well, I agree, and completely. This includes some who hold the Certified Financial Planner® designation, as well as the more than 98 other lesser related organizations, logo marks and credentialing agencies [none of which demand ERISA-like fiduciary responsibility]. For more on this topic, the ME-P went right to the source last month, in an exclusive interview with Ben Aiken; AIF® of Fi360.com

The CFP® Credential – What Credential?

Basu further writes that stockbrokers and insurance agents who earn commissions from buying and selling stocks, insurance and other financial products realize that a Certified Financial Planner® credential will help grow the volume of their business or branch them into other related and lucrative products and services. After all, there are more than 55,000 of these “credentialed” folks. And, this marketing designation seems to have won the cultural wars in the hearts and minds of an unsuspecting – i.e., duped public; probably because of sheer numbers. Didn’t a CFP Board CEO state that its’ primary goal was growth, a few years ago? Can you say “masses of asses”, as the oft quoted Bill Gates of Microsoft used to say when only 2,000 micro-softies defeated 400,000 IBMers during the PC operating system wars of the early 1980’s. Quantity, and marketing money, can trump quality in the public-relations business; ya’ know … if you repeat the lie often enough … yada … yada … yada! Yet, as the so-called leading industry designation, the CFP® entry-barrier standard is woefully low. Moreover, the SEC’s [FINRA] Series #7 general securities licensure sales examination is not worth much more than a weekend’s study attention, even to the uninitiated.

Easy In – Worth Less Out

In our experience, we agree with Basu and others who suggest that scores of lightly educated, and sometimes wholly in-articulate and impatient individuals are zipping through the CFP® Board of Standards approved curriculum in three to six months of online, on-ground, or “self-study”. But, that some can do so without a bachelor’s degree when they join wire-houses and financial institutions, which cannot be trusted to adequately train them, is an abomination. And, even more sadly, some of these CFP™ mark-holders, and other folks, believe they have actually received an “education” from same. Of course, their writing skills are often non-existent and I have cringed when told that, in their opinion, advertiser-driven trade magazines constitute “peer-reviewed” and academic publications. Incidentally, have you noticed how thin these trade-rags are getting lately? Much like the print newspaper industry, are they becoming dinosaurs? One agent even told me, point-blank, that his CLU designation was the equivalent of an “academic PhD in insurance.” This was at an industry seminar, where he thought I was a lay insurance prospect.

THINK: No critical thinking skills.

Education

There is another sentiment that may be applied in many of these cases; “hubris.” I mean, these CFP® people … just don’t know – how much they don’t know.” The very real difference between training versus education is unknown to many wire-houses and FAs, isn’t it? And, please don’t get me started on the differences in pedagogy, heutagogy and androgogy. Moreover, it’s sad when we see truly educated youngsters become goaded by wire-houses into thinking that these practices are de-rigor for the industry. One such applicant to our Certified Medical Planner™ program, for example, had both an undergraduate degree in finance and a graduate degree in economics from the prestigious Johns Hopkins University – in my home town of Baltimore, MD [name available upon request]. He was told, in his Smith Barney wire-house training program, to eschew CMP™ accountability and RIA fiduciary responsibility, when working with potential physician and lay clients; but to get his CFP® designation to gather more clients. To mimic my now 12 year-old daughter; it seems that: SEC Suitability Rules – and – Fiduciary Accountability Drools. And, to quote Hollywood’s “Mr. T”; I pity the fools, er-a, I mean clients. But, T was an actor, and this is serious business.

Of CEU Credits and Ethics

Beside trade-marks and logos, we are all aware that continuing education, and a code of ethics, is another important marketing and advertising component of state insurance agents and CFP licensees. It’s that old “be” – or “pretend to be” – a trusted advisor clap-trap. Well, I say horse-feathers for two reasons. First, both my insurance and CFP® Continuing Educational Unit [CEU] requirements were completed by my daughter [while age 7-10], by filling in the sequentially identical and bubble-coded, multiple-choice, answer-blanks each year. Second, this included the mandatory “ethics” portions of each test. When I complained to my CEU vendor, and state insurance department, I was told to “enjoy-the-break.” My daughter even got fatigued after the third of fourth time she took the “home-based tests” for me. After I opened my big mouth, the exact order of questions was changed to increase acuity, but remained essentially the same, nevertheless. My daughter got bored, and quit taking the tests for me, shortly thereafter. She always “passed.”

Thus, like Basu, I also find that far too many financial advisors are unwilling to devote the time necessary to achieve a sound education that will help attain their goals, and would rather sell variable or whole life products than simple term life, even when the suitability argument overwhelmingly suggests so, for a higher payday. We not only have met sale folks without undergraduate degrees, but also too many of those with only a HS diploma, or GED. Perhaps this is why a popular business truism suggests that the quickest way for the uneducated/under educated class to make big bucks, is in sales. Just note the many classified ads for financial advisors placed in the newspaper job-section, under the heading “sales.” Or, in more youthful cultural terms, “fake it – until you make it.”

Of the iMBA, Inc Experience

According to Executive Director Ann Miller RN MHA, and my experience at the Institute of Medical Business Advisors, Inc:

“Far too many financial advisors who contact us about matriculation in our online Certified Medical Planner™ program – in health economics and management for medical professionals – don’t even know what a Curriculum Vitae [CV] is? Instead, they send in Million Dollar Roundtable awards, Million Dollar Producer awards, or similar sales accomplishments as resume’ boosters. It is also not unusual for them to list some sort of college participation on their resumes, and websites, but no school affiliation or dates of graduation, etc. And, they become furious to learn that we require a college degree for our fiduciary focused CMP™ program, and not from an online institution, either. The onslaught of follow-up nasty phone-calls; faxes and emails are laughable [frightening] too.”

www.MedicalBusinessAdvisors.com

Assessment

More often than not, it is the financial institutions that FAs and CFP™ certificants’ work for that reward sales behavior with higher commissions, rather than salaries; which encourage such behavior and create the vicious cycles that are now the norm.

THINK: ML, AIG, Citi, WAMU, Wachovia, Hartford, Prudential, etc.

Note: Original author of Restoring Trust in the CFP Mark, Somnath Basu PhD, is program director of the California Institute of Finance in the School of Business at California Lutheran University where he’s also a professor of finance. He can be reached at (805) 493 3980 or basu@callutheran.edu. We have asked him to respond further.

My Story: I am a retired surgeon and former Certified Financial Planner® who resigned my “marketing trademark” over the long-standing fiduciary flap. I watched this chicanery for more than a decade after protesting to magazines like Investment Advisor, Financial Advisor, Registered Rep, Financial Planner, the FPA, etc; up to, and even including the CFP® Board of Standards; to no avail. Feel free to contact me for a copy of a 43 page fax, and other supportive documentation from the CFP® Board of Standards – and their outsourced intellectual property attorneys – over a Federal trademark infringement lawsuit they tried to institute against me for innocent website errors placed by a visually impaired intern. Obviously, they disliked the launch of our CMP™ program. As a health economist and devotee of Ken Arrow PhD, I polity resigned my license, as holding no utility for me, to the shocked CFP Board. They later offered to consider re-instatement for a mere $600 fee with letter of explanation, to which I politely declined. Of course, my first thought after living in the streets of South Philadelphia while in medical school, during the pre-Rocky era, was to say f*** off – but I didn’t. Nevertheless, I still seem to be on their mailing list, years later. No doubt, the list is sold, and re-sold, to various advertisers for much geld. And, why shouldn’t they; an extra bachelor, master and medical degree holder on their PR roster looks pretty good. I distrust the CFP® Board almost as much as I distrust the AMA, and its parsed and disastrous big-pharma funding policies. Right is right – wrong is wrong – and you can’t fool all of the people, all of the time, especially in this age of internet transparency.

Shaking my Fist at Somnath … in Envy

And so, why do I shake my fist at Somnath Basu? It’s admittedly with congratulations, and a bit of schadenfreude, because he wrote an article more eloquently than I ever could, and will likely receive much more publicity [good or slings-arrows] for doing so. You know, it’s very true that one is never a prophet in his own tribe. Oh well, Mazel Tov anyway for stating the obvious, Somnath. The financial services industry – and more specifically – the CFP® emperor have no clothes! Duh!

Good Guys and White Hats

Now that Basu’s article has appeared in Financial Advisor News e-magazine, the other industry trade magazines are sure to follow the CFP® certification denigration reportage, in copy-cat fashion. And, the fiduciary flap is just getting started. This is indeed unfortunate, because I do know many fine CFP® certificants, and non-CFP® certified financial advisors, who are well-educated, honest and work very diligently on behalf of their clients. It’s just a shame the public has no way of knowing about them – there is no white hat imprimatur or designation for same – most of whom are Registered Investment Advisors [RIAs] or RIA reps. For example, we know great folks like Douglas B. Sherlock MBA, CFA; Robert James Cimasi MHA, AVA, CMP™; J. Wayne Firebaugh, Jr CPA, CFP®, CMP™; Lawrence E. Howes MBA, CFP®; Pati Trites PhD; Gary A. Cook MSFS, CFP®, CLU; Tom Muldowney MSFS, CLU, CFP®, CMP™; Jeffrey S. Coons PhD, CFP®; Alex Kimura MBA, CFP®; Ken Shubin-Stein MD, CFA; and Hope Hetico RN, MHA, CMP™; etc. And, to use a medical term, there are TNTC [too many, to count] more … thankfully!

Conclusion

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Impact of Size on Mutual Fund Performance

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

Vital Information for Doctors to Consider

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

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

The actual size of a mutual or index fund, in terms of amount of assets, and the growth rate of a fund are the two aspects of size to consider. The impact of size on mutual fund performance varies—it can be negative, neutral, or positive. Size affects different types of funds differently; it also affects the manager’s ability to achieve objectives. Monitor size changes and make investment decisions accordingly.

Economies of Scale

A relatively large amount of assets available to a portfolio manager presents various economies. The costs at most funds (e.g., expense ratios) are reduced as a percentage of net asset value as the fund grows. Expense ratios can have a major impact on performance. In addition to being an effect of size, low fees can cause size changes. Funds do at times waive some fees to attract assets.

Asset Base

A larger asset base provides more liquidity to a fund. With more assets, the manager can buy more shares and more stocks. Transaction costs are reduced if higher trading volumes are achieved. A larger asset base also can reduce relative tax costs. Realized but undistributed capital gain can be spread over more shares at the time of year-end distribution. A larger asset base and manager success attracts higher-caliber managers to the management team.

Fund Growth

Growth of fund assets impairs certain funds more than others. Generally, bond funds are less affected by asset growth and size than equity funds. Growth may have a positive impact on bond funds because buying bonds of similar characteristics further diversifies credit, event, and other risks. Equity funds that invest in larger capitalization stocks can be less affected than funds buying less liquid small-cap stocks. (This is so because funds usually limit their investments in a single company, i.e., many funds will not buy more than 5% of a specific company. Five percent of a small company uses up less cash than 5% of a large company. Therefore, a small-cap fund is more likely to exhaust its choice of available companies sooner than a large-cap fund. A large-cap fund could increase its investment to a 5% level, whereas a small-cap fund may already be fully invested in the companies the manager likes to own.)

Growth Rate

The rate of growth can affect performance. Rapid growth may mean that a large portion of the portfolio remains un-invested. A rapidly growing growth-type equity fund with a high percentage of cash earns lower returns in a rising market than a fully invested fund. With rapid growth, the fund may not provide pure exposure to the desired asset class. At a certain point, however, fund asset growth impairs the manager’s ability to achieve objectives. For this reason, funds often close to new investors or to new investment once they have reached a certain size. Growth affects managers in many ways. Many fund managers or teams of managers direct a number of funds and possibly even private accounts. As the fund grows, managers are spread thin and may have difficulty in reacting quickly or efficiently to changing market conditions. Managers may need to hire assistant portfolio managers or delegate work to analysts or other employees. As a result, the manager manages people, administration, or internal quality control systems rather than studying companies or investment strategies. Also, a manager may become complacent in periods of rapid asset growth. Such growth can mean their own compensation is substantially greater, which may in turn change the manager’s motivation. Rapid growth often changes a fund because there are not enough opportunities to invest in the targeted securities. For example, a fund can change from aggressive to conservative, small cap to large cap. Managers may have to slow trading or increase liquidity in the portfolio to prevent this occurrence.

Meaningful Positions Difficult

Rapid growth or a large asset base can prevent managers from taking meaningful positions in market sectors they believe will outperform others. Smaller funds are more flexible and may take advantage of opportunities or liquidate unwanted positions faster than larger funds. A large fund that owns a significant position will negatively affect a security’s market price if it unloads shares all at one time. Rapid growth also impairs research of funds, affecting an investor’s choice of funds. A fund with outstanding performance over the past 5 years and a $150 million asset base may be much different when its base grows to $1 billion; at that point, it may no longer be the “right choice” for an investor.

Asset Declinations

Just as rapid asset growth affects performance, a rapid decline of fund assets also may impact performance. Significant quantities of redemptions over short periods force managers to liquidate security positions, often at the wrong time (i.e., they would rather be buying in a declining market than selling to accommodate redemptions). To prevent this scenario, some funds have redemption charges to discourage investors from such short-term decisions. Such environments can negatively impact bond funds as easily as equity funds. Large redemptions compound the effect of declining fund net asset values.

What a Doctor-Investor Can Do?

What can physician-investors do to avoid negative effects on investment? Avoid overloading a portfolio with hot, rapidly growing funds, if possible. Generally, size should be a neutral factor for most bond funds. Small and/or aggressive equity funds can be affected by growth, however. Emphasize funds that promise to close to new investors after assets reach a certain size. Once a fund becomes large, monitor it closely for problems caused by the growth. If there is a better, smaller fund, it may be wise to change. Also, closed-end funds are always a possibility. These funds have a major advantage in that their asset base is a factor of growth in security values, not new investment (unless the fund makes a secondary stock offering). Closed-end managers work with a finite portfolio, which reduces the problem of sudden asset growth.

Assessment

To the extent that a lack of SEC and FINRA over-sight, and the recent financial, insurance and banking meltdown has affected the above; such investing is left up to the doctor’s discretion and personal situation. When it comes to the financial services product sales industry; always remember “caveat emptor” or “buyer-beware.”

Disclaimer: Both contributors are former licensed insurance agents and financial advisors.

Conclusion

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Filed under: Experts Invited, Financial Planning, iMBA, Inc., Insurance Matters, Investing, Media Mentions and PR, Op-Editorials, Portfolio Management, Recommended Books, Risk Management, Taxation | Tagged: CFP, CMP, CPA, david marcinko, DDS, DO, DPM, financial advisors, Financial Planning, fund assets, fund costs, fund expenses, fund growth, fund managers, fund size, hope hetico, index fund, index fund size, Investing, MD, mutual fund expenses, mutual fund performance, mutual fund size, OD, physician investors | 2 Comments »

Impact of Performance Fees on Mutual Funds and Physician Portfolios

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

More Complex than Realized by Some Doctors

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

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

Physician-investors may find themselves paying advisory fees, brokerage commissions, and other sales charges and expenses. All of these layers of expense can reduce or eliminate the advantage of professional management, if not monitored carefully. Also, fees can have a major impact on investment results. As a percentage of the portfolio, they normally range from low of 15–30 basis points (or .15% to .30%, a basis point is one one-hundredth of one percent) to a high of 300–400 basis points or even higher.

Charges are Universal

All portfolio managers, mutual funds, and investment advisors charge fees in one form or another. Ultimately, they must justify their fees by creating value added, or they would not be in business. Value added includes tangibles, such as greater investment return, as well as intangibles, such as assurance that the investment plan is successfully implemented and monitored, investor convenience, and professional service.

Comparisons Required

Always compare investment performance of funds or managed accounts after fees are deducted; only then can adequate comparisons be made. Also, compare fees within asset classes. Management fees and expenses of investing in bonds or bond funds are much different than the fees of investing in, for example, small companies or emerging market stocks. Whereas 100–200 basis points of fees may be appropriate for an equity portfolio or fund, similar charges may offset the advantages of a managed bond portfolio. With managed bond portfolios, real bond returns have limited long-term potential, because returns are ultimately based on interest rates. For example, if a 3% real (i.e., after inflation) return is expected, 200 basis points in fees may produce a negative after-tax result: 3% real return minus 2% fees minus 10% taxes equals a negative 9% total return.

Sales Charges

Mutual funds (and some private portfolio managers) charge sales charges to sell or “distribute” the product. Investors who buy funds through the advice of brokers or “commission based” financial planners will pay a sales load. The many combinations of sales charges fall into three basic categories: front-end, deferred (or back-end), and continuous.

Front-End Fees

Front-end fees are a direct assessment against the initial investment and are limited to a maximum of 8.5%. They usually are stated either as a percentage of the investment or as a percentage of the investment, net of sales charges. For example, a 6% charge on a $10,000 investment is really a $600 charge to invest $9,400 or a real charge of 6.4%. Many low-load funds charge in the range of 1% to 3%. Rather than pay brokers or other purveyors, these fund companies or sponsors use the charges to offset selling or distribution costs. Although rare, some funds charge a load against reinvested dividends.

Deferred Charges

Deferred charges (or back-end loads, or redemption fees) come in many forms. Often, the longer the investor stays with the fund the smaller the charge is upon fund redemption. A typical sliding scale used for deferred charges may be 5-4-3-2-1, where redemption in year 1 is charged 5%, and redemption in year 5 is charged 1%; after year 5, there are no sales charges. Sometimes deferred charges are combined with front-end charges.

Redemption Fees

Certain quoted redemption fees may not apply after a period, such as one year. Funds often use such fees to discourage the trading of funds. Frequently, these charges are paid to the fund itself rather than to the fund management company; or broker. Long-term physician investors actually benefit from this fee structure; short-term shareholders who redeem shares bear the additional liquidation costs to satisfy redemption requests.

Continuous Charges

Continuous sales charges, known as 12b-1 fees for the SEC rule governing such charges, represent ongoing charges to pay distribution costs, including those of brokers who sell and maintain accounts, in which case they are known as “trail commissions.” The fund company may be reimbursed for distribution costs as well. In the prospectus, funds quote 12b-1 charges in the form of a maximum charge. This does not mean that the full charge is incurred, however. For example, a fund with a .75% 12b-1 approved plan may actually incur much lower expenses than .75%. Compared to front-end charges, a .75% per year sales charge of this type could be more costly to investment performance, given enough time.

Sales Loads

Portfolio managers can charge sales loads as well, usually in the form of a traditional WRAP fee arrangement (the investor pays a broker an all-inclusive fee that covers portfolio manager fees and transactions costs). No-load funds can be purchased through brokers or discount brokerage firms. The broker charges a commission for such purchases or sales.

Management Advisory Fees

Private account managers and mutual funds charge a fee for managing the portfolio. These fees typically range between 25 and 150 basis points. Bond funds tend to charge in the range of 25 to 100 basis points, and equity funds charge 75 to 150 basis points. Fees charged by private account managers usually are higher because of the direct attention given to a single doctor client. These managers do not pass along additional administrative costs, however, because they pay them out of the management fee. These management fees come in many forms. Tiered fees can charge smaller accounts a higher fee than larger accounts. Mutual funds often charge “group fees”: a fund family may tier its fee structure to encompass all funds offered by the fund family or by a group of similar funds (such as all international equity funds). Performance fees, although subject to SEC regulations, may be charged as well. A performance fee may be charged if the manager exceeds a certain return or outperforms a particular index or benchmark portfolio.

Administrative Expenses and Expense Ratios

Most private managers are compensated with higher management fees, as mentioned above. Therefore, many private accounts usually do not incur separate administrative expenses. Some management firms charge custodial fees or similar account maintenance fees. Mutual funds incur a number of administrative expenses, including shareholder servicing, prospectuses, reporting, legal and auditing costs, and registration and custodial costs. Mutual funds report these expenses and management fees as an expense ratio—the ratio of expenses to the average net assets of the fund. Expense ratios also include distribution costs or 12b-1 charges.

Brokerage Commissions

Almost all buyers and sellers of securities incur brokerage commissions. Private “wealth managers” usually provide commission schedules to prospective physician-investors or current clients. Some private managers charge higher management fees and a discounted commission schedule, while others charge lower fees and higher commissions. These combinations of management and commission fees make comparison of prospective managers’ cost structures a difficult task. Most portfolio managers obtain research from brokerage firms, which can affect the commission relationship between broker and manager. Reduced commission schedules exchanged for information are known as “soft dollar costs.” Mutual funds may negotiate similar reduced commission schedules. In this regard, more-competitive brokerage firms can charge lower fees to investors. Commissions are not part of the expense ratio, because they are a part of the security cost basis. Firms with higher portfolio turnover are more likely to have higher commission costs than those with low turnover. Asset class impacts such costs as well. For example, small-cap stocks may be more expensive than large-cap stocks, or foreign bonds may be more expensive than domestic bonds.

Total Cost Approach

To arrive at a relevant comparison of fees among funds and managers, and to see what the total effect of fees on investment performance is, analyze the various charges on a net present value basis. Begin with a given investment amount (e.g., $10,000) and factor in fees over time to arrive at the present value of those fees. Present the comparisons in an easy-to-use table.

Sources of Fee Information

Consult the mutual fund prospectus for fee information. The prospectus has a fund expenses section that summarizes sales charges, expense ratios, and management fees; it does not cover commissions, however. Expense ratios usually are reported for the past 10 years. Commission or brokerage fees are more difficult to find. The statement of additional information and often the annual report disclose the annual amounts paid for commissions. When the total commission paid is divided by average asset values a sense of commission costs can be determined. Private wealth managers disclose fee structures in the ADV I filed with the SEC. Managers must disclose these fees to potential and current clients by providing either ADV Part II or equivalent form to the investor.

Reporting Services

Reporting services, such as Morningstar and Lipper, provide similar information from their own research of mutual funds. These services can be extremely beneficial, because fee information is summarized and often accounted for in the reports’ investment return calculations. This helps the investor and planner make good comparisons of funds. Information services that cover private managers provide information, primarily about management fees.

Assessment

To the extent that online trading, deep discount brokerages, lack of SEC and FINRA oversight, and the recent financial, insurance and banking meltdown has affected the above, it is left up to your discretion and personal situation. Generally, all fess are, and should be, negotiable.

Disclaimer: Both contributors are former licensed insurance agents and financial advisors.

Conclusion

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Defining Current Dental Terminology [CDT®] Codes

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

What they Are – How they Work

By Staff Reporters

OMAP Unique Procedure Codes*

The HHS [Health and Human Services] Office of Medical Assistance Program’s [OMAP] unique procedure codes were originally listed in the appropriate service guides. The maintenance of these codes was the responsibility of OMAP. These procedure codes were reviewed as needed and deleted either when a program no longer exists or when other Healthcare Common Procedure Coding System [HCPCS] codes are created which fully describe the service. Most of the unique codes were created to meet the needs of specialized services or programs. OMAP’s unique procedure codes were all five character configurations with the following alpha/numeric combinations: four numeric/one alpha (e.g., 7300Y); three numeric, two alpha (e.g., 206EP); two alpha/three numeric (e.g., BA311); or three alpha/two numeric (e.g., VIS01).

Current Dental Terminology (CDT procedure codes)

The American Dental Association’s (ADA) Code on Dental Procedures and Nomenclature is contained in the CDT-3 user guide. The maintenance of these codes is the responsibility of the Council on Dental Benefit Programs with consultation from: Blue Cross and Blue Shield Association, the Health Insurance Association of America, the Health Care Financing Association, National Electronic Information Corporation, and the American Dental Association recognized dental specialty organizations. The ADA updates the user guide approximately every five years. CDT codes are five-character, alpha-numeric configurations (e.g., D2110). Contact the American Dental Association to obtain a current copy of the CDT-3 Users Manual.

* Note: Due to HIPAA (Health Insurance Portability and Accountability Act) requirements, Medicare Local codes and OMAP Unique codes were replaced with national standard procedure codes.

www.HealthcareFinancials.com

Assessment

For more terminology information, please refer to the Dictionary of Health Economics and Finance.

www.HealthDictionarySeries.com

Conclusion

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Inspect our 2-Volume Hospital Print Guide [for Free]

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

ADVETISEMENT

Evaluate “Healthcare Organizations” [Financial Management Strategies] AND Order Now!

By Dr. David Edward Marcinko; MBA

By Professor Hope Rachel Hetico; RN, MHA

[Editor and Managing Editor]

As healthcare continues to evolve, leaders and executives have the formidable and immediate challenge of creating both short-term and long-term financial strategies. Given that today’s knowledge-base is different from that of even six-months ago, and the need is for solutions to tomorrow’s economic problems, success seems always just beyond your grasp!

Why Subscribe?

But fortunately, you can be ready; Healthcare Organizations: [Financial Management Strategies] is your blueprint for success. To ensure your organization’s competitive edge and perhaps even its survival, you must quickly gain the financial management tools and techniques necessary to lead in the 21st century. What you learn and implement using this Guide enables you to respond proactively to the rapidly changing healthcare environment. Your subscription to Healthcare Organizations: [Financial Management Strategies] not only helps you lead, it brings together healthcare executives and visionary thought leaders to help you develop essential models and successful financial management strategies, going forward.

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Testimonials

“This well-organized financial management guide is easy to use and perfect for the healthcare organization, hospital or clinic manager; CFO, CEO, administrator or comptroller; CNO, CMO or physician-executive who is tasked with developing, implementing and extending a comprehensive (and integrated) financial, accounting, health economics and enterprise-wide business management program.”

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Assessment

For today … for tomorrow … for all healthcare organizations … for you! Remember, the Guide is available on a 30-day, risk-free trial. You may contact http://www.STPub.com at (604) 983-3434, fax (604) 983-3445, or e-mail at custinfo@stpub.com to place an order, or ask questions regarding pricing and/or availability. All shipments arrive within 5 to 10 days. Prepayment is required for all international shipments and a courier charge will be added to the subscription price. After hours, we suggest you review the STP website FAQs section for answer to your inquiry: www.stpub.com/pubs/custinfo.htm

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Evaluate our 2-Volume Institutional Print Guide

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

Healthcare Organizations [Financial Management Strategies]

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Our 1,200 pages, 2-volume, quarterly institutional print guide Healthcare Organizations [Financial Management Strategies] is available on a 30-day, risk-free trial.

You may contact http://www.STPub.com at (604) 983-3434, fax (604) 983-3445, or e-mail at custinfo@stpub.com to place an order, or ask questions regarding pricing and/or availability.

All shipments arrive within 5 to 10 days. Prepayment is required for all international shipments and a small courier charge will be added to the subscription price.

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Assessment

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

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Note: The guide is sponsored by www.MedicalBusinessAdvisors.com with contributions from www.CertifiedMedicalPlanner.com and is edited by ME-P’s Dr. David E. Marcinko and Professor Hope R. Hetico; RN, MHA. Definitions and terms supplied by www.HealthDictionarySeries.com

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Filed under: "Advisors Only", "Doctors Only", Book Reviews, Career Development, Glossary Terms, Health Economics, Health Insurance, Health Law & Policy, Healthcare Finance, iMBA, Inc., Information Technology, Managed Care, Practice Management, Practice Worth, Professional Liability, Quality Initiatives, Recommended Books, Research & Development, Risk Management, Sponsors | Tagged: accountants, AMA, APMA, ASCs, certified medical planner, clinics, CMS, cost accounting, CPT codes, david marcinko, doctors, halth insurance, health dictionary series, Health Economics, healthcare, healthcare administration, Healthcare Finance, Healthcare Organizations, hope hetico, hospitals, lawyers, medical business advisors, medical care, medical clinics, medical practice management, nurses, nursing homes, physician's practice, Risk Management, Specialty Technical Publishers | Leave a comment »

The Gay Doctor Dilemma

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

Understanding Domestic Partnership Problems

[By Staff Reporters]

Legal Strangers

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

Tax Treatment

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

Non-Tax Benefits

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

Estates and Gift Problems

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

Personal Benefits

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

Conclusion

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Filed under: Accounting, Estate Planning, Ethics, Financial Planning, Insurance Matters, Investing, Portfolio Management, Professional Liability, Recommended Books, Retirement and Benefits, Risk Management, Taxation | Tagged: domestic partnerships, Estate Planning, financial planning gay couples, gay, gay doctors, gay financial network, gay financial planning, gay physician's network, gay physicians, homosexual doctors, IRA, legal stranger, lesbians, non-citizen spouse, spousal benefits, unmarried doctors, unmarried partners, unmarried physicians | 18 Comments »

Future of Health Publishing and Business Journalism

Posted on March 27, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

Good Content and “Fly” Beats the Competition

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

Last month, Steve Brawner [Steve Brawner Communications, a free-lance journalist for the Medical Business News, Inc., and the publisher of Medical News of Arkansas] contacted me to talk about hospitals, healthcare economics and the current financial dilemma in medical care. The interview will appear, as a special report, in April

But, after discussing answers to his top ten questions, we at the Institute of Medical Business Advisors, Inc www.MedicalBusinessAdvisors.com posited another interesting query. It was not on any particular subject area of our expertise, but aimed at us as electronic-publishers, reporters and health journalists.

The Future of Journalism

In other words, the question was:

“What do we think is the future business model for health journalism?”

Now, we’ve been mulling this thought over some time now, and our opinion goes something like this:

“We don’t – the old media is collapsing.”

And, while I don’t pity the likes of Chicago billionaire Sam Zell [the so-called “grave-dancer” for his penchant to buy distressed companies on the cheap and revitalize them for profit] – poor Sam – he was a very successful real-estate entrepreneur and the Chairman of Equity Group Investments. He thought this knowledge or luck was transferrable to the publishing industry, it wasn’t.

But, I do feel for distressed print newspapers like the Seattle Post Intelligencer, Chicago Tribune and especially the Baltimore Sun; as a native Balti-moron. I have both a favorite uncle, and older cousin, whose entire careers were spent in the print and ink business, there.

Link: https://healthcarefinancials.wordpress.com/2009/03/09/healthcare-experts-versus-health-journalists/

New Media “Fly”

How has this happened? Well, Google destroyed the advertising model for most media, and blogs and social networks have democratized the commentary / opinion playing field to some greater / lesser extent. Think: Mark Zuckerberg [Facebook] of Harvard, whose parents are both physicians – incidentally Mark’s got “fly” – Zell does not. We got the electrons at the ME-P, but little cash.

The Problem

The problem is that not many “new” media outlets, like the Medical Executive-Post, can afford to take on the interesting part of publishing; which is paying real investigative journalists. Think: The Huffington Post. Something I would love to be able to do; as there’s lots of muck to be raked in health economics, finance, administration, health IT; as well as medically focused financial planning, Wall Street and related personal investing activities for doctors – an integrated oeuvre of topics to say the least.

www.HealthDictionarySeries.com

Our Own Investigative Reporter

About the closest we have to a true investigative reporter is Darrel K. Pruitt; DDS. And, although he is no Bob Woodward or Carl Bernstein; he does occasionally do a good job. Think: William Mark Felt as FBI agent “deep-throat”.

Of course, as regular readers of the ME-P are aware, Darrell broke the dental profession’s [allegedly dufus] conspiracy with CCHIT [allegedly faux], and regularly reports on the folly of eHRs, eDRs, NPIs and eMRs. Think: citizen doctor journalist.

Link: https://healthcarefinancials.wordpress.com/2009/03/02/cchit-is-prejudiced-and-lacks-diversity-%e2%80%93-an-indictment/

Link: https://healthcarefinancials.wordpress.com/2009/03/02/avi-baumstein-and-hipaa-compliancy/

Link: https://healthcarefinancials.wordpress.com/2009/03/04/don%e2%80%99t-rush-ehrs/

Assessment

But, when the ME-P gets financially solid enough to hire others, and put them into the mix of expertise, commentary and free-labor entrepreneur punditry we now have on the site; then there’ll be no need for the current newspapers [at least insofar as our covered topic channels are concerned]. Until then; we don’t know what the answer is, but it, like the economy, doesn’t look good for the print media space.

Link: http://www.shirky.com/weblog/2009/03/newspapers-and-thinking-the-unthinkable

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As Editor-in-Chief of the premium subscription, two volume, 1,200 pages, institutional print-guide Healthcare Organizations [Financial Management Strategies], we prefer engaged readers who demand compelling content; old or new media.

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According to the conventional wisdom expressed above, this printed guide should be a relic of the past, from an era before instant messaging and high-speed connectivity. But, our experience shows just the opposite. Applied healthcare economics and financial management literature has grown exponentially in the past decade and the plethora of internet information makes updates that sort through the clutter and provide strategic analysis all the more valuable.

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Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. What is our best-of-breed business model for print and the internet? Should we charge for our electronic content – and if so – how much? OR, shall it remain an informal and complimentary companion to the $535 annual print guide? Please opine.

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Filed under: Book Reviews, Health Economics, Health Insurance, Healthcare Finance, iMBA, Inc., Managed Care, Media Mentions and PR, Practice Management, Recommended Books, Research & Development | Tagged: Baltimore Sun, Bob Woodward, Carl Bernstein, Chicgo Tribune, Darrell Pruitt, eDRs, EHRs, EMRs, Facebook, health journalist, Healthcare Organizations, hospitals, iMBA, Inc., journalism, Mark Zuckerberg, Medical Business News Inc, medical clinics, Medical News of Arkansas, NPI, Sam Zell, Seattle Post Intelligencier, William Mark Felt | 1 Comment »

Asset Allocation Methods for Physician-Investors

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

What’s Old … is New Again?

By Dr. David Edward Marcinko; MBA, CMP™

Publisher-in-Chief

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

Traditional Concepts

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

Principal stability and income approach

Objective: Income, liquidity, and stability of principal.

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

Income approach

Objective: Maximum income.

Investment: 100% fixed income exposure.

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

Income-oriented approach

Objective: Income and some capital growth.

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

Income and growth approach

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

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

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

Growth approach

Objective: Capital growth with income as a secondary objective.

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

Aggressive growth approach

Objective: Long-term capital growth.

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

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

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

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This Time the Hospital Financial Crisis is Different

Posted on March 19, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

Oh Really … No so Fast!

Submitted by J. Wayne Firebaugh, Jr; CPA, CFP®, CMP™

Dr. Malcolm T. MacEachern, Director of Hospital Activities for the American College of Surgeons, presciently observed that:

… Our hospitals are now involved in the worst financial crisis they have ever experienced. It is absolutely necessary to all of us to put our heads together and try to find some solution. If we are to have effective results we must have concerted and coordinated immediate action. … Repeated adjustments of expenses to income have been made. Never before has there been such a careful analysis of hospital accounting and study of financial policies. It is entirely possible for us to inaugurate improvements in business methods which will lead to greater ways and means of financing hospitals in the future … It is true that all hospitals have already trimmed their sales to better meet the financial conditions of their respective communities. This has been chiefly through economies of administration. There has been more or less universal reduction in personnel and salaries; many economies have been affected. Everything possible has been done to reduce expenditures but this has not been sufficient to bring about immediate relief in the majority of instances. The continuance of the present economic conditions will force hospitals generally to further action. The time has come when this problem must be given even greater thought, both from its community and from its national aspect…

Source: Steinberg, C. Overview of the US Healthcare System; American Hospital Association 2003.

Many hospital CXOs, healthcare administrators and physician executives would agree that Dr. MacEachern accurately describes today’s healthcare funding environment. However, they might be startled to learn that Dr. MacEachern made these observations in 1932! There is the old truism that there is nothing new under the sun.

American Hospital Association Statistics

Healthcare statistics suggested that the financial crisis is much the same today as it was for hospitals during the Great Depression. The American Hospital Association’s (AHA) reported gloomy statistics for hospitals include:

In 2001, 29% of hospitals had negative total margins.
Approximately $101.3 billion of uncompensated care was provided between 1997 and 2001 with an average annual increase of 16% during that time period.
Emergency departments in 62% of all hospitals report operating at, or over, capacity.
Technology costs are soaring as traditional technologies such as X-Ray machines, for $175,000, are being replaced by contemporary technologies such as CAT Scanners at $1 million that are in turn being replaced by CT Functional Imaging with PET Scans costing $2.3 million. Even such a “simple” instrument as a scalpel that costs $20, is being replaced by equipment for electrocautery costing $12,000, that is then being replaced by harmonic scalpels costing $30,000.
Between 2000 and 2002, 33% of hospitals reported increases in liability premiums of more than 100%.
The average age of hospital plants has increased 21% from 7.9 years to 9.6 years in just one decade.
In the four years ending 2002, hospital bond downgrades have outpaced hospital bond upgrades by almost 5 to 1.

Editor’s Assessment

As editor’s of the premium subscription, two volume, 1,200 pages, institutional print-guide Healthcare Organizations [Financial Management Strategies], we prefer engaged readers and contributors like Mr. Firebaugh, who demand and create compelling content like the above. Please review these links for same.

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Always beware the words: “this time it’s different;” as it rarely is. And so, your thoughts and comments on this Medical Executive-Post are appreciated. Please opine and subscribe to the ME-P here; it’s fast, free and secure.

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Filed under: Career Development, Health Economics, Health Insurance, Healthcare Finance, Managed Care, Marketing & Advertising, Media Mentions and PR, Recommended Books | Tagged: AHA, American College Surgeons, American Hospital Association, CAT, CT, david marcinko, financial crisis, hope hetico, hospitals, medical crisis management, MRI, PET, Wayne Firebaugh | 4 Comments »

Physician Household Borrowing and/or Investing

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

Deciding What Works?

[By Staff Reporters]

Another way of asking the above titled question might be, “Is it smart for a doctor’s household to build savings while they are getting out of debt?”

Financial Priorities

In the first instance, the doctor already has debt and would be increasing the terms of any loans by deferring some of the payments to savings, which is equivalent to borrowing the same amount.

In the second instance, the doctor would be taking on debt to save more money. The answer is that it makes sense to borrow money for investment purposes only if the financial gains derived from the investment are larger than the financial benefits of paying off the debt. But, who can know for sure?

www.MedicalBusinessAdvisors.com

Minimum Account Payments

Assuming that a medical professional has more debt than needed, and doesn’t make contributions to a retirement account, the concern becomes: [1] should he/she make minimum payments to the debt and contribute to a retirement account; or [2] should he/she make the maximum payments toward the debt or loans, etc?

Downside Risks

It is important to understand the downside risks of a lower payment strategy. Just as stocks return more than bonds due to their higher risk, the lower payment strategy returns more because of its’ higher risk. Taking on debt to finance an investment is riskier than paying off debt for a number of reasons.

First, the US economy may continue its’ current depressionary spiral, and investments and savings could disappear as financial institutions fail. This would leave the doctor with debt that he or she could not service.

Second, the rate-of-return required to decide whether or not to borrow for investment purposes may not be achieved, leaving the doctor in worse financial shape than if he or she had just paid off the debt.

Assessment

Ultimately, the doctor must decide if the added risks are worth the possible gain. But, the services of a fiduciary financial advisor may also be required. However, some doctors may not be ready to receive the sort of “tough-love” required in this case.

Channel Surfing the ME-P

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

Conclusion

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

Filed under: Financial Planning, Funding Basics, Investing, Recommended Books | Tagged: cash management, certified financial planner, certified medical planner, CFP, CMP, david marcinko, debt, depression, financial planner, Financial Planning, Investing, physician debt, US economy | 1 Comment »

On Emergency Funds for Physicians

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

Cash Reserves Now More Important Than Ever!

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

CEO: www.MedicalBusinessAdvisors.com

This is a basic question in financial planning circles that has generated much activity in the medical community, of late. Previously considered so mundane – as to be dismissed by some haughty physicians – it has acquired increased urgency with the current financial meltdown.

What Security Level Desired?

Yet, the answer to this question is dependent upon the security level desired by the medical provider and his/her family. Traditionally, financial planners suggested most people with solid employment, and transferrable skills, have at least three months of living expenses (not including taxes) in a reserve fund that is easily accessible (i.e., liquid). The amount needed for a one-month reserve is equal to the amount of expenses for the month, rather than the amount of monthly income. This is because during no-income months – there is no income tax.

The Usual Checklist

We suggest the following questions as helpful in determining the amount of reserve needed by medical professionals:

1. How many incomes do you have in your household?

2. How secure is your current practice, or medical job?

3. Do you have other unrelated sources of income; medically or non-medically related?

4. How long would it take you to find another position in your specialty, if suddenly unemployed? [Hint: Assume one month per ten grand of income; at $150-k annually, this means searching for 15 months].

5. How much money do you spend, and save, each month?

6. Would you be willing [able] to lower your monthly [fixed or variable] expenses, if you were unemployed?

Many Factors to Consider

But, many other factors come into play when determining how much money a particular physician and his/her family should have on hand. Does the family have one income or two? How stable is this income source? Does the doctor work for himself [managing partner], or is she employed [minority partner, associate, etc]? What kind of firm, company or hospital employs him; private, HMO, MCO, Federal or State entity? Does the family use all of the income each month? What about, life, health, disability or LTC insurance as fringe benefits? Does the family anticipate the possibility of large liability exposures and expenses occurring in the future (i.e., medical school or practice start-up debt, private tuition for the kids, medical expenses, liability suits etc.)? Are you willing to relocate for a new job?

Family Situation Appraisal

If the doctor is in a dual-income family – with stable incomes – and/or lives on a single income – the need for a liquid reserve is minimal; but still much more than for the average layman. On the other hand, if the doctor is a single individual, with an unstable income and she spends everything each month, the need for a liquid cash reserve is higher.

In the previous example, and in the stable past, the doctor may have opted for a six-to-nine month reserve if the need for security was high; and a three-to-six month reserve if the need for security was low. For the last five to seven years however, we have suggested to our medical clients that they expand this reserve cash corpus to 12-24 months; and as a blanket rule of thumb for all medical professionals. Of course, I was roundly criticized for it; until now.

Today, we are suggesting 3-5 years; with considerably less criticism. Cash is power, choice, swagger, potency, freedom and represents options. Acquire it!

Stashing the Cash

Once the amount of reserve is determined, the doctor should consider the appropriate investment vehicles for the reserve fund. At minimum, the reserve should be invested in a money market mutual fund with NAV @ 1.00 USD. Larger income earners may opt for tax-exempt money market mutual funds, as needed. For larger reserves, an ultra-short term, no-low bond fund, might be appropriate for amounts over three months – in periods of deflation; not so during inflationary periods.

Assessment

Today, we recommend doctors keep 3-5 years of cash-on-hand. Yes, I am aware of the “paradox-of-thrift” conundrum. But, do you want to help the domestic GDP, or your family; you decide? Personally, my own concern is not the macro-economic milieu.

Full disclosure: I am a former insurance agent, registered investment advisor; board certified surgeon and Certified Financial Planner™

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. How stressed out are you, right now? You are sleepless if previously considered cash, as trash.

But, if sitting on a little pile; you should be sleeping like a baby.

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OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

LEXICONS: http://www.springerpub.com/Search/marcinko
PHYSICIANS: www.MedicalBusinessAdvisors.com
PRACTICES: www.BusinessofMedicalPractice.com
HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
CLINICS: http://www.crcpress.com/product/isbn/9781439879900
ADVISORS: www.CertifiedMedicalPlanner.org
BLOG: www.MedicalExecutivePost.com

***

Front Matter with Foreword by Jason Dyken MD MBA

“BY DOCTORS – FOR DOCTORS – PEER REVIEWED – FIDUCIARY FOCUSED”

***

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ME-P Sponsor of Intellectual Capital

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

www.HealthcareFinancials.com

By Ann Miller; RN, MHA

Executive Director

All hospitals, healthcare systems and organizations use a variety of teaching, educational and didactic techniques to bring value to patients, payers, providers, governments and third-party intermediaries.

Intellectual Capital

This intellectual capital is the sum total of all knowledge and expertise used to serve the healthcare industrial complex and its’ stakeholders. Leaders, CXOs, CEOs, CFO, managers, administrators and employees provide most all of this current cognitive capital.

Print Journal Guide

We believe that Healthcare Organizations: [Financial Management Strategies] adds to this intellectual capital by guiding you, empowering your organization, and creating value for your patients, employees, investors and clients by bridging the intersection of medical mission and profit margin.

Assessment

www.HealthcareFinancials.com seeks to “Bridge the Intersection of Medical Mission and Profit Margin”; using the aggregated free-labor knowledge of those in the industry. There is just no better method available.

Visit and Order Now

Specialty Technical Publishers

8 – 14th Street

Blaine, WA 98230

1-800-251-0381

orders@stpub.com

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

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

Get our Widget: Get this widget!

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Understanding Healthcare Competition

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

Funneling Porter’s Five Forces of Business

Staff Reporters

Michael Porter PhD, of Harvard Business School, is considered by many to be one of the world’s leading authorities on competitive strategy and international competitiveness.

In 1980, he published Competitive Strategy: Techniques for Analyzing Industries and Competitors, in which he argued that all businesses must respond to five competitive forces. And now, these thoughts have been condensed for the healthcare industrial complex by Robert James Cimasi; MHA, CMP™ of Health Capital Consultants, LLC, in St. Louis, MO. They are cited below from the print journal-guide www.HealthcareFinancials.com

1. The Threat of New Market Entrants

This force may be defined as the risk of a similar company entering your local marketplace and winning business. There are many barriers to entry of new market entrants in healthcare including: the high cost of equipment, licensure, requirement for physicians and other highly trained technicians, development of physician referral networks and provider contracts, and other significant regulatory requirements.

Certificate of Need (CON) laws, which require governmental approval for new healthcare facilities, equipment, and services that have been in place since they were federally mandated in 1974. State CON laws create a regulatory barrier to entry. New medical provider entrants commonly faced substantial political opposition by established interests, which is manifested in the CON review process.

2. The Bargaining Power of Suppliers

A supplier can be defined as any business relationship or vendor you rely on to deliver your product, service or outcome. Healthcare equipment is a highly technical product produced by a limited number of manufacturers. This reduces the range of choices for providers and can increase costs.

3. Threats from Substitute Products or Services

Substitute products or services are those that are sufficiently equivalent in function or utility to offer consumers an alternate choice of product or service. An illustration of this in healthcare would be diagnostic imaging, or PET scans, as a substitute for surgery, which is often a more costly and risky option for patients. The threat of less invasive or less expensive diagnostic tests other than diagnostic imaging is relatively small for the near term future.

4. The Bargaining Power of Buyers

This force is the degree of negotiating leverage of an industry’s buyers or customers. The buyers of healthcare services are ultimately the patients. However, the competitive force of buyers is manifested through healthcare insurers including the US and state governments through the Medicare, Medicaid, TRICARE, and other programs; managed care payers (e.g., Blue Cross/Blue Shield affiliates); workers’ compensation insurers; and others.

In addition to the government, many of these healthcare insurers are large, national companies, often publicly traded, commanding significant bargaining power over healthcare provider reimbursement.

5. Rivalry among Existing Firms

This is ongoing competition between existing firms without consideration of the other competitive forces which define industries. Healthcare providers face pressure from other existing providers to obtain favorable provider contracts; maintain the latest technology; increase efficiencies; and lower prices.

Link:

http://www.thehealthcareblog.com/the_health_care_blog/2009/02/making-price-competition-work-.html#comments

Assessment

And so, these forces should be considers by all new, mid-career, and mature independent medical practitioners. They should also be combined with an internal organizational SWOT analysis as well.

Conclusion

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

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

Filed under: Career Development, Managed Care, Marketing & Advertising, Recommended Books | Tagged: competitive forces, david marcinko, HBS, hope hetico, medical marketing, michael porter, SWOT analysis | 1 Comment »

Healthcare Financials News and Noteworthy

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

Politics, Gossip and Health Industry Economic Trends

By Staff Reporters [www.HealthcareFinancials.com]

· Reimbursement: Legislation enacted in July 2008 reversed a 10.6% cut – while stating in January 2009 that a 1.1% increase would replace same – that would have gone into effect if lawmakers had not acted.

· Payments: A new project called the Acute Care Episode demonstration will test whether a global payment system will better align the incentives of hospitals and doctors; beginning in January 2009.

· Finance: Total hospital profit margins fell to negative 1.6% in the 3rd quarter of 2008 versus positive 6.1% during the same period last year.

· Policy: CMS delayed finalizing an exception policy to the Stark Gain Sharing programs in the 2009 Medicare Physician Fee Schedule Final Rule issued on Oct. 30, 2008. Since it received little feedback, it will accept additional comments on exception structures until mid-February 2009.

· Regulations: The 2009 Final Rule on Hospital Outpatient Department [HOPD] and Ambulatory Surgery Center [ASC] payments added 27 surgical procedures and 13 CPT® codes to the new Medicare ASC payment list; and increased reimbursement for other procedures. But, the rule also cut ASC reimbursement to 59% of that paid to hospital outpatient departments.

· Cost Shifting: Milliman reported hospitals lost $30 billion on Medicare and Medicaid, earned $66 billion on commercial insurance, and lost $13 billion on uninsured patients last year.

· Politics: Tom Daschle is out, but his replacement in dual roles as Secretary of Health and Human Services [HHS], and Director of White House Health Policy Office, will likely continue to advocate expanding health information technology as one part of a comprehensive health reform program of the new Obama Administration.

· Government: HHHS supplied $1.1 billion in grant funding to health departments, hospitals and healthcare organizations to improve response ability to public health emergencies.

· Technology: The Social Security Administration [SSA] is developing a prototype to automatically pull information from electronic health records to deal with the more than 2.5 million disability claims it receives each year.

· Credit: Credit agency Fitch changed its not-for-profit hospital sector view to negative, from previously stable. Moody’s downgraded 18 for-profit hospital bond ratings and upgraded 1. And, Hospital Corporation of America used risky payment-in-kind (PIK) debt swaps to keep bonds afloat.

· Banking: Despite Citigroup’s bailout, it will remain a major player in the tax-exempt healthcare lending space. And, insurers like WellPoint, UnitedHealth Group and BCBS are launching HSA and health debit card programs, as others enter the banking space to raise scarce cash reserves.

· Safety: OSHA is releasing a new computerized graphical safety interface, known as eTool, to help hospitals reduce occupational injuries and illnesses.

· Coding: The DHHS extended the deadline for implementing ICD-10CM and ICD10-PCS coding modifications, two years; until October 1, 2013.

· Business: SearchAmerica.com provides dedicated, but controversial, business services to optimize healthcare revenue and AR collection cycles.

· Pharmaceuticals: CMS proposed a ban on referenced based drug pricing for health plans in 2010; open commentary accepted until March, 2009.

Note: Healthcare Financials News and Noteworthy is an occasional feature of the ME-P.

Contact Us

In the ME-P, as with as our companion subscription print-publication Healthcare Organizations [Financial Management Strategies], we want you to have a blog and journal-guide that meets your needs and covers material that you consider most important and interesting www.HealthcareFinancials.com

Therefore, if you would like to see additional topics covered on this blog, or in the guide-journal, feel free to send your topical ideas to us: MarcinkoAdvisors@msn.com Kindly include “Healthcare Organizations” in your subject line and as much information as possible in your request.

Ann Miller; RN, MHA

Executive Director

iMBA, Inc

Suite # 5901 Wilbanks Drive

Norcross, GA 30092-1141 USA

www.MedicalBusinessAdvisors.com

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On Physician Leadership Today

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

Past versus Present in the Health 2.0 Era

By Susan Bock; MAOM, SPHR

If you don’t know where you’re going, any road can take you there.

Hundreds, if not thousands, of books, articles and training materials have been published on leadership skills; far fewer for physicians of course; but the basics remain the same.

Self Help Proliferation

Why is there such a proliferation of paper devoted to this subject? Perhaps, it is due to the fact that business leadership today is ever so different from leadership of yesterday. Every aspect of leadership has been under intense scrutiny, by employees, industry experts, physician-executives and business gurus. Much like healthcare today, the very form of leadership is in a state of evolution – changing, modifying and redefining its core values. A multitude of leadership theories or models have been developed, revised, reviewed and assessed by the experts. What is needed, therefore, is an integration of several models specifically appropriate for today’s healthcare business environment and modern healthcare executive.

Yesterday’s Death Knoll for Medicine

Replication of the leadership skills of yesterday is the death knoll for business today; especially for the business of healthcare. Leadership is no longer based on managing, directing, or supervising [top-down or command and control model]. As stated by James S. Doyle in his book The Business Coach [A Game Plan for the New Work Environment],

“Today’s employees … do not respond well to bosses. Quite simply, they have plenty of other options where they will be treated as full members of a team.”

Societal norms, generational beliefs and expanding diversity in healthcare are, in part, contributing to the new business environment. Likewise, medical leaders are required to respond, react and re-direct in the moment.

What Makes a Leader?

In a recent Harvard Business Review publication, “What Makes a Leader”, author Daniel Goleman says that the desired traits most often sited were intelligence, toughness, determination, and vision. A sufficient level of technical and analytical ability is even more essential now that we have moved into the new millennium.

However, the leadership skills of this era are placing much more emphasis on the so-called ‘soft skills’ or ‘emotional intelligence’ and this may very well be the key attribute that distinguishes outstanding healthcare leaders from those who are merely adequate.

Multi Generations

It is common to have three generations represented in any organization. We have the Baby-boomers, Gen X and now, Gen Y. The Baby Boomer generation is saying with some sadness, “It sure isn’t want it used to be!”, while Generation Xers are saying “It’s about time things changed!” and the latest generation to enter the medical workforce, Gen Y’s, are saying “Ready or not, we’re here”.

Each generation is extraordinarily complex, bringing various skills, expertise and expectations to the work environment. Determining the best methods to unite such diverse thinking is one of the many challenges faced by business leaders.

Assessment

Is it any wonder that many leaders in the Baby Boomer generation find themselves at a loss? The days of functional leadership are gone and suddenly, no one cares about the expertise of the Baby Boomers or how they climbed the corporate ladder, in medicine or elsewhere. The concept of ‘paying your dues’ is as foreign to the younger generations as is life without email, wikis or social networks. Still not convinced? Just think about the election of Barack Obama as 44th president of these United States. Leadership in the era of Health 2.0 is no longer about controlling or dictating with intense focus on the bottom line; it is about collaboration, empowerment and communication.

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. How does the digital generation change the leadership equation in healthcare today?

Our Other Print Books and Related Information Sources:

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

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

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

Healthcare Organizations: www.HealthcareFinancials.com

Health Administration Terms: www.HealthDictionarySeries.com

Physician Advisors: www.CertifiedMedicalPlanner.com

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Filed under: "Doctors Only", Career Development, Managed Care, Practice Management, Recommended Books, Research & Development | Tagged: Gn X, leadership, next gen, physician leadership, Susan Bock | 4 Comments »

Protecting Your Pension

Posted on January 24, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

A Book Report for “Dummies”

Staff Reporters

According to one review, this aptly-titled book Protecting Your Pension for Dummies [Wiley-July 2007, 978-0-470-10213] has proven to be prophetic in its early warnings against money-hungry financial advisors [FAs].

Watch the “Advisors”

The text, written by pension litigators Robert D. Gary and Jori Bloom Naegele, cautioned about hidden fees for financial advisors, lack of benchmarks for financial performance, inappropriate and risky investments, and heavily weighted distribution of plan investments in shaky company stock; etc. In other words, the traditional industry “bar of suitability”, is both ethically and legally low.

Assessment

For example, did you know that the financial services [read “sales”] industry has no definition for the term “financial advisor?” According to one source, it can be a “butcher, baker or candle-stick maker.” Of course, there are many fine financial services salesmen and consultants “out-there”. But, finding one may be difficult. And, does it not seem that an increasingly number of pundits, like the authors of this book, and others, suggest their numbers are fewer and farther between than the industry itself suggests?

Terms: www.HealthDictionarySeries.com

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. Are medical professionals, and the lay public, finally realizing that far too many of these FAs [read stock-brokers] are not fiduciaries working on your behalf; do not have to disclose conflicts of interest, and do not put client interests first?

Our Other Print Books and Related Information Sources:

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

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

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

Healthcare Organizations: www.HealthcareFinancials.com

Health Administration Terms: www.HealthDictionarySeries.com

Physician Advisors: www.CertifiedMedicalPlanner.com

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The Health Dictionary Series

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

What it is – How it works

By Dr. David Edward Marcinko; MBA, CMP™

By Hope Rachel Hetico; RN, MHA, CMP™

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

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

For All Medical Specialties

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

An iMBA Wiki Project

Your contributions are invited as a modern health 2.0 initiative.

Assessment

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

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

Filed under: Accounting, Book Reviews, Career Development, Estate Planning, Glossary Terms, Health Economics, Health Insurance, Healthcare Finance, iMBA, Inc., Information Technology, Insurance Matters, Managed Care, Recommended Books | Leave a comment »

Market Driven Healthcare

Posted on January 19, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

Keep Practicing Medicine

By Dr. David Edward Marcinko; MBA, CMP™

By Hope Rachel Hetico; RN, MHA, CMP™

In the second edition our book, the Business of Medical Practice, we cite Regina E. Herzlinger, PhD, the Nancy R. McPherson professor of business administration and chair at Harvard Business School, and mother of a physician-daughter. Regina was a guest lecturer at Piedmont Hospital, here in Atlanta, GA last year, as we were fortunate to heed her advice decades ago.

Herzlinger Speaks

In her musings, Regina opines that there is little wonder that some physicians become depressed and want to give up their careers entirely when pondering the future of medicine, managed care and related compensation issues?

Healthcare Update

In fact, the newest Medicare Trustees Report projects a 4.7% reduction in physician reimbursements in 2009 and 37% in cumulative cuts over the next nine years. It notes that each year for the next decade will feature a roughly 5% cut in doctors’ pay – unless Congress steps in – while the costs to physicians of providing care increase by more than 2%. Trustees also noted that spending on Medicare Part B continues to rise at alarming levels and puts growing strain on beneficiary and government pocketbooks.

In response, the Bush administration repeated its call for nearly $36 billion in Medicare reductions over five years to hospitals and non-physicians, and pushed again for a physician quality reporting program that would lead to reimbursements based on individual performance against predetermined standards. What path the new Obama Administration will pursue is still not known?

Market Driven Healthcare

Nevertheless, Herzlinger implores in her book, Market Driven Healthcare, “don’t give up practice, yet.” Pragmatically, the future is bright and offers great opportunity to early adaptors who have the foresight to change medicine for the better and be handsomely compensated, too! But, physicians’ inability to deal with competitive market forces is well known and many are loath to deal with them.

Assessment

And so, one way is to seek a strategic competitive advantage is with additional education through a traditional Master’s Degree in Business Administration (MBA); or a new-wave online distance-education resource like the Certified Medical Planner program in health economics and medical management for financial advisors and healthcare consultants (CMP™). Tuition, textbooks and fees may be tax deductible. In this way, doctors may maintain their place as salary and compensation leaders in the U.S. labor force www.CertifiedMedicalPlanner.com

Conclusion

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

Our Other Print Books and Related Information Sources:

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

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

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

Healthcare Organizations: www.HealthcareFinancials.com

Health Administration Terms: www.HealthDictionarySeries.com

Physician Advisors: www.CertifiedMedicalPlanner.com

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Filed under: "Doctors Only", Book Reviews, Career Development, Health Economics, Health Insurance, Managed Care, Marketing & Advertising, Op-Editorials, Practice Management, Recommended Books, Research & Development | 1 Comment »

Seeking Writers and Contributors

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

Business of Medical Practice [3^rd edition]

Ann Miller; RN, MHA

Project Manager

MarcinkoAdvisors@msn.com

As readers of the Executive-Post may know, our textbook the Business of Medical Practice is a best seller http://www.springerpub.com/prod.aspx?prod_id=23759

Invitation

Accordingly, we wish to personally invite all subscribers to contribute to our third edition now in progress. New and prior chapter are still available for updating; for a low-effort but high-yield contribution. We have others ideas for this peer-reviewed publication, as well.

Goal

Our goal is to help physician colleagues and medical executives benefit from nationally known experts as an essential platform for their success in the healthcare industry.

Assessment

And so, please advise and thanks again for your consideration and possible contributions.

Conclusion

Feel free to email me 24/7 for more information about this peer-reviewed publishing opportunity.

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

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

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

Healthcare Organizations: www.HealthcareFinancials.com

Health Administration Terms: www.HealthDictionarySeries.com

Physician Advisors: www.CertifiedMedicalPlanner.com

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Copyright 2008 iMBA Inc: All rights reserved, USA, unless otherwise noted. Use is restricted to Executive-Post subscribers only. No redistribution is allowed. To avoid violation of iMBA Inc copyright restrictions and redistribution policy, please register for your own free Executive-Post membership. Detailed information and registration links are available at:

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Seeking Writers and Contributors

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

Business of Medical Practice [third edition]

Ann Miller; RN, MHA

Project Manager

As readers of the Executive-Post may know, our textbook the Business of Medical Practice is a best seller.

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

Accordingly, we wish to personally invite all subscribers to contribute to our third edition now in progress. New and prior chapters are still available for updating; for a low-effort but high-yield contribution. We have others ideas for this peer-reviewed publication, as well.

Our goal is to help physician colleagues and medical executives benefit from nationally known experts as an essential platform for their success in the healthcare industry. And so, please advise and thanks again for your consideration and possible contributions. Feel free to email me 24/7 for more information MarcinkoAdvisors@msn.com

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

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

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

Healthcare Organizations: www.HealthcareFinancials.com

Health Administration Terms: www.HealthDictionarySeries.com

Physician Advisors: www.CertifiedMedicalPlanner.com

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

Referrals: Thank you in advance for your electronic referrals to the Executive-Post

Filed under: Book Reviews, Breaking News, Career Development, Health Economics, Marketing & Advertising, Media Mentions and PR, Practice Management, Recommended Books, Retirement and Benefits | Tagged: books, publications, writers | Leave a comment »

Meet an Executive-Post Sponsor

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

Certified Medical Planner™ program

The Executive-Post at www.HealthcareFinancials.com is now proudly sponsored, in-part, by the Certified Medical Planner™ program. This asynchronous online educational program is the leading provider of health economics and medical management information for financial advisors and medical business consultants. And, it is authorized to license and monitor the Certified Medical Planner™ certification mark of professional distinction.

With the addition of fiduciary requirements to the Certified Financial Planner’s® Board’s Standard of Professional Conduct, the adoption of the Pension Protection Act [PPA] and the vacating of the broker-dealer exemption, the need for health economics education in the physician advisory space is at an all-time high.

The online Certified Medical Planner™ program imparts the healthcare specificity – physician focused financial planning knowledge – and the integrated medical practice management expertise that is needed to help devise solutions and raise the bar of advisory competence and accountability for all those serving medical professionals in the modern era.

For more information, please visit: www.CertifiedMedicalPlanner.com

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Referrals: Thank you in advance for your electronic referrals to the Executive-Post.

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On Physician Peer Review

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

New Era Risks

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

The Center for Peer Review Justice is a group of physicians, podiatrists, dentists and osteopaths who have witnessed the perversion of medical peer review by malice and bad faith.

Raison D’etre

Like the American Association of Neurological Surgeons [AANS], they have seen the statutory immunity, which is provided to “peers” for the purposes of quality assurance and credentialing, used as cover to allow those “peers” to ruin careers and reputations to further their own, usually monetary agenda of destroying the competition.

Cause and Goals

Therefore, the group is dedicated to the exposure, conviction, and sanction of doctors, and affiliated hospitals, HMOs, medical boards, and other such institutions, that would use peer review as a weapon to unfairly destroy other professionals.

Assessment

www.PeerReview.org is a rallying point and resource center for any medical professional that finds himself in the midst of an unfair and bad faith attack by unethical, malicious “peers”.

Conclusion

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

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

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

Filed under: Career Development, Op-Editorials, Practice Management, Professional Liability, Recommended Books, Risk Management | Tagged: AANS, Center Peer Review Justice, david marcinko, hope hetico, medical ethics, medical peer review | 9 Comments »

Thomas E. Getzen; PhD

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

ABOUT

Dictionary of Healthcare Economics and Finance

Why the Dictionary of Healthcare Economics and Finance?

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

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

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

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

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

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

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

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

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

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

In the words of Atul Gawande, MD, a surgical resident at Brigham and Women’s Hospital in Boston, and one of the best young medical writers in America, “Doctors quickly learn that how much they make has little to do with how good they are. It largely depends on how they handle the business side of their practice”.

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

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

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

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

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

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

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

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

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

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

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

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

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

Thomas E. Getzen, PhD

Executive Director, International Health Economics Association

Professor of Risk, Insurance and Healthcare Management

The Fox School of Business – Temple University

Philadelphia, Pennsylvania, USA 19122

More Terms – Health Dictionary Series:

Speaker: If you need a moderator or a speaker for an upcoming event, Dr. David Edward Marcinko; MBA – Editor and Publisher-in-Chief – is available for speaking engagements. Contact him at: MarcinkoAdvisors@msn.com

***

Filed under: Glossary Terms, Health Economics, Practice Management, Recommended Books, Research & Development, Sponsors | Leave a comment »

The Malpractice Insurance Capitation-Liability Theory

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

A New Litigation-Equation Philosophy of Liability

[One Healthcare-Executive’s Experiential Opinion]

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

Developed by iMBA Inc, the factors that comprise the so-called “litigation-equation” include: (1) patient communication factors, (2) provider healthcare delivery systems and reimbursement factors, (3) payer factors and, (4) revised liability legislation and patient encounter data factors. All are briefly reviewed below:

Communication Factors

Patient communication factors for the CLT include; reduced economic and financial fear, consideration of cultural barriers, improved medical awareness through continuing education, concern for geographic access, focused primary and specialty care availability, management information systems, and the frequency and duration of utilization.

Reimbursement Factors

Provider reimbursement factors and healthcare delivery systems include both soft and hard varieties.

Soft CLT provider factors include increased patient availability to services, accessibility to timely appointments, office and quality care satisfaction surveys, communication assessments, known fixed costs and technical information interchanges.

Hard CLT factors include managed operational procedures, illness severity, defined treatment options, clinical variations, outcomes measurements and quality monitoring, performance quotas, aligned financial incentives, and predictable reimbursements.

Payer Factors

Payer factors of the CLT include practitioner screening and shifting, quality assessment, behavioral modification and team care, provider discipline, complaint management, cost and call economic considerations, and adequate capitalization rates.

Liability Factors

Finally, liability factors of the CLT include allegation frequency and severity, standards of care, defensibility, risk management, premium pricing, loss adjustment, legislation, settlement losses, and administrative costs.

WHITE-PAPER: ACOs VBC Capitation SAMPLE DEM

Assessment

To fully understand the CLT, all four parts of the litigation-equation must be recognized. These factors, when integrated with underwriter data and experience, may help determine the level of liability risk and the ultimate cost of malpractice coverage.

For example, if capitated medical care is deemed to involve less risk than in the traditional indemnity environment, then the cost of liability coverage should gradually decrease as the percent of capitated managed care increases, in any particular office setting.

In actual terms, the CLT suggests that capitated insurance and patient care risk are inversely, but not necessarily proportionally, related since experiential data will determine the percentages.

Conclusion

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

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

Filed under: Professional Liability, Recommended Books, Risk Management | Tagged: Philosophical Musings | 4 Comments »

Annuity Insurance Products

Posted on November 26, 2007 by Dr. David Edward Marcinko MBA MEd CMP™

A Brief Overview of Annuities for Physicians

[By Gary A. Cook, MSFS, CFP®, CLU, ChFC, RHU, LUTCF, CMP™ (Hon)]

[By Kathy D. Belteau, CFP®, CLU, ChFC, FLMI]

[By Philip E. Taylor, CLU, ChFC, FLMI]

Introduction

Annuities were reportedly first used by Babylonian landowners to set aside income from a specific piece of farmland to reward soldiers or loyal assistants for the rest of their lives.

Today’s annuities substitute cash for farmland; however the concept is the same. In 1770, the first annuities were sold in the United States and were issued by church corporations for the benefit of ministers and their families. Annuities have grown on a tax-deferred basis since enactment of the Federal Income Tax Code in 1913. They began to gain widespread acceptance in the early 1980s when interest rates credited exceeded 10%. During the last two decades, annuities have been the fastest growing sector of premiums for life insurance companies.

Nevertheless, are they actually “needed” by contemporary physicians – – or merely “sold” to them?

An annuity is a legal contract between an insurance company and the owner of the contract. The insurance company makes specific guarantees in consideration of money being deposited with the company.

Annuities are generally classified as fixed or variable – deferred or immediate. As their names indicate, deferred annuities are designed as saving funds to accumulate for future use.They are growth-oriented products where the tax on the interest earned is deferred until the money is withdrawn. An immediate annuity is used for systematically withdrawing money without concern for the money lasting until the end. The insurance company assumes this risk.

Deferred Annuities

The deferred annuity contract, like a permanent life insurance policy, has been found by some to be a convenient method of accumulating wealth. Funds can be placed in deferred annuities in a lump sum, called Single Premium Deferred Annuities, or periodically over time, called Flexible Premium Deferred Annuities. Either way, the funds placed in a deferred annuity grow without current taxation (tax-deferred). .

Fixed Deferred Annuity

Fixed deferred annuities provide a guaranteed minimum return of return (usually around 3 percent per year) and typically credit a higher, competitive rate based on the current economic conditions.

Fixed annuities are usually considered conservative investments as the principal (premium) is guaranteed not to vary in value. Insurance companies are required by state insurance laws to maintain a reserve fund equal to the total value of fixed annuities. Fixed annuities are also protected by State Guaranty Fund Laws.

Example:

Dr. Park, a retired physician, desires a safe financial vehicle for $100,000 of her excess savings. She doesn’t need the earnings of this investment for current income and also wants to reduce her income tax liability. She decides to purchase a fixed deferred annuity with her $100,000. The annuity guarantees a 3 percent annual return and the current rate is 6 percent.

After the first year, $6,000 of interest is credited to the annuity and Dr. Park has no current income taxes as a result. If the 6 percent interest rate does not change, after 3 years, the annuity will have $119,102 of value.

Variable Deferred Annuity

Recently, variable deferred annuities have become very popular. Like fixed annuities, variable deferred annuities offer tax-deferred growth, but this is where the similarities end. Variable annuities are not guaranteed. The appreciation or depreciation in value is totally dependent on market conditions.

Variable deferred annuities assets are maintained in separate accounts (similar to mutual funds) that provide different investment opportunities. Most of the separate accounts have stock market exposure, and therefore, variable annuities do not offer a guaranteed rate of return.

But, the upside potential is typically much greater than that of a fixed annuity. The value of a variable deferred annuity will fluctuate with the values of the investments within the chosen separate accounts. Although similar to mutual funds, there are some key differences. These include:

· A variable annuity provides tax deferral whereas a regular mutual fund does not

· If a variable annuity loses money because of poor separate account performance, and the owner dies, most annuities guarantee at least a return of principal to the heirs. This guarantee of principal only applies if the annuity owner dies. If the annuity value decreases below the amount paid in, and the annuity is surrendered while the owner is alive, the actual cash value is all that is available.

· When money is eventually withdrawn from a deferred annuity, it is taxable at ordinary income tax rates. With taxable mutual funds, they can be liquidated and taxed at lower, capital gains rates.

· There is also a 10 percent penalty if the annuity owner is under 59½ when money is withdrawn. There is no such charge for withdrawals from a mutual fund.

· The fees charged inside of a variable annuity (called mortality and expense charges) are typically more than the fees charged by a regular mutual fund.

Assessment

Variable deferred annuities are sensible for physicians who want stock market exposure while minimizing taxes. Most financial advisors and Certified Medical Planners™ [CMP™] recommend regular mutual funds when the investment time horizon is under 10 years. But if the time horizon is more than 10 years, variable annuities may occasionally become more attractive because of the additional earnings from tax-deferral.

Both types of deferred annuities are subject to surrender charges. Surrender charges are applied if the annuity owner surrenders the policy during the surrender period, which typically run for 5 to 10 years from the purchase date. The charge usually decreases each year until it reaches zero. The purpose of the charge is to discourage early surrender of the annuity.

Equity Index Annuity

The equity index annuity combines the basic elements of both the variable and the fixed annuity. The credited interest earnings are generally linked to a percent of increase in an index, such as the Standard & Poor’s 500 Composite Stock Price Index (S&P 500). This percentage is called the Participation Rate and may be guaranteed for a specified period of up to 10 years or adjusted annually. Thus, the physician annuity owner is able to participate in a portion of market gains while limiting the risk of loss.

Typically, the indexed annuity has a fixed principal, with the insurance company and contract owner sharing the investment risk. If the S&P 500 Index goes up, so do interest earnings. If it declines, the insurance company guarantees the principal.

So, the physician contract owner accepts the risk of an unknown interest yield based on the growth or decline of the S&P 500. Medical professionals and healthcare practitioners should pay particular attention to surrender penalties, asset management fees and any monthly caps on appreciation.

Immediate Annuities

Immediate annuities provide a guaranteed income stream. An immediate annuity can be purchased with a single deposit of funds, possibly from savings or a pension distribution, or it can be the end result of the deferred annuity, commonly referred to as annuitization. Just like deferred annuities, immediate annuities can also be fixed or variable.

Immediate annuities can be set up to provide periodic payments to the policy owner annually, semiannually, quarterly or monthly. The annuity payments can be paid over life or for a finite number of years. They can also be paid over the life of a single individual or over two lives.

Immediate Fixed Annuity

Immediate fixed annuities typically pay a specified amount of money for as long as the annuitant lives.They may also be arranged to only pay for a specified period of time, i.e., 20 years. They often contain a guaranteed payout period, such that, if the annuitant lives less than the guaranteed number of years, the heirs will receive the remainder of the guaranteed payments.

A note of caution here, as the selection of an immediate annuity is an irrevocable decision!

Example:

Dr. Jones is 70 years old and retired. He is only of average wealth, but is concerned that if he lives too long, he could deplete his savings. He decides to use $100,000 and purchase a lifetime immediate annuity with 20 years certain. The insurance company promises to pay him $7,000 per year as long as he lives. If Dr. Jones dies four years after purchase, he would only have received $28,000 out of a $100,000 investment. However, his heirs will receive $7,000 for the next 16 years. If Dr. Jones survives to the age of 98, he would have received $196,000 (or 28 years of $7,000).

Immediate Variable Annuity

Immediate variable annuities provide income payments to the annuitant that fluctuates with the returns of the separate accounts chosen. The theory is that since the stock market has historically risen over time, the annuity payments will rise over time and keep pace with inflation. If this is indeed what happens, it is a good purchase, but it cannot be guaranteed.

Some companies will, at a minimum, provide a guarantee of a low minimum monthly payment no matter how poorly the separate accounts perform.

Split annuities

A popular method of adding income and yet still accumulating savings is through the use of two separate annuity policies. Part of the funds is placed in an immediate annuity to provide monthly income. The balance is placed in a deferred annuity grows to the total value of the premium paid for both annuities.

The income that is received from the Immediate Annuity includes a portion of the initial premium, as well as the taxable interest earned. Only the portion of income that is interest is taxable. The ratio between the annuity principal and interest being paid out is called an Exclusion Ratio.

Example:

Dr. Jeanne Jones has put $100,000 into a 5-year non-tax deferred vehicle at 5%. The earnings to supplement Jeanne’s retirement is $25,000. With a combined federal and state tax of 33%, the net after tax income would be $16,750. Jeanne takes the same $100,000 using the split annuity concept she would receive $24,444 over the 5 years. Based on an exclusion ration of 89%, her total taxable amount is $2,797. This would yield $923 in taxes at the same 33% tax rate. Jeanne would have $23,521 of spendable income with the split annuity compared to the $16,750.

Qualified Annuities

The term qualified refers to those annuities which permit tax-deductible contributions under one of the Internal Revenue Code (IRC) sections, i.e., § 408 Individual Retirement Accounts (IRA), § 403(b) Tax Sheltered Annuities, § 401(k) Voluntary Profit Savings Plans. Qualified annuities can also result from a rollover from such a plan.

Assessment

Currently, there is much lively debate in the industry as to whether an annuity, which is tax-deferred by nature, should be used as a funding vehicle within a tax-qualified plan, i.e., a tax-shelter within a tax-shelter. Since the investment options within the annuity are also generally available to the plan participant without the additional management expenses of the annuity policy, it is felt this could be a breach of fiduciary responsibility. And, most insurance agents are not fiduciaries.

Both the National Association of Securities Dealers (NASD) and the Securities and Exchange Commission (SEC) have gone on record as criticizing these sales.

However, there are numerous examples of deferred annuities that have outperformed similar investment-category mutual funds, even after taking the annuity expenses into account.

Conclusion

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

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

Filed under: CMP Program, Financial Planning, Glossary Terms, Insurance Matters, Investing, Recommended Books, Retirement and Benefits, Risk Management | Tagged: annuities, certified medical planner, CMP, deferred annuity, Financial Planning, FINRA, Flexible Premium Deferred Annuities., Insurance Matters, NASD, SEC, Single Premium Deferred Annuities, SIPC, variable annuity, wualified annuities, www.certifiedmedicalplanner.com | 6 Comments »

Our Recommended Book List

Posted on November 18, 2007 by Dr. David Edward Marcinko MBA MEd CMP™

A List of Important New Releases in Health Economics, Medical Practice Management and Finance

Staff Writers

Currently recommended book list:

Financial Planning for Physicians and Advisors

http://www.jbpub.com/catalog/9780763733421

The Business of Medical Practice [Advanced Profit Maximization Techniques for Savvy Doctors]

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

Risk Management and Insurance for Physicians and Advisors

http://www.jbpub.com/catalog/9780763733421

Dictionary of Health Insurance and Managed Care

http://www.springerpub.com/prod.aspx?prod_id=49944

Dictionary of Health Economics and Finance

http://www.springerpub.com/prod.aspx?prod_id=02549

Dictionary of Health Information Technology and Security

http://www.springerpub.com/prod.aspx?prod_id=49952

And, be sure to review this link for the complete list of all recommended books on related topics of healthcare administration import: www.amazon.com/s/ref=nb_ss_gw/103-2940163-7675863?url=search-alias%3Dstripbooks&field-keywords=david+marcinko&x=11&y=21

Note: Recommendation does not imply endorsement; but add these to your library.

Feel free to write and post a book review, too!

Filed under: Recommended Books | Leave a comment »

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Dictionary of Healthcare Economics and Finance

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A New Litigation-Equation Philosophy of Liability

[One Healthcare-Executive’s Experiential Opinion]

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A Brief Overview of Annuities for Physicians

Deferred Annuities

Fixed Deferred Annuity

Variable Deferred Annuity

Immediate Annuities

Immediate Fixed Annuity

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