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Using Spot Audits to Reduce Internal Medical Practice Fraud

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The Mistrusting Doctor

[By Dr. Gary L. Bode MSA, CPA, LLC]

Spot audits are an important internal medical practice control.  Here, physician-owners use their expertise with the logistics and dynamics of their practice, to devise a series of regular inspections to see if anything is going wrong, and assuring that everything is going right.

Frequent, small spot audits, perhaps different in nature, are best.  These are non disruptive.  Implementation and application of these spot audits can make the difference between them being perceived (by employees, patients and vendors), as prudent and responsible versus petty and mistrusting. Nothing erodes a practice’s efficiency faster than physician indifference.  Nothing demoralizes a practice more than a petty, mistrusting doctor.

Sporadic Audit of Random Employees

Examples of possible spot audit components include:

  • Is the time clock accurate?
  • Can it be manipulated?
  • Is this a real employee?
  • Is there the correct number of employee days being paid?
  • Is there the correct number of employee hours being paid?
  • Is the compensation level accurate?
  • Is petty cash reimbursement fully documented?
  • Are withheld funds appropriate?
  • Do the net pay figures in the accounting software agree with the bank records?
  • Are payroll tax and liability [i.e., child support checks accurate and timely?]
  • Are payroll reports being properly generated and submitted?

Assessment

What else did we miss?

Link: www.BusinessofMedicalPractice.com

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Appreciating the Financial Rewards of a Managerially Efficient Medical Practice

The Real Benefits of Improving Medical Practice Performance

By Dr. Gary L. Bode MSA, CPA, PC

www.BusinessofMedicalPractice.com

Most medical practitioners are not well trained in business.  However, our health care services are provided in an underlying business environment. Let’s consider the financial rewards of a well-run practice, since they are the most tangible. We shall demonstrate the financial benefit of improving practice performance one percent, in three key parameters.

Example:

Our hypothetical example uses a practice with $500,000 per year of gross fees, a 20% aggregate contractual write off rate, 3% of bad debt and 70% of overhead.  The money available for pre tax practitioner salary is $116,400 as calculated below:

1) 80% (100% minus the 20% of contractual write off) of 500,000 in gross fees is $400,000.

2) 97% (100% minus the 3% of bad debt) of 400,000 is $388,000.

3) 30% (100% minus the 70% of overhead) of 388,000 is $116,400.

Leverage

The financial leverage inherent in a practice makes even small improvements in performance yield dramatic bottom-line or “in pocket” results. Cutting overhead 1% nets the practitioner an extra annual $3,880 of potential salary.  Likewise, decreasing bad debt 1% yields $1200.  A simultaneous 1% improvement in both parameters yields $5,120, all for the same amount of patient care with no additional malpractice liability.

Assessment

Notice that increasing gross fees, the area most practitioners think of when discussing practice management, has the least financial impact of the three key parameters.  While outside the scope of this essay, good services marketing can improve any practice’s gross fees, even in today’s environment.  The key to this is superb patient service, of which the clinical result is only a component.  Making the patient’s total perceptions exceed their prior expectations insures a full appointment book.

Conclusion

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Remember Tax Deadline Day is April 18th 2011

Tax Emancipation Day is April 15th 2011

By Dr. Gary L. Bode MSA, CPA, PC

In the 2011 tax filing season, taxpayers have until Monday, April 18 to file their 2010 tax returns and pay any tax due. Emancipation Day, a holiday observed in the District of Columbia, falls this year on Friday, April 15. By law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have three extra days to file this year. Taxpayers requesting an extension will have until October 17 to file their 2010 tax returns.

Who Must Wait to File

For most taxpayers, the 2011 tax filing season starts on schedule. However, tax law changes enacted by Congress and signed by President Obama in December mean some people need to wait until mid to late February to file their tax returns in order to give the IRS time to reprogram its processing systems. The IRS recently announced February 14, 2011 as the start date for processing these delayed tax returns.

Some taxpayers, including those who itemize deductions on Form 1040 Schedule A, will need to wait until February 14, 2011 to file. This includes taxpayers impacted by any of three tax provisions that expired at the end of 2009 and were renewed by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 enacted December 17, 2010. Those who need to wait to file include:

  • Taxpayers Claiming Itemized Deductions on Schedule A. Itemized deductions include mortgage interest, charitable deductions, and medical and dental expenses as well as state and local taxes. In addition, itemized deductions include the state and local general sales tax deduction that was also extended and that primarily benefits people living in areas without state and local income taxes.
  • Taxpayers Claiming the Higher Education Tuition and Fees Deduction. This deduction for parents and students, covering up to $4,000 of tuition and fees paid to a post-secondary institution, is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit extended last month and the Lifetime Learning Credit.
  • Taxpayers Claiming the Educator Expense Deduction. This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23 and Form 1040A, Line 16.

Assessment

In addition to extending those tax deductions for 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act also extended those deductions for 2011 and a number of other tax deductions and credits for 2011 and 2012, such as the American Opportunity Tax Credit and the modified Child Tax Credit. The Act also provides various job creation and investment incentives, including 100% expensing and a 2% payroll tax reduction for 2011. Those changes have no effect on the 2011 filing season.

http://www.amazon.com/Financial-Planning-Handbook-Physicians-Advisors/dp/0763745790/ref=sr_1_1?ie=UTF8&s=books&qid=1276795609&sr=1-1

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Understanding Client Engagement Letters for Financial Advisors

Review the Basics to Protect Yourself from Liability

By Dr. David Edward Marcinko MBA CMP™

http://www.CertifiedMedicalPlanner.org

[Publisher-in-Chief]

According to the Professional Liability Agents Network (PLAN), a nonprofit association of insurance agencies specializing in risk management and loss prevention, there are two things that FAs should remember about engagement letters: have them and revise them. In fact, according to iMBA Inc’s Dr. Gary L. Bode CPA MSA – an accountant, financial advisor and board certified doctor – not all financial advisors and financial planners use engagement letters. “And, I think they are making a big mistake.”

www.MedicalBusinessAdvisors.com

Moreover, merely having a standard engagement letter is not enough: The changing scope of client service requires advisors and planners to review and update their engagement letters annually. Engagement letters should be updated to reflect changes in the engagement’s scope or timing. Many attorneys also recommend using a separate engagement letter each year to avoid problems of continuous representation and to establish the date of the statute of limitations before the engagement begins (thereby limiting the time period in which a client can file a claim).

The 10 Essential Elements

Even short, simple engagement letters are binding contracts. When creating or updating your engagement letters, make sure several essential provisions are included. Although additional clauses may be necessary, these basic provisions are the framework of your engagement letter.

1. Scope of Services and Limitations

Many doctors and lay professionals think of financial planning as a comprehensive analysis. If your engagement is limited, you must state that clearly in your engagement letter. Courts have held that it is reasonable for a client to expect a comprehensive analysis unless you state otherwise.

2. Client Responsibilities

The client’s role in an engagement is to provide the advisor or planner with certain data and to verify its accuracy. An engagement letter should contain a provision identifying the assistance you expect from your client in providing information and verifying its accuracy. The engagement letter should also specify any timetables applicable to this information.

3. Fees and Billing Procedures

Fee collection suits by advisors and planners against clients can result in professional liability counter-suits. You can prepare for this problem by specifying fees and billing procedures. An important part of this provision is your right to suspend work in progress until unpaid balances are brought current.

4. SEC Provisions for Investment Advisors

Planners who serve in investment advisory roles are required by the SEC to add several clauses to their engagement letters. First, if you collect any part of your fee in advance, you must explain in your engagement letter how a refund of the advance fee will be calculated if the client decides to stop the relationship before you have finished your work.

Second, you must state that you will not assign your responsibilities as a planner to a third party without the written consent of the client.

Finally, you can avoid regulatory responsibilities resulting from your possessing discretionary authority to act on behalf of your client by including in your engagement letter a disclaimer that says you will not exercise your discretionary authority without the client’s express written consent.

5. IRS Requirements

The IRS requires financial advisors and financial planners to have written consent to use a client’s tax return for purposes other than preparing a tax return. Thus, to protect yourself from liability, it’s important to add a “consent to use tax return information” clause in engagement letters.

6. Sharing of Information

Many financial advisors and planners recommend including in engagement letters a clause that allows the planner to receive information from and share information with their client’s other advisors. But, if you’re going to exchange information about a client, you’d better have the client’s affirmation; much like the HIPAA Statutes [business associates agreement].

7. Dispute Resolution

Include an arbitration clause in every engagement letter – arbitration is much faster and cheaper than taking a case through the court system. This theory is supported by PLAN, which recommends including in every engagement letter details about the type of dispute resolution to be used in the case of a disagreement.

8. Limitation of Liability

PLAN recommends that client service professionals require clients to either indemnify them from certain types of claims or establish a dollar limit on their liability. Although this provision has been used successfully in other professions, the SEC position on such clauses seems unclear. So, before adding a limitation of liability or indemnification clause, then, check with your state and federal regulatory agencies about standard procedure.

9. Good Will

Many firms conclude an engagement letter with a “good will” provision that thanks the client for his or her business and offers to discuss the letter and its provisions if the client has questions. While this provision may appear gratuitous, PLAN believes this can be critically important to a defense if a client claims to not know what he or she was signing.

10. Signature

As mentioned above, your engagement letter becomes your contract for professional service. As such, it is important to have it signed by your client http://www.plan.org

Assessment

Much like medical and surgical consent forms, or even treatment plans, client engagement letters for financial services professionals now seem the norm.

Note: Julie Schaeffer, a Chicago-based freelance writer, assisted in the original version of this essay.

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