MDManagement

Non-Cash Contribution Tax Deduction - Homework made Easy

2012-01-24T11:55:00.002-05:00

Each year, during "tax season", I will have clients provide me with lists of items that they have donated to their favorite charity. It makes sense right? Out with the old and in with the new. Items in your household or wardrobe that you no longer need or maybe doesn't fit quite right any more can find a new home or body size. It's perfect, your junk is someone else's treasure. And, instead of holding the dreaded "Garage Sale", you receive an Itemized Deduction on your income taxes from Uncle Sam. Uncle Sam is such a good guy, isn't he? But wait a minute! Your favorite Uncle has rules you must follow if you are going to turn these "treasures" into a deduction on your income tax return.

The following summary is meant to assist you in preparing the "treasure listing" that you provide me or your tax professional to ensure your deduction is used. Keep in mind that all cash and non-cash charitable contributions must be substantiated in order to be deductible.

Name and Address of the Charity - make sure that you provide this information when organizing your tax information. Often the organization will provide you with a receipt that contains this information. If your total non-cash contributions exceed $500, a form 8283 must be attached to your return. This form requires this information for the donee organization.
A Description of the property being donated - typically, the recipient of these goods will provide you with a form or receipt that provides space for describing the property. Be sure to keep a good list of what you donated. A description like, "Three garbage bags of clothing" will likely not fly with the IRS in an audit. Be sure to list the items separately. The form 8283 doesn't require that each item is listed separately, but your records need to clearly substantiate the deduction. Also, keep in mind, that household items that you donate must be "in good used condition or better". Most tax professionals now believe that used clothing is not "in good used condition or better" and no longer qualifies for a non-cash charitable donation deduction. So, if you are going to donate clothing and you wish to take a deduction, you should be able to verify that it meets this criteria.
Dates, Costs, and Fair Market Value - your records should list the date you donated the property to the organization and the date you originally acquired the property. Each item donated should contain the original cost of the item (or adjusted basis) as well as the fair market value of the item. The method used for determining "fair market value" may also be required, if you need to file a form 8283. To obtain a value of your items, I would suggest that you use a donation calculator, like the one found here at Goodwill Industries of West Michigan to substantiate your deduction even if you donate the items to another charity.
Qualified 501 (c) (3) Charitable Organization - whether you donate cash or non-cash, your contribution must be given to a qualified charity to receive a deduction. To make sure that you are donating to a charity that will qualify, look the charity up on the IRS website that allows you to search for the organization. It really works quite well - click here to go to the IRS webpage and search for the exempt organizations that are eligible to receive tax-deductible contributions.

Substantiating your non-cash charitable contributions at the time you make the donation will assist you in taking an appropriate donation and receiving a deduction. Using the steps above and the two websites referenced will help make your homework easy!

Disclaimer/Disclosure - the above summary does not constitute specific tax advice. The reader should be certain to review their personal tax situation with their own tax professional. Any US tax advice included in this written or electronic communication was not intended or written to be used, nor can it be used by a taxpayer, for the purpose of avoiding any penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

Close the Back Door! Or, It Will Be Cold Inside Your Practice

2012-01-10T08:48:00.291-05:00

Having experienced many cold winters here in Michigan, there is one saying I heard as a kid and often repeated to my own children - "Close the back door. We don't need to heat the garage!"

Dental practices that are experiencing the effects of a slow economy might want to take this saying to heart as it relates to the number of new patients they add to their practice. The average dental practice saw approximately 20 new patients per month in 2011, according to data collected from practices across the country. If you are thinking, wow, what do I have to do to reach that goal? Or, twenty a month? I'm knocking that down by the end of the second week of the month, be careful. Comparing yourself to benchmarks can be helpful, but you need to look at the bigger picture.

Begin this year by establishing the number of active patients you currently have in the practice. A good definition of an active patient, is a patient that you have seen in the practice within the last eighteen months. Then, at the end of each quarter, add to this figure, the number of new patients that have joined your practice. Next, subtract the total number of active patients at the end of the quarter. If the result of this computation is positive, great, your practice is moving in the right direction. If, however, the result of this exercise is the same or lower, you may need to "check the back door".

Keep in mind that every practice will experience patients leaving. The key here is to track and know why they are leaving. Is it because they have moved away? This happens all the time, but do you know it? If your patients aren't leaving because they moved out of the area, then it's likely it may be for a reason or perception that you and your team can change before your schedule feels a major impact.

In his book, Everything is Marketing, Fred Joyal explores several reasons that patients leave a practice. They include the following:

Your Practice doesn't offer what they want - Let's face it, people talk! If they hear about the latest whitening program or dental procedure from a friend and never hear about it from you, then they just might be leaving because they perceive that you don't offer what they desire. You do offer a whitening program don't you?
They don't know what you do - Begin with the assumption that if they aren't told at each visit, they don't know. In my opinion, having a brochure by the checkout counter on a snore guard, or a television ad running in the lobby that demonstrates the benefits of the new laser equipment you are using, doesn't count as telling them. It only supplements what you and your dental team communicate as part of your continual standard of care.
They think you are too expensive - Having done many fee analysis over the years, I know that the typical dentist isn't too expensive. Often, I end up showing a client that their fees are below the average for their locale before they will actually adjust their master fee schedule to a recommended charge. Here is a little secret for you - patients don't leave because you increase your fees. They leave because they don't value what you do for them. Building up the value of dentistry in the minds of your patients is a process of communication that you and your team need to work on continually. This communication begins with you, believing in the value of your services.
Their insurance changed, and you don't accept it - I'm not an advocate for participating with every dental preferred provider organization that comes your way, but I do think you should research the plans and understand how they work. Prepare a brochure for your patients entitled, Dental Plans: What you Need to Know. Most likely your patients don't have a thorough understanding of their plan. Once educated, many will choose to stay with you, their preferred dentist - even if that means going out of network and paying more.
They are embarrassed about how long they've put off their recall - I recently went to see my family physician and I know, from first-hand experience, that I felt a little sheepish saying to the receptionist who couldn't find me on her computer screen - "Might you have changed practice management systems within the last eight years?" I have a dentist client who says, "I hate bugging patients about keeping their appointments". To which I reply, "You aren't bugging them, you are simply showing them you care!" This is the last reason Fred points to as a reason a patient might be leaving your office.
They don't believe you care - I once had a general dentist call me after being referred to a specialist to have a wisdom tooth extracted. "Mike, I'm just calling to find out how you are feeling. Did everything turn out alright?" You show a patient you understand their discomfort or go out of your way to simply acknowledge them in some way and you show them that you care.

Adding new patients to a practice can be tough in any economy. Be sure to enhance your marketing efforts this year by Minding Your Own Business and "Closing the Back Door!"

Not just for kids!

2012-01-02T09:00:00.004-05:00

Yesterday, our Pastor asked the kids of the congregation what they were going to do to make the Year, 2012, a good year. He challenged them to think of some ways in which they could make the world a better place. As we move forward into a year of changes and opportunities in the business of healthcare, this is a question that we should all contemplate.

Walt Disney once wrote that there were three types of people in this world: "Well Poisoners," who criticize and try to tear people down rather than build them up; "Lawn Mowers, " good people who do their jobs, pay their taxes, and take care of their families and homes but never venture beyond their own yards to help others; and "Life Enhancers," who by their kind words and deeds enhance the lives of others and leave their world a better place for having lived.

As we set our goals for 2012, let's look for ways in which we can be "Life Enhancers". Be an encourager to your staff, show compassion to your patients, be a mentor, a leader, a friend. Begin this year by Minding Your Own Business and giving yourself to enhancing life of those around you. How will you make the Year, 2012, a good year? - It's not just a question for kids.

To help you set your goals for 2012 and establish quarterly action plans use this worksheet - http://dld.bz/MDManagement_GoalWorksheet (Link expires 1.8.11). Go ahead, Practice with a Purpose!

Number One Customer - Your Employee

2011-07-20T11:23:00.004-04:00

Physicians and Dentists who manage their own office face a variety of compliance issues these days that place time demands on them and their office managers. And, with all the work and oversight that comes with billing matters, e-prescribing, electronic medical records, applying for and attesting to "Meaningful Use", and managing the daily activities of the office, doctors and managers may fall prey to putting-off various aspects of Human Resource Management.

Remember, your employees are a key component to running an efficient and compliant professional business. They really are your first and most important customer. When HR troubles arise, doctors find themselves facing staff turnover, misuse of overtime, employee absences, "rotten apple" attitudes, un-met productivity goals, and host of other people problems that can have a major impact on the profitability of the Practice.

Might it be time for a review or analysis of one or more of the following?

Do all your employees have a job description? Have you reviewed it with them lately?
When was the last time you looked over your Personnel Policy Manual? It may be time to have this reviewed with an HR professional.
Are your employee's wages and benefits up to par with what is being offered locally?
Have you done your performance evaluations with your employees within the last twelve months?
Should your employee benefit plans be analyzed for cost savings?
Do you maintain a Procedure Manual that will help answer questions for the new employee, or even the seasoned veteran, on how you would like to see a task or situation handled?

If you find yourself admitting to a lack of follow-up in these areas, or wondering if you are up-to-date on the latest policies, then be sure to give us a call to set-up a HR Check-up.

Both the Internal Revenue Service (IRS) and the US Department of Labor (DOL) also require that you maintain specific records regarding your staff. Having an employee file with the following items would be crucial should either agency require you provide this information:

Employee's demographic information including full name, social security number, address, date of birth, sex and occupation.
Copies of employee's W-4, I-9, and State New Hire Forms
Amounts and dates of all wage payments. This would also include the fair market value of "in-kind" wages paid.
Start and end dates of employment.
The time and day of the week that an employee's workweek begins.
Hours worked each day and the total hours worked each workweek and pay period.
The basis on which your employee's wages are paid and their regular hourly pay rate.
Your records should indicate employee's regular straight-time earnings, total overtime earnings for a workweek, total earnings for a pay period, and any additions or deductions from from their earnings.
The date of payment and the pay period covered by the payment.
Periods for which employees received pay for days absent due to sickness or injury and the amount and weekly rate of payments you or third-party payers made to them.

Additionally, your business should have available the following corporate information:

Your employer identification number
Copies of payroll tax returns filed
Dates and amounts of tax deposits and benefit payments made (such as 401(k) deferral payments)
Records of fringe benefits provided to your employees, including substantiation.

Hopefully, this information has just been a good reminder of things you are already doing. If not, don't neglect your number one customer any longer.

Scheduled October 1, 2011 Tax Decrease in Michigan - Delayed

2011-07-19T13:24:00.002-04:00

Under a 2007 law, Michigan's income and withholding tax rates were scheduled to decrease from 4.35% to 4.25% on October 1, 2011. However, under legislation enacted into law on May 25, 2011, this decrease has been postponed until January 1, 2013. In addition, the 2011 law revokes the additional tax rate decreases that were scheduled from October 1, 2012 through October 1, 2015.

Start your day with a Practice Huddle

2011-03-04T10:49:00.000-05:00

Whether a football player is on offense or defense, they go to the huddle at the start of each play to encourage each other and call a play that will move the team towards their goal. Doctors can use a similar approach to reaching practice goals by utilizing a "team huddle", a morning meeting, to start the day. Here are some key practice management aspects to consider with your staff.

Review Goals - summarize your actual production, adjusted production, collections, number of patients seen, number of new patients, number of procedures performed, and expenses for the prior day, week or current month and compare these figures against your goals to alert your team of any variances. Don't focus on only the negatives if you find yourself behind on your goals. Remember, this is a time for positive team encouragement and to work the office "playbook", which should move your team towards the practice goals. Save the longer strategy discussions and modifying the playbook for a regular staff meeting.

Review Yesterday - analyze the prior day's activities so that you follow-up on items that may have been missed or for a chance to market your services in the future. How was the new patient referred to your practice and why did they make an appointment with you? Was a treatment plan established and was it entered into your practice management system? Did you receive an updated e-mail address and cell phone number? Use this summary to follow-up with your new patients the next day with a quick note or phone call thanking them for visiting your office. Providing them with a patient opinion survey will also help your practice listen to and meet their needs; moving your practice towards becoming more than just a friend on Face book.
Review Today - look at today's appointments scheduled. Is the day full? If not, use your staff time efficiently by looking to today's listing of patients that are inactive or overdue for care. Work towards filling the day or a future schedule. If someone should call today with an emergency, where should the staff put the patient? Look at today's treatment plans and coordinate care with all providers of care to do what is best for the patient and efficiently utilize insurance benefits. Do any of today's patients have an outstanding balance with you? If so, be sure everyone on the team knows their role and assignments for following up.

Dental clients using our Morning Meeting Report can save an average of 12 minutes per day in gathering information for the meeting - that's approximately a week's worth of work over a year's time. Using a standardized report or a display board will keep your meetings efficient and make a positive impact on your work day. Give me a call to find out how you can begin implementing our standardized reporting process, or start one of your own. Either way, get into the practice of holding a daily huddle with your staff and move closer to your goals. One, Two, Three - Let's Go!

Practice with a Purpose - 7 New Year's Resolutions for Doctors to Consider

2011-01-03T14:26:00.001-05:00

If you don't measure it, you can't manage it - A key to making improvements to your practice in the New Year is to measure the objectives of your particular goal. Don't go overboard on this or you find yourself bogged down in the analysis. For starters: pick a few Key Performance Indicators that you haven't tracked in the past and begin to study them on a regular basis.
Is it time for a Master Fee Schedule check-up? - Having done several fee analyses for practices, I have found that it is not uncommon to see errors in the master fee schedule. Fees below actual costs, below the market, or simply below contracted fee schedules can result in dollars being "left on the table". For starters: create a listing of all the procedures you did in the past year and the frequency of each code used along with your current fee. Sort the codes by frequency and by dollar volume to key in on your top 25 codes, which most likely makes up 80 to 90 percent of your gross charges. If these fees are in line with your costs to produce the charge and market rates, then take the next step and check the rest of your less frequently used codes where under pricing is often overlooked.
Get to know your patients - While you shouldn't scrap every advertising program you have in place, be purposeful in your marketing strategy this year to grow your "top line". For starters: profile your current patient base. Knowing where they work, of which organizations they are members, how they were referred to your practice or how many referrals they sent to your practice will help you identify your biggest growth opportunity. Whether it is a specific new patient type, service that you could or should be performing for the better health of your patient, or maybe a new geographical market, create a laser-focused marketing plan.
Look to gain insight from one of your greatest assets - About a third or more of your general overhead is spent on staff salaries. Be sure to look to your staff for suggestions on how you might improve your practice this year - most do care about the continued success of your business. For starters: Whether it is through having regular staff meetings or casual morning huddles in the office, create time on your agenda for non-threatening discussions on their thoughts that will benefit you and your staff this New Year. And then, don't file them - plan and act accordingly making the best use of your assets.
Follow the money - Cash flow is the lifeblood of a medical or dental practice. Keeping an eye on your cash flow will keep your practice healthy and allow for a less stressful year. For starters: Go through your accounts receivable listing and look for those accounts that are greater than 90 days old. Is there a plan for collecting the money? If not, look to institute a revised method for collecting this money - check out Payment Clinic as one option for a renewed effort towards patient collections this year.
Keep things Looking Fresh - Walking into an office and finding old magazines in the waiting room or furniture that looks worn and tired creates a negative "first impression" of you when a patient enters your office for the first time. First impressions also find their way on your website, or lack thereof, and may be the difference between making that first appointment or sending a potential patient looking for other options to satisfy their health care needs. For starters: ask a few people outside of your office to provide you with a set of "fresh eyes". Have them give you their impressions of your website, your patient information brochure, or have them call and make an appointment with your front desk staff to evaluate the experience that your new patient may encounter.
Renew your perspective - I recently read that most people take a long time to die. I know, what a way to think about a New Year, right? But think about it for a minute, if your not one of those who will leave this life suddenly, you will most likely die in a bed waiting. So imagine yourself there for a moment, lying on your back and reflecting on your life. Do you have any regrets? Would your patients and family say that you really made an impact on their life? What saying would you want inscribed on your tombstone? Now, is there anything you can do this year to make your work life and your personal life even better? For starters: be sure to take time away from your practice and make an honest assessment of the impact your business has on you and you have on it. Look for ways this year that will provide you with the proper work balance, renew your passion for being a doctor, and "Practice with a Purpose".

I wish you a happy, healthy, and prosperous New Year. I look forward to working with you this year once again...helping you mind your own business.

Connecting with your Patient's Emotions

2010-12-18T10:21:00.001-05:00

I recently saw a brief segment of the show Dr. Phil where he was interviewing a young woman who had not yet seen a gynecologist. Even though she had been informed of and seemed to understand all the medical reasons for going to this specialist, she avoided making her first appointment. Her own sister tried to coach her into taking this important step for the sake of her own health and yet she resisted and would not comply. It wasn't until she met a gynecologist on Dr. Phil and gained a sense of "knowing" this doctor personally and becoming comfortable with a real person, that she agreed to have her first gynecological exam with this particular physician.

While I'm not a regular viewer of Dr. Phil, I was glad that I had caught the few minutes of this particular show. It made me think about what my clients are facing many times when they see their patients for the first time in an exam room. It also confirmed for me that patients will delay making an appointment with a doctor because of emotion - they are most likely terrified. Helping your patients overcome this fear is key to the growth of your business. So, how is it that you can take strides in assisting your next potential patient "get to know you" and make an appointment?

Is your website up to date with information about you and your staff that will allow a potential patient the opportunity to gain an initial impression?
Does your web presence allow your patients the opportunity to tell their friends about you?
Do you have a "meet the doctor" time built into your initial appointments? Or do you have an occasional "open house" where a potential new patient will have a chance to meet you?
Do you make a point of calling or sending a note to patients that will be coming to your office for the first time?
Are you active in your community? And do people see you as a "face" that cares about them outside of the office?
What do you and your staff do everyday to connect with the patients that you see in the office?

You became a doctor because you are passionate about caring for people and their health. Let people get to know you and see your passion for them and you will take hold of your future.

Here is an interesting key note lecture by futurist Patrick Dixon that speaks to the future of Healthcare and connecting to your patients emotions.

Reporting for Unclaimed Property - Update

2010-12-02T10:13:00.001-05:00

I recently had a client contact me about a check that had been issued to a participant in their retirement plan which had not been cashed - "My investment company said that I needed to file some report regarding this check, can you help me?"

I wrote a post a few years ago on the subject of the State of Michigan's Unclaimed Property Reporting that discussed the filing requirements. While many of our clients are now reporting, I'm sure that this is still a law that many overlook. Given the recent notice sent out be the State of Michigan, I thought I would post an update:

Beginning in 2011, changes to the Uniform Unclaimed Property Act, mandate a new due date to file the unclaimed property holder report as well as a shortened dormancy period for most property types. Every business or government entity incorporated in Michigan must report to the Michigan Department of Treasury abandoned property belonging to owners where there is no known address.

Medical and Dental practices will have unclaimed property from time to time resulting from normal business operations. The retirement plan distribution check noted above is just one example. Others would include - uncashed payroll checks, payments to vendors, and patient refund checks. Based upon the dormancy period, the business would have the obligation to report and submit this payment to the State of Michigan assuming the original owner could not be found. Taking the effort to find the person and contacting them regarding their outstanding matter seems to be the best "first step", in my opinion. However, if you can't find the person, then you need to file with the Michigan Department of Treasury. They have recently changed the compliance rules and here is what you need to know:

New date for reporting Unclaimed Property is July 1.
Dormancy periods for most property types have been shortened to three years (payroll items are one year).
A 25% penalty may be levied for those failing to comply, in addition to being responsible for interest charged on the amount you were holding.
Those voluntarily reporting the preceding four years are exempt from the penalty

To obtain additional information on filing requirements, forms, or to utilize available software go to this link - www.michigan.gov/unclaimedproperty

Follow the Money - Offer Options, and Get Paid

2010-11-09T12:41:00.000-05:00

In an effort to save money, companies and individuals are increasingly purchasing health insurance plans with lower premiums and higher deductibles. According to a recent study done by the Kaiser Family Foundation and the Health Research & Educational Trust, about 27% of covered workers have a deductible of at least $1,000 for single coverage, and a greater proportion of workers are enrolled in high-deductible health plans with a savings option as compared to the year 2009. This dynamic is changing the landscape of the revenue cycle management in the “health-care world”, as we know it. And while this change seems to speak directly to an office providing medical services, I believe that the application can be applied to dental and other health-care services as well. The fact that patients are going to be paying a larger percentage of their out-of-pocket costs rings true for all health-care disciplines.

To maintain a handle on the accounts receivable and increase the speed at which payment for services are recovered, providers of care will need to enhance their collection efforts and systems. In 2006, I prepared a summary for you entitled Effective Management of Accounts Receivable - (Part 1, Part 2, Part 3). Given today’s trends that we have noted in clients’ total accounts receivable and percentages of balances over 90 days old, I would encourage you to review this three part summary with your staff as a “check-up”, of sorts, on your current process of managing your collections. Additionally, I continue to look for tools that you can use to enhance your payment cycle. This month I would like to highlight and provide you with some information on one such tool, that I recently came across and of which you may find helpful for your practice.

Payment Clinic – The place where patients pay medical bills…

Payment Clinic is a leader in flexible patient-pay technology solutions, helping patients, hospitals, and Doctors work together to get patient balances paid. Why send a patient to collections before offering the option and flexibility of paying for your service on-line and resolve the balance due. Here’s how Payment Clinic works:

Thru your billing statements and staff, patients learn that they can pay their bill for your services using Payment Clinic.
Patients use the website to review if they are eligible for any discounts on their bill, which are based upon parameters that you establish and are maintained by Payment Clinic.
Patients pay their bill they received from you on payment clinic by placing a “paid in full” amount on the system. If the patient’s offer is accepted based upon your criteria, you get paid. Patients save time, hassle and money (when eligible) off their bill because they agree to pay you sooner using Payment Clinic.

With no up-front costs to the practice, and no software to maintain, Payment Clinic is an option worth looking at as an additional way for medical and dental practices to efficiently manage their accounts receivable. If you would like to explore this service further to implement into your practice, send me an e-mail.requesting additional detailed information.

Is your Practice Healthy?

2010-09-21T13:11:00.000-04:00

Today I met with a group of office managers and billing personnel from various medical groups. The discussion today was based upon a talk I have done several times entitled, "Show Me the Money" It is always a pleasure meeting with managers and billing staff, who in my opinion, are so very instrumental to a physician's practice. Here are some comments that were shared on the evaluation of the meeting:

"Very interesting with good advice for our offices."

"Informative"

"Common Sense Approach!!"

"Informative, with many good things to consider"

All participants agreed or strongly agreed that this was of interest to them, a practical value, considered their attendance to be worthy of their time, and would recommend the workshop to others.

If you are interested in attending such a meeting or sponsoring one for your medical or dental group, please fill out my login and learn form. We will let you know when the next meeting is scheduled or contact you directly to schedule a meeting for your group.

Working to help you Mind your Own Business!

CMS Launches EHR Incentive Programs Website

2010-06-24T09:30:00.003-04:00

The Centers for Medicare & Medicaid Services (CMS) has launched its official website for the Medicare & Medicaid EHR incentive programs.

CMS said its EHR incentive program website is for providers that are seeking to learn about who is eligible for the programs, how to register, the definition of meaningful use, as well as upcoming EHR training and events.

To Access the CMS Website - Click Here

Can you increase your bottom line by saving on your wireless plan?

2010-06-05T08:37:00.000-04:00

Over the years, having entered and reviewed paying habits of medical and dental offices, there has been one expense item that I thought could stand some further review - the telephone bill, and especially wireless plans. This weekend I came across a service that analyzes your plan and then provides saving suggestions based upon your current wireless service. BillShrink claims that nearly 8 out of 10 people pay more than they need to pay on their cell phone bill. From personal experience, I know that if I stop in to see or call my wireless provider once a year they will find savings for me. The conversation usually goes something like this --"Well, Mr. DeVries, it looks like you are using "X" number of minutes each month. We could switch you to our "NowBetter" plan that will reduce your monthly cost to be...." Or, sometimes I get -- "Did you know you could get more minutes for the same price by signing up for our "FamilySaver" plan?

When considering the cost of your wireless service there are so many companies and plan variations that I often wondered how anyone would be able to keep track of all the options. With the services that BillShrink offers, and an advisor who helps you mind your own business, you just might find the right wireless plan that will serve your needs at a cost you really desire.

Small Business Healthcare Credit Calculator

2010-06-03T00:59:00.000-04:00

Although the recently enacted health reform legislation will impose penalties on certain businesses for not providing coverage to their employees, most of our medical and dental client practices will not have to worry about this provision because they are considered "small business employers" who employ fewer than 50 employees and aren't subject to the so called “pay or play” penalty. However, even though you may not be required to do so, the competition for good employees may necessitate that you give consideration to offering your employees such benefits, especially if your employees are going to be required to have insurance. Given this thought and that many of our clients already offer their full-time employees health insurance coverage, let's take a look at key provision of the legislation that we will look to utilize in our year-end tax planning efforts with clients - Tax credits to certain small employers that provide insurance.

The new law provides small employers with a tax credit (i.e., a dollar-for-dollar reduction in tax) for nonelective contributions to purchase health insurance for their employees. The credit can offset an employer's regular tax or its alternative minimum tax (AMT) liability. To qualify, a business must offer health insurance to its employees as part of their compensation and contribute at least half the total premium cost. The business must have no more than 25 full-time equivalent employees (“FTEs”), and the employees must have annual full-time equivalent wages that average no more than $50,000. However, the full amount of the credit is available only to an employer with 10 or fewer FTEs and whose employees have average annual full-time equivalent wages from the employer of not more than $25,000.

The credit is initially available for any tax year beginning in 2010, 2011, 2012, or 2013. Qualifying health insurance for claiming the credit for this first phase of the credit is health insurance coverage purchased from an insurance company licensed under state law. For tax years beginning after 2013, the credit is only available to an eligible small employer that purchases health insurance coverage for its employees through a state exchange and is only available for two years. The maximum two-year coverage period does not take into account any tax years beginning in years before 2014. Thus, an eligible small employer could potentially qualify for this credit for six tax years, four years under the first phase and two years under the second phase.

For tax years beginning in 2010, 2011, 2012, or 2013, the credit is generally 35% (50% for tax years beginning after 2013) of the employer's non-elective contributions toward the employees' health insurance premiums. The credit phases out as business-size and average wages increase.

Keep in mind that there are some special rules. The employer is entitled to an ordinary and necessary business expense deduction equal to the amount of the employer contribution minus the dollar amount of the credit. For example, if an eligible small employer pays 100% of the cost of its employees' health insurance coverage and the amount of the tax credit is 35% of that cost (for tax year 2010), the employer can only claim a deduction for the other 65% of the premium cost.

Self-employed individuals, including partners and sole proprietors, two percent shareholders of an S corporation, and five percent owners of the employer are not treated as employees for purposes of this credit. There is also a special rule to prevent sole proprietorships from receiving the credit for the owner and their family members. Thus, no credit is available for any contribution to the purchase of health insurance for these individuals and the individual is not taken into account in determining the number of full-time equivalent employees or average full-time equivalent wages.

To determine your potential tax credit for 2010, you can review and fill-in the Health Care Credit Worksheet Or, if you complete my Health Care Credit Questionnaire prior to July 1st, I will send you a complementary computation for your review and to help you mind your own business.

FTC Extends Enforcement Deadline for Red Flags Rule

2010-06-01T09:08:00.002-04:00

On May 28, 2010, the FTC announced that it is again delaying enforcement of the Red Flags Rule (the Rule), at the request of several members of Congress. Unless Congress enacts legislation modifying the Rule, the new enforcement date will be January 1, 2011. This constitutes the fourth time that the FTC has delayed enforcement of the Rule, which was originally scheduled for enforcement on November 1, 2008.

Here’s to Your Health

2010-05-02T21:15:00.000-04:00

I took this picture of a dental office that doubles as a pharmacy on a recent trip to Honduras. I saw several medical offices during, what felt like, “roller coaster” taxi rides around the city of Tegucigalpa. Many were similar to this building except that the others I saw had a fence or a wall in front of their establishment and it wasn’t unusual to find rolled barbed wire adorning the top of the barrier. We only spent about four days in Honduras and found the Central American people to be very hospitable. However, in that short time I realized, once again, that we live in the best country in the world. While I’m thankful for where I live and for the health-care system we have here in the United States, I’m afraid that our costs for this privilege are about to increase.

Did you have similar thoughts on March 23 when you saw President Obama sign the new Health Care Bills into law? No matter what side of the fence you are on regarding the issues that face us as a nation, one thing is certain – we are about to experience change in our businesses. The passage of the Health Care Act (a 906-page document) and the Reconciliation Act (a 2,310 page document) is not only historic, it is massive and will be complicated to implement. While the centerpiece of the new law is the mandate for most residents of the U.S. to obtain health insurance, it comes with a host of new tax rules, and ill-defined regulations.

In an effort to help you through the changes that will occur, we will continue to review various aspects of this law and others to help you manage your practice effectively. This month, let’s begin looking at some implications of the new health-care law.

W-2 Reporting

Beginning in 2011, employers will be required to report the value of employee health care coverage on Form W-2. For this reason, we will begin asking you to separate the costs you pay for health care coverage by individual employee. We will be working on a plan for implementing this plan soon so that it doesn’t become a burden in early 2011.

Higher Payroll Taxes

Beginning in 2013, a new 0.9 percent increase in Medicare tax will be levied on taxpayers who file single and earn more than $200,000. Married couples will see the affects of this additional tax once their incomes hit $250,000. Currently, all taxpayers pay 1.45 percent of their earned income in Medicare taxes, which is matched dollar for dollar by their employer. While the employer will not be required to match the additional new tax, they will be required to withhold the amount on wages their employees earn above the applicable amount.

Medicare Taxes on Unearned Income

Also in 2013, people with incomes above the $200,000 (single) or $250,000 (married) will be required to pay Medicare taxes on unearned income. For every dollar of dividends, capital gains, annuities, royalties, and rents you will be required to give almost 4 cents to Uncle Sam for Medicare taxes.

How this will affect individual taxpayers will depend on the source of their income. For example, if a doctor who is married has $200,000 in wages and net investment income of $100,000, the couple will pay the additional Medicare tax on $50,000 of their investment income ($200,000 + $100,000 less $250,000). Their additional tax would be $1,900 ($50,000 X 3.8%).

Should the doctor have a higher wage in our example, say $300,000, the couple’s additional tax would total $4,250 (0.9 percent of earned income over $250,000 plus 3.8 percent of $100,000 net investment income).

Given these additional Medicare tax rules, it makes sense to explore ways in which you can defer more money in your qualified retirement plans. If you are not maximizing your contributions, consider doing so if you become subjected to these new taxes. Income from tax deferred retirement accounts such as a 401(k) or similar accounts will not be included in income subject to the additional tax.

Individuals without Coverage
Beginning in 2014, nonexempt U.S. citizens and legal residents will be required to maintain a minimum amount of health coverage. Individuals who fail to do so will be subject to certain penalties beginning in 2016. The penalty will be the greater of 2.5 percent of household income over the minimum income required to file a tax return or a per-person penalty rate. The rate for each adult in the household would be $695 while the rate for uninsured children under 18 years old will be half of the adult rate. The overall penalty cannot exceed 300 percent of the per-adult penalty, or $2,085.

Even though small employers will not be required to do so, the competition for good employees may necessitate that you give consideration to offering your employees such benefits.

Employer Health Care

After December 31, 2013, applicable large employers (generally those with at least 50 full-time employees) will be required to offer affordable coverage to all of their full-time employees. They will pay a penalty if one of their employees is certified as having purchased health insurance through a state exchange and the employee receives a tax credit or cost-sharing reduction.

Employers offering coverage through an eligible employer-sponsored plan and paying a portion of the cost will have to provide vouchers to their employees that can be applied to the cost of a health plan with an insurance exchange.

Certain small employers might be eligible for a credit if they provide health coverage to their employees.

The Health Care and Reconciliation Acts are complicated and will take time to sort out. We will continue to review the effects of the changes and offer information that will help you mind your own business.

Hardship Distributions from your Retirement Plan

2010-03-09T17:31:00.002-05:00

Over the past 26 years of working with doctor clients, I can't remember a year where I received more phone calls from participants in retirement plans requesting a distribution due to a financial hardship than last year. Upon receiving such a call, we would educate the client’s staff member on the consequences of a plan distribution prior to age 59 ½, but often a “hardship distribution” was their only option. Some of the phone calls, though, resulted in having to refuse the request. Why? - Because the employee couldn’t substantiate or verify the hardship.

Warner, Norcross, & Judd (www.wnj.com), a local law firm in Grand Rapids Michigan, recently sent out a question and answer summary of this topic that I thought would be worth sharing with you for the next time you are presented with an employee requesting a distribution from your retirement plan for a “financial hardship”. Here is a paraphrased version:

Q: What documentation do I need to verify that an employee has experienced an event that qualifies as a safe harbor hardship under our 401(k) plan?

A: While the Internal Revenue Service doesn’t have specific rules for what documentation is needed, a hardship distribution should only be made if the employee has demonstrated the occurrence of the event. Having the employee fill out a form and simply check a box that they have incurred a hardship is not sufficient: you need to have some form of documentation. So, what could you use?

• Medical Expenses – ask for a copy of the medical bill, along with a denial from the insurance company, or a letter from the health care provider verifying the need for the treatment and a summary of the out-of-pocket costs.

• Purchase of principal residence – request a signed purchase agreement.

• Twelve months’ future tuition and related costs – obtain a bill or letter from the educational institution that outlines the tuition, room, board and related expenses for the student enrolled.

• Payments to prevent eviction or foreclosure on principal residence – have the employee submit to you the formal legal document giving notice of overdue rent or mortgage payments that will result in eviction or foreclosure proceedings, if not paid by a certain date.

• Burial or funeral expenses – get a copy of a death certificate and funeral home bill.

• Repair of casualty losses to a principal residence – gather evidence of a casualty loss, a repair bill and proof that the expenses were not covered by an insurance company.

Medicare News that just came across my desk

2010-03-03T14:38:00.000-05:00

Late last night, the president signed H.R. 4691, the Temporary Extension Act of 2010 into law. This legislation includes a provision that freezes Medicare physician payments at their current level until March 31, 2010. The legislation also extends the therapy cap exception process through until March 31, 2010. The bill passed the Senate by a vote of 78 - 19. The House of Representatives had unanimously approved a companion bill by voice vote on Feb. 25.

Also note, effective immediately, claims with dates of service March 1 and later which were being held by Medicare contractors will be released for processing and payment. Please keep in mind that the statutory payment floors still apply and, therefore, clean electronic claims cannot be paid before 14 calendar days after the date they are received by Medicare contractors (29 calendar days for clean paper claims).

Anticipated Raise Amounts for Your Staff

2010-01-09T08:36:00.012-05:00

The cost of living from November 2008 to November 2009 was 1.8% - as defined by Table 1. Consumer Price Index for All Urban Consumers (CPI-U): U.S. city average, by expenditure category and commodity and service group. I often suggest that "merit" should be the greatest factor in determining a raise for an employee. However, I recognize that the cost of living is frequently used as a factor, as well as considering the profitability of your practice, when determining employee raise amounts.

For 2010, in a general sense, what percentage raise do you anticipate providing your employees? Please let me know by way of participating in a brief survey - Click Here or enter your response below.

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Consider Converting your Traditional IRA to a Roth IRA in 2010 - Part 3

2010-01-04T10:00:00.003-05:00

I have a few clients that started a Roth IRA in their college or residency years, however most physicians and dentists with whom I work, do not have Roth IRA's because the income limitations associated with Roth contributions have made it impossible for them to start one.

The intent of this series is to provide you with some basic strategies and information on Roth Conversions for 2010. The concepts and strategies offered here may not be right for you. For a more specific tax analysis of your personal situation, you should schedule a consultation with your tax preparer or financial planner.

For the final post on this matter (Part 3 of 3) - let's review a strategy where hindsight can be beneficial to making a Roth conversion work for you:

Over the years of preparing taxes for physicians and dentists, I have come across the situation where a client's Roth contribution for the year was in excess of the allowed amount because their income for the year was too high. Rather than withdrawing the excess contribution to avoid the potential tax and penalty consequences, I would suggest that they contact the trustee of their IRA and "re-characterize" their contribution, or portion thereof, to a traditional IRA before we filed their income tax return. This, after-the-fact, corrective action would allow the client to keep any built up earnings in a tax deferred account rather than paying the tax consequences.

For the purpose of converting your traditional IRA to a Roth IRA in 2010, utilizing a similar "re-characterization" strategy may prove beneficial to you if, in hind-sight, you determine that converting wasn't as beneficial as you might have hoped. Under the current tax law, a taxpayer has until October 15 of the year following the conversion date to "re-characterize", or undo, your conversion. Let's look at a couple examples:

Let's say that you convert all of your traditional IRA accounts to a Roth IRA right away in 2010. At the time of your conversion the value of your traditional IRA's was $100,000. You would have up to October 17, 2011 to re-characterize all or a portion of your conversion. In late summer or early fall of 2011 you check the value of your now Roth IRA and find that the market value of your account is $125,000. In this situation, choosing to keep the 2010 conversion would make sense because you will have sheltered $25,000 of income from future income tax.

Now let's assume the same facts as above, but in this case when you open your statement in late summer or early fall of 2011 you find that the value of your account dropped to $80,000. If you would have known that your account was going to drop in value when you made the original conversion, you would have put off the conversion of your traditional IRA until the later date to avoid paying tax on the higher value of $100,000, right? Well, in this case, you would simply "re-characterize" the Roth conversion back to a traditional IRA before October 17, 2011 and then reconsider converting the lower value to a Roth at later date.

While the above examples present a fairly straight-forward reason for using the strategy of "re-characterizing" a Roth, your personal situation may present a whole set of different circumstances requiring further analysis. Regardless, having the option of looking back and re-considering your decision makes the initial decision to convert from a traditional IRA to a Roth IRA a whole lot easier and less risky.

Consider Converting your Traditional IRA to a Roth IRA in 2010 - Part 2

2009-12-28T10:33:00.003-05:00

For today's post on this subject (Part 2 of 3), here are six reasons and strategies for physicians and dentists to consider in converting from a Traditional IRA to a Roth:

Take advantage of today's lower tax rates - obviously, no one really knows for sure what direction income tax rates will go in the coming years, but it seems very likely, based upon current and proposed government spending, that future income rates will increase. By converting dollars from a traditional IRA to a Roth IRA and paying the tax required on this income at current rates for 2010, you stand to save tax dollars. If you desire, you can elect to pay the tax due over tax years 2011 and 2012, but the chances of tax rate increases in those years are greater. If you aren't so sure that rates will go up in the future, but you don't want to take a chance that they will, then convert just a portion of your IRA. Higher income tax rates in your future may also be caused by the distributions you will need in future years. If your planned lump-sum distribution will cause you to move up a tax bracket in the year in which you need the money, consider converting a series of distributions that will keep you in the lower bracket each year leading up to the year in which you anticipate needing the money.
Use up charitable deduction carry-forwards - I find that clients in their retirement years who are inclined to continue their charitable contributions may have limits placed upon their contributions because their taxable income isn't high enough to take the full deduction. By converting a portion of their IRA to a Roth we are able to take a larger charitable deduction and not necessarily increase their tax liability.
Utilize high basis in non-deductible IRA - Over the past several years, I have recommended that physician and dental clients consider making contributions to their IRA account even though it was not tax deductible (see Part 1 for a discussion on deductible vs. non-deductible IRA's). This action has caused their "basis", or portion of the balance that represents their contribution, to be high as compared to the IRA overall value. Of course, the stock market decline prior to this year has also contributed to this factor. Converting your regular IRA to a Roth in situations where you have a high "basis" could mean that you will pay minimal or no additional tax. Keep in mind, though, that all IRA balances are considered and not just the non-deductible account that you may have segregated into a separate account.
Estate Planning - you may find, in your retirement years, that you don't need the all of the "nest egg" that you have acquired over many years of saving and you desire to leave a portion of this money to your heirs. Roth IRA's provide a for a more efficient way of leaving retirement plan money to your children or grandchildren. Distributions from traditional IRA's, for example, require that your kids pay income taxes on the money they receive at their rates. Roth IRA distributions from an inherited Roth IRA would be exempt from personal income taxes. The other advantage that Roth IRA's have over Traditional IRA's is the fact that you are not required to take an required minimum distributions after age 70 1/2.
Use non-qualified money to pay the tax - Physicians and Dentists should use money outside of their qualified retirement plan money to pay the tax associated with the conversion. Using funds, outside of your qualified retirement money, even if you are 59 1/2, will generally enhance your overall future wealth.
Contribute and then Convert - As noted above, the income limitations for converting from a traditional IRA are soon to be repealed. However, the income limits for making a current Roth contribution remain in effect. Assuming you don't have a traditional IRA to convert and you are subject to the income limits for making a contribution, you can still make a contribution to a Roth IRA by first making a non-deductible contribution to a traditional IRA account and then immediately converting it to a Roth IRA.

There's an old saying that hindsight vision is 20/20. On the next post we will consider a strategy that will allow you the ability to correct the timing of your Roth conversion.

Consider Converting your Traditional IRA to a Roth IRA in 2010 - Part 1

2009-12-21T10:00:00.014-05:00

I have a few clients that started a Roth IRA in their college or residency years; however, most physicians and dentists with whom I work do not have Roth IRA's because the income limitations associated with Roth contributions have made it impossible for them to start one.

Recently, I have had several physician clients inquire about the possibility of converting their "Traditional IRA" account to a "Roth IRA" in 2010. Beginning on January 1, 2010, the modified adjusted gross income limit of $100,000 that has precluded most physicians and dentists from converting traditional IRA balances to a Roth account will be repealed. This change in the tax law will allow affluent taxpayers the significant opportunity to move funds from a tax-deferred status to a situation where future distributions may be tax-free.

The intent of this series is to provide you with some basic strategies and information on Roth Conversions for 2010. The concepts and strategies offered here may not be right for you. For a more specific tax analysis of your personal situation, you should schedule a consultation with your tax preparer or financial planner.

For today's post (Part 1 of 3), let's consider some basic concepts of the two types of IRA's that are generally available today:

Traditional IRA - these Individual Retirement Accounts allow the income or capital gains in your "nest egg" to accumulate without having to pay current taxes on your earnings. Contributions are either tax deductible as an income adjustment on your personal tax return, providing for tax current tax savings. Or, because of participation in another qualified retirement plan and income limitations, the contribution to your account is considered to be a "Non-Taxable" contribution. In the case of the non-taxable contributions, taxpayers file a form 8606 with their tax returns, which reports the contribution type to the IRS and tracks your contributions from year to year as additional contributions are made. The filing of this form becomes an important factor for the year in which you receive distributions from your IRA or, for the purpose of this summary, the year in which you convert to a Roth IRA. When you convert to a Roth or begin to take distributions from a regular IRA you pay taxes on this ordinary income based upon a computation that takes into consideration your non-tax contributions.

Roth IRA - like the traditional IRA's, your "nest egg" can grow without having to report and pay current taxes on the earnings in your account. Unlike the traditional IRA, contributions to a Roth do not afford the ability to deduct the contributions from your taxable income and thus, do not allow for current year tax savings. Your savings comes in future years when "qualified" distributions are made from your account and considered exempt from income taxes. A distribution is considered to be qualified if made: once you reach age 59 1/2, upon death or disability, or (up to $10,000 per lifetime) for first-time homebuyer expenses. However, and this is a key consideration, a distribution is not considered qualified if made within the five-year period beginning with the first tax year you made a contribution to a Roth IRA.

The first, and probably the most important, reason for converting your traditional IRA to a Roth IRA (even if it is a partial or small contribution) is that you need to get the "five-year period clock" ticking to take advantages of the strategies that I will outline in my next post.

Provide Your Staff with a 2009 Total Pay Statement

2009-12-18T10:34:00.003-05:00

Let your employees know how much you appreciate them for all the work they do for you. Without their help it would really be difficult to run a medical or dental practice. In addition to saying thank you or doing something special for them, consider providing them with a compensation summary for 2009. The following is a link to an example form you can use to summarize their compensation package.

Compensation Summary

2010 Holiday Schedule for yuor Personnel Policy Manuals

2009-12-16T10:23:00.004-05:00

Here is a listing of the most common employer-paid holidays and their 2010 dates of observance:

Martin Luther King's Birthday - Monday, January 18, 2010

Presidents Day - Monday, February 15, 2010

Good Friday - Friday, April 2, 2010

Memorial Day - Monday, May 31, 2010

Independence Day - Sunday, July 4, 2010

Labor Day - Monday, September 6, 2010

Thanksgiving Day - Thursday, November 25, 2010

Day After Thanksgiving - Friday, November 26, 2010

Christmas - Saturday, December 25, 2010

New Year's Day - Saturday, January 1, 2011

Key Figures for the New Year - 2010

2009-12-14T10:22:00.000-05:00

• IRS Standard Business Mileage Rate for 2010 - Under the standard mileage rate method, a taxpayer who owns or leases an automobile (including a van, pickup or panel truck) and uses it for business may claim an expense deduction equal to the standard mileage rate time the number of business miles traveled in the year. I find that medical and dental offices use this figure frequently for reimbursing employees when they use their automobile for the business. The new IRS prescribed rate for 2010 is 50 cents per mile, down from last year’s mileage rate.

• Payroll Tax Figures – For those of you who are completing payroll for your employees, please take note of the following:

Because there is no Cost of Living Adjustment for the year, the Social Security Administration has announced that the wage base for computing the Social Security tax (OASDI) in 2010 will remain the same as in 2009 - $106,800.

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

The FICA tax rate for employees and employers is 7.65% each - 6.2% for OASDI and 1.45% for HI. For self-employed workers, the FICA tax is 15.3% - 12.4% for OASDI and 2.9% for HI. There is a maximum amount of compensation ($106,800 in 2010) subject to the OASDI tax, but no maximum for HI.

• Election to expense capital purchases subject to change – The Economic Stimulus Act of 2008 increased the Section 179 allowance to $250,000 of qualified equipment purchases for any year beginning in 2008. The American Recovery and Reinvestment Act extended this amount through the end of 2009. For now, the 2010 amount is scheduled to revert back to the amount based upon the 2007 amounts plus an inflation adjustment, which we believe will put the deduction limit at an estimated $135,000. I suspect that congress will take this matter up again with a future bill and we may see this adjusted once again - stay tuned for more on this election.

• Retirement Plan Limits in 2010 – The maximum elective deferral amount (voluntary contribution) for 401(k) plans remains unchanged at $16,500. Those who are 50 years or older can contribute an additional $5,500 as a “catch-up” contribution. For those with SIMPLE plans, the elective deferral amount also remains at $11,500 and the additional “catch-up” remains at $2,500, for those over the age of 50.

• Employer Health Savings Accounts – Up to $6,150 may be put into an HSA for those with family coverage and $3,050 for individual coverage. Account owners who are 55 or older may put an additional $1,000 in their account. Minimum deductibles for HSA’s increased to $2,400 for family coverage and $1,200 for individual coverage.

Year-End Tax Planning 2009

2009-12-05T11:23:00.000-05:00

As we approach the end of the year, here are some things to consider as it relates to your personal and business tax returns:

Health care reform bills: Many observers are convinced that we’ll have a health care reform bill enacted this year. On Saturday, November 7, the House of Representatives by a vote of 220-215 approved H.R. 3962, the Affordable Health Care for American Act. Having read some of the approximate 2,000 pages of this bill, it seems to me that the bill is not clear on how they plan to implement the various aspects of the plan nor do they address completely how we will pay for the costs associated with this “Affordable” bill. Keep in mind that the House bill faces tough opposition in the Senate, which is considering its own version of health care reform; but no matter what is ultimately decided upon, it’s clear that if passage of health care reform as stated in H.R. 3962 should occur, we will see tax rates go up possibly as early as next year.

Pay your tax now: Previous tax planning wisdom was - accelerate year-end deductions and defer income into the following year. Given the possibility of rates moving upwards, it just might make more sense this year to accelerate your income where possible and defer deductions into next year. So, don’t pay your real estate taxes before the end of the year – rather, pay them when they are due, typically in February. Also, make any estimated tax payments after the first of the year rather than attempting to get a deduction this year.

Consider your stock portfolio: If you have a stock portfolio that contains long-term capital gains, consider selling them before the end of the year taking advantage of the capital gain tax rates, which may go away in the coming years. If the stock that you are selling is something that you would like to hold over a longer period of time, then buy it back after the sale and you will have stepped-up your basis for any future sales. Remember, that the “wash-sale” rule only applies when you sell at a loss and not at a gain.

Contribute to your IRA: You can contribute up to $5,000 ($6,000 if you are age 50 or older by year-end) to your IRA for 2009. Most likely, if you are participating in your employer sponsored retirement plan, you will not be able to deduct your IRA contribution. However, doctors should still consider funding a traditional IRA even though the deduction may not be allowed. Funding a non-deductible IRA will allow you to keep a portion of your money in a “tax deferred vehicle” for future years. Depending upon the long-term tax outlook, you might also consider converting this IRA to a Roth IRA. See my previous month’s comments on this strategy. You may want to wait to see what happens with tax rates next year before making this move.

Contribute to your Employer-Sponsored Retirement Plan: The 2009 annual 401(k) deferral limit for qualified retirement plans is $16,500. If you are age 50 or older by year-end, you can contribute an additional $5,500. Funding the maximum retirement plan amount is one area that I would not suggest waiting until tomorrow to do. Be sure to check your pay check stubs now to be certain that you are deferring the maximum to decrease your taxable income. If your Practice doesn't currently have a qualified plan, you may still establish a plan for 2009, but the deadline is December 31st for establishing a plan for the current year.

Review your retirement plan design: Looking at the possibility of funding more dollars into a qualified retirement plan by the use of a defined benefit component may make sense. Consider the option of establishing a Cash Balance Plan next year as a way of deferring salaries next year and in the coming years when rates are projected to increase.

Maximize your deductible interest: Deductible interest for itemized deduction purposes includes mortgage interest on a principal or second residence on up to $1,000,000 of debt, which is used to acquire or improve your home, as long as the debt is secured by the home. Also, you may deduct the interest on up to $100,000 of home equity indebtedness, which is secured by your home. Interest may be deductible on margin loans as long as you have adequate investment interest and dividend income. Interest borrowed for rental properties may be limited due to the passive loss rules.

Boost Your Personal Interest Deductions: If you're paying interest on credit cards, auto loans, student loans, and other non-business debt, consider a home equity loan so long as the interest rates are lower. You will be able to deduct this interest as home mortgage interest on loans of up to $100,000 as apposed to receiving no deduction for personal interest. Note, however, if you are subject to AMT, you may not want to follow this strategy as this interest (home equity loans for personal items other than for improving or buying a home) is not deductible for AMT purposes.

Section 179 Expensing Option: The maximum section 179 expense deduction remains at $250,000 for tax years beginning in 2009; however, careful consideration to electing this option versus taking the regular allowable depreciation deduction in future years bears some thought this year.

Don't loose on Leasehold Improvements: Leasehold improvements made to your office space must be depreciated over 39.5 years. Be sure to clarify what you are paying for when negotiating with your landlord. Attempt to pay for things that might fall into a lower asset life and be sure these items are separately identified on the invoices you pay. Items such as carpeting, flooring, lighting in patient areas, removable cabinetry, and wiring and plumbing for medical or dental equipment can be depreciated over shorter periods. Also, consider working into your written lease agreement that if you pay for limited leasehold improvements that your landlord will apply those payments as rent paid. Your landlord should see the benefits of this strategy as well.

Make Charitable Contributions to 501(c) 3 Non-Profit Organizations: In most situations, charitable contributions to qualified organizations are deductible up to 50% of your income. If you are looking for a way to reduce your taxable income, making charitable contributions is a great way to reduce your taxable income in any tax year. Keep in mind that retaining a receipt for your deduction is of utmost importance now, so don't overlook obtaining a receipt for contributions over $250. Also remember, a contribution made with cash without a receipt is not allowed as a deduction. Donating appreciated stock or mutual funds is also an effective way for making contributions. Using this approach you can avoid the capital gains on the asset being transferred in addition to obtaining a charitable deduction.

Put your Children on the Payroll: If your children are able to provide some form of service to your Practice, consider paying them a reasonable salary for the work done. Typically, the first $5,700 of earned income they receive will not be subject to federal taxes. Consider using the money they earn to fund a Roth IRA, which can be used later for college, a first home purchase, or providing a great start towards retirement.

This is not meant to be an all-inclusive listing of tax planning strategies. A number of tax deductions or credits are available to tax payers in lower tax brackets. Given that most doctors do not qualify for these programs they have been omitted from this listing. Keep in mind also that the above listing is based upon general rules and should be carefully considered for your individual situation.

Planning for IRA Contributions

2009-11-02T14:56:00.000-05:00

Over the past several years, I have suggested to doctor clients who did not have a deductible or “rollover” IRA account and were participants in a retirement plan, that they make non-deductible IRA contributions. While the IRA was not deductible on the personal return, the earnings continued to be tax deferred. We were also planning for 2010 when income limitations for a Roth Rollover are planned to be suspended. Since 2010 is just around the corner, now is the time to begin planning for a Roth Rollover. Keep in mind that you will pay tax on the income earned within your IRA plan, but once a Roth, your account will grow tax free. If you didn’t establish a plan, there still may be time to participate now and in the coming years. Simply make a non-deductible contribution for a tax year, then switch the IRA to a Roth and pay tax only on the earnings. Keep in mind however, that if you have a regular IRA this strategy may not be as advantageous because the tax free portion of Roth conversions is based on the ratio of nondeductible contributions to the total value of all regular IRA balances.

Retirement Plan Update

2009-11-02T14:53:00.001-05:00

The IRS has mandated that all qualified plans that use a pre-approved plan document restate their current plan to include the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”). Plans must be restated on an approved plan document by April 30, 2010. If you haven't made plans for updating your plan, be sure you do soon.

Other Notes:

According the IRS, the value of an employee’s unused leave can be transferred to a 401(k) or profit sharing plan annually instead of being paid to the worker in cash. This can help the employee who has “leave” that can’t be carried over, so she will not need to accept additional taxable pay. A similar amendment can be made to allow the value of the unused leave to be contributed to the plan when an employee separates from service. In both situations, however, consideration must be made to contribution limits.

Over the past several months, we have received many calls from client employees requesting a distribution from their retirement plan. Unless your plan allows for a “hardship” distribution, or participant loans, the ability for an employee to obtain money from their account balance is not possible unless the participant is of retirement age or has separated from service. Keep in mind that when making hardship distributions, such distributions are permitted only when the employee has an immediate need for the money. Also, the withdrawal must be limited to the amount of money needed to satisfy the hardship plus any tax and penalty. Payouts are taxed as income to the participant and unless the recipient is 59.5 years of age or the funds are used for deductible medical costs the payout is subject to an additional 10% tax penalty. If your plan includes a 401(k) option, the employee must also suspend from making contributions to the plan for a set period of time.

Patient "No Show" Survey - Results

2009-07-11T09:11:00.004-04:00

We wish to thank all of you who participated in our recent practice management survey, which was prompted from an office manager’s comment about the increase in the number of patient “no show” appointments. Your active participation is an encouragement to continue to look for ways to help you in managing your business and increase your bottom line. Our overall response rate was very good – so, Thank You!

For this particular practice management survey, we asked if you have noted an increase in the percentage of no show appointments over the last six months. 50% of you said, yes. We asked if you charged your patients for their missed appointment. 61% indicated that they do charge their patients. And the most common response to the question on how much you charged for these missed appointments was the fee range of $21 - $25.

The problem with patients missing a scheduled appointment is not a new issue for medical and dental offices. However, based upon indications that the problem isn’t going away and may actually be on the rise, let’s take some time to review ways to manage and minimize our exposure to this scheduling annoyance.

Know your Patient – You can’t manage what you do not measure. To put this into perspective for your “no show” appointments, be sure to identify and track patients that miss appointments. From your list, look for common reasons for the missed appointments. Are there certain appointment types that are skipped more often than any other types? Have you “bumped” or canceled an appointment with this patient before? Was the time-frame from the date of booking the appointment to the actual appointment date longer than normal? Look for specific patterns in your data that may help you pin-point solutions for lowering the number of missed appointments.

Stay on time – The legendary college basketball coach, John Wooden said, “Respect a man, and he will do all the more.” Patients that experience long time delays in the waiting or exam room may perceive this as a lack of respect for their time, which can cause a greater amount of disrespect for your time. If you are finding that you are always running late, look for ways to create more patient access. Strategies may include changing your scheduling techniques, and/or adding a mid-level provider or another doctor to your practice.

Communicate & Engage - A patient that understands the importance of the scheduled appointment is more likely to keep the appointment. Making reminder telephone calls to the patient is a common way of doing this. If you are scheduling patients for a repeat visit, providers should speak with the patient regarding the need for the revisit and then staff members will be able to reinforce this with the patient during the check-out process and provide them with your appointment policy. Also during the scheduling process, ensure that your patients participate in selecting the day and time of the appointment.

Here are some tips to consider that were offered by your peers:

Install a reminder system. Send out reminder postcards 15 days prior to the patient visit. Call the patient two days prior to the visit. – Whether this is a manual system or an automated one, reminding patients of their appointment in advance is a good practice. Keep in mind that this can be done by training and utilizing your college age students who are looking for work. Making calls in the early evening may stand a better chance of making a personal connection.
Confirm appointments electronically first and then call the patient if they do not respond. Some practice management systems today have the ability to contact your patients through a computerized system – does yours? Invest in learning how to use the features of your computer system or technology in general. These tools can assist you in efficiently managing your practice.
Establish a procedural system and written policy for canceled and “no show” appointments. Include a note on your appointment card. Ensure that your contact information for the patient is up to date at each visit. – Effectively communicating and reinforcing what you say with a written policy that is part of your “patient appointment or welcome packet” will assist you in educating your patients regarding the importance of their appointment with you.

Patient No Shows

2009-06-17T20:02:00.011-04:00

Patients are experiencing more out of pocket medical and dental costs than ever before. High deductible plans, Health Savings Accounts, higher co-pays, cut-backs on benefits, and loss of jobs are all contributing to patients having to make tougher decisions regarding their personal health care. Have you noticed any specific trends occuring in your practice?

During a recent meeting with a client and their office manager, a comment was made by the office manager regarding patient "no shows". She said, "I have noted an increase in the number of patients who do not show up for their scheduled appointments. In fact, I have had other office managers tell me that they too are experiencing an increase in the percentage of patient no shows".

How about you? Are you experiencing similar trends? I would appreciate your input on this subject matter. Please participate in a very brief survey on this matter by clicking on the link below.

Patient No Show Survey

Employed or Independent - What direction is in store for you?

2009-06-01T16:06:00.024-04:00

Back in the early and mid 90's physician clients considered selling their independent practices to hospitals or merging with larger practice groups. Some individual and small group practitioners were fearful of what effect "managed care" would have on their business and selling out seemed to be the right answer. We helped our clients review contracts, implement incentive payments, and simply helped them retain a good buy-out. Since that time, I have also consulted with many physicians who left employment with a hospital or a larger group practice to establish an independent practice of their own once again. The life of a physician, as it turned out, just wasn't greener on the other side of the fence. Often, in business, a motivating factor for making a change is the fear of something, which ultimately drives us to make a decision or moves us in a particular direction. Sometimes the motivating factor is simply the fear of the unknown.

Today physicians are faced with more unknowns and complexity. Regulatory compliance, declining and uncertain reimbursement, restrictions on ancillary medical services, the possibility of mandated electronic records are just some ingredients that come to the top of the list during casual conversations. Add to the list the fact that it is becoming more difficult to recruit young physicians to independent practices and then stir in some economic uncertainty and a batch of hospitals looking to retain or build their market share and you have a recipe brewing for a fear caused movement once again.

While this time it may seem different, at the end of the day I believe that we will find many similarities. Reactionary decisions, rather than disciplined strategic planning, will be the cause for a future supply of unsatisfied physicians. If you find yourself asking questions like, should I sell? Or, if you are being approached by a hospital to consider a sale, then I would strongly suggest that you stop, drop and roll.

Stop - Before you go too far or any further and take some time to step back and reflect on what is important to you. Why are you where you are today? Work through a personal assessment with an independent business consultant or coach. Understand that selling your practice will not solve all your problems. In fact, it just may introduce some new ones.
Drop - Rid yourself of the notion that you have no choice, but to sell. Today there are many independent physicians and physician groups, both small and large, that are not only surviving, but thriving! Work with a healthcare practice management consultant that can help you identify areas of your practice that needs improvement and increase your profitability. If the end result is to ultimately sell to the hospital, your increased profitability will put you in a better position to receive a higher purchase price.
Roll - Ultimately you have to come to a decision and be the best you can be as a physician whether working in a hospital environment or as an independent business owner. Don't let fear drive your decisions. Instead, retain a "you can do it" positive attitude. Assess your personal and business goals regularly. And, become part of the solution to putting out the "Healthcare Reform" fire.

The decisions we make today will have consequences long into the future. So, if you are considering changes to the way in which you work, the longer your viewpoint the better - often the short-term financial consequences that are being presented today are not nearly as good or as bad as what we may think. In his book, Time to Sell?, Randy Bauman quotes an anonymous physician that said, "I always have to remind myself that it's never as good as it seems on the best days and never as bad as it seems on the worst days. That's how I keep my perspective."

To assist you in keeping your perspective and to identify the areas of your practice that may be causing you to consider a change, use the following questions that were adopted from Randy Bauman's book - Time to Sell?:

Initial Assessment
Self Assessment

(Note that no e-mails or personal information is being requested on the forms. You can simply review the questions or if you choose to submit your answers, I will be using the data to gain additional information and perspectives on what physicians are encountering)

Over the next several months we will be addressing additional issues here with the goal of simply - helping doctors mind their own business!

“Making Work Pay” Tax Credit

2009-03-22T15:56:00.001-04:00

The recently enacted “American Recovery and Reinvestment Act of 2009” contains a wide ranging tax package that includes tax relief for low and moderate-income wage earners, individuals and families with college expenses, and home and car purchasers. The centerpiece of the tax package is a “Making Work Pay” tax credit of up to $400 per year for individuals, or $800 per year of couples. While this tax credit will not likely be available for you as a healthcare professional, it may affect the employees working for you. Unlike the $600 per worker lump-sum rebates that were issued last year, this credit will be received as a reduction in the amount of income tax that is withheld from the employee’s paycheck, or through a credit on a tax return. For the last half of 2009, it is expected that employees will experience about $13 a week of less Federal withholding from their paychecks. The IRS has issued the new income tax withholding and advance earned income credit payment tables, which can be found here. Clients utilizing our payroll services or the ASP version of the Client Bookkeeping Solution will have their tax tables updated automatically by us. If you are doing your own payroll, the IRS asks that employers start using the new tables as soon as possible, but no later than April 1, 2009.

Stimulus Act Requires Immediate Attention to COBRA Administration

2009-03-22T15:52:00.000-04:00

The Stimulus Act, which was recently approved by Congress and signed by the President, makes important changes to the COBRA continuation coverage rules, some of which require immediate attention. The new legislation states that employees who were involuntarily terminated between September 1, 2008 and December 31, 2009, with an annual income less than $125,000 (single) or $250,000 (couples), are eligible for the COBRA premium assistance and will receive a federal COBRA premium subsidy. Since the “Eligible Employee” pays reduced COBRA premiums each month, you, the employer must pay the balance. You will then receive reimbursement by reducing your employment tax deposits and reporting these offsets on quarterly payroll tax forms.

If your office is subject to COBRA rules, be sure to review the modifications made with your attorney and take immediate action to prepare for the procedural changes. You will also need to keep us informed of any payments you are making for “Eligible Employees”. We have received several summaries of the changes being made and would be happy to make them available to you, if you haven’t already received one from your business attorney. Simply, give us a call or send an e-mail requesting a copy.

Cash Controls for a Medical or Dental Office

2009-02-12T07:59:00.003-05:00

Controlling cash in your office involves the proper use of several rather simple bookkeeping systems that have been developed over many years. I have found, with the implementation of computer systems, some offices have let these procedures slide making them prime targets for embezzlement. When policies and procedures regarding your cash are followed, the opportunity for theft is reduced and will assist you in identifying the possibilities. 

Bank Accounts – Only the physician or dentist should have signature privileges. And by all means, do not allow your personnel to use a signature stamp. Although it may be convenient to delegate such responsibilities, it can lead to problems. Signing each check forces you to see where the cash is going. I also suggest you maintain a savings account where funds in excess of a minimum “working capital”, as defined in your office policy manual, should be kept in the savings account earning interest.

Receipts – Most receipts come from two major sources; your patients and third-party payors. Other receipts occasionally come from outside clinical work, teaching or consulting, or sales of incidental office products. All receipts, regardless of the source, should be deposited into the checking account and reconciled. I suggest that each practice have their office manager keep a reconciliation worksheet that summarizes and reconciles the receipts for each day of the month. Be certain that your office policy is to provide a receipt for any payments made by your patients and that the method of payment is indicated on the receipt. A bank deposit, in duplicate, should be made out daily to match the day’s income. If the deposit does not reconcile to your practice management report or manual “day sheet”, the office manager should note the difference on the reconciliation summary. The deposit slip should list cash, coin, and checks separately and taken to the bank on a daily basis, if at all possible. Make sure that your office policy for checks received in the office is that all checks are stamped, “for deposit only”, as soon as they are received. It is important that a record of all income be kept; using your bank account and a reconciliation summary provides a simple way of maintaining such records.

Disbursements - Invoices of received goods or services should be saved and compared with bills to determine the bill’s accuracy. I suggest that office managers pay bills twice-monthly on a regular basis and only prepay expenses that might result in some form of discount. The date paid and check number should be written on the paid bill. If the check-writing system you use produces an extra stub for your records, then simply attach the stub to the bill being paid. Paid bills should be saved and filed by the month paid making it easy to follow checkbook activity and retrieve a bill or invoice, if necessary. No checks should be issued without a bill, invoice, or some type of written explanation. It is also a good policy for the practice to limit the use of the professional checking account for business use only – personal expenditures should not be mixed with the business account.  

Petty Cash – Many offices have a petty cash drawer which allows for payment of small, everyday, recurring expenses. A check for $50 - $100, depending upon your need and office policy, should be written from the practice checking account and cashed. The money is used to pay for the small expenses that require cash payments, such as postage or miscellaneous office supplies. Assign a person in your office the responsibility for maintaining a log of expenditures. Payments of cash should be replaced with a receipt or record of expenditure. When the cash is expended, the receipts are replaced with a new check from the checking account and the receipts should be filed with the month’s paid bills. Don’t fall into the trap, and bad example, of “borrowing” from the petty cash fund. 

There are many ways in which an employee can steal from you. Some methods are quite simple and others involve elaborate schemes. While there is no “fool-proof” bookkeeping system that will prevent employee dishonesty, using time-proven systems and internal controls will help you reduce the possibilities. The following are additional preventative measures that will help you: 
  
Select your staff with care. This may seem like obvious advice, but surprisingly it is consistently ignored. The physician or dentist may be impressed during the interview with a potential employee’s credentials or past experience and not check work references. Always take the time to check references.

Pay your employees adequately and treat them well. Under-paid employees can more readily justify stealing from an employer. Often the embezzler is caught by way of another employee’s comments. 

Set-up good, internal controls and stick to them. Many of the controls have been discussed above, but often doctors do not review the systems in place to be certain that they are being followed. Periodically, do a spot check of the accounts receivable, the filing system, and the desk drawers of your employees responsible for handling cash and checks. An employee who knows that you are checking on them occasionally may be more prone to following the systems and procedures put into place. Be sure to assign specific duties to your staff by way of their job descriptions. It is easier to determine who makes errors if the duties are assigned. If your staff is large enough, and it is appropriate, rotate duties occasionally. 

Maintain contact with your staff. Note any patient complaints about billing errors as they may indicate improper bookkeeping methods. Watch for excessive spending by an employee. Be aware of employee credit problems or poor management of personal financial affairs. Do not allow your staff to work after hours on the books. Unusual devotion to this duty may indicate that an employee doesn’t want anyone following her work for fear of discovery. Also, be aware of employees not taking vacation time. 

Bond your employees. A blanket-position bond will cover all employees regardless of their duties. It is probably the best bonding coverage available. Bonding will compensate for losses and will discourage embezzlement as a bonding company may prosecute an employee in order to recover its losses.

If you ever suspect that embezzlement may be occurring in your practice, be certain to consult with your attorney, involve your outside accountant, and contact the bonding company for an audit and procedures to follow.

Standard Mileage Rates for 2009

2009-02-12T07:56:00.000-05:00

Beginning January 1, 2009, the standard mileage rate for the use of an automobile in your business is 55 cents per mile up from 50.5 cents per mile in 2008. You may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System, after claiming a Section 179 deduction for that vehicle, for any vehicle used for hire, or for more than four vehicles used simultaneously.

Keep Your Corporate Shield Up

2009-01-20T08:12:00.004-05:00

Many dental and medical practices operate as a corporation or as a limited liability company to protect the owner(s) from the non-professional liabilities of the business. Running your business as a corporation or a limited liability company can protect your personal assets, your home, your car, and your savings from being seized to pay for business debts. All that's at risk is the money you put into the business and any personal guaranties of corporate debt. But, you must follow the proper guidelines or you may expose your personal assets to needless risk.

Operating the business as a separate entity is important to keeping your corporate shield up - Let's review some guidelines that will assist you with this.

Business Name: Use the full and correct name of your business in correspondence and contracts. If your corporate name is John S. Doe, D.D.S., P.C., don't just use - John S. Doe, D.D.S. It would also be a good idea to check your business cards or other patient promotional information to be sure that they too contain the business name.

Banking: Maintain separate bank accounts for your business. Have the business name printed on all checks. Be careful not to mix business funds with your own personal funds. It is also important to not pay personal expenditures from the business checking account. Personal payments from a corporation run the risk of being classified as a corporate dividend, which is income to the recipient and not deductible by the corporation, creating double taxation.

Signatures: Sign documents and letters as an officer of the business. For example, a contract should be signed this way:
Mary A. Jones, M.D., P.C.
By:_____________________________ 
Mary A. Jones, M.D., President (Sign as an officer or member)

Property Transfers: If you transfer property to the business (such as a computer or furniture), formally document the transfer by a bill of sale or an assignment.

Leases: If you lease a car, building, or other property to the business, the board of directors or members should approve the transaction and a lease should be signed.

Loans: Sign promissory notes if you loan money to or borrow money from the business, and have these transactions approved by the board of directors or members.

Employment: The owner/shareholder should have a written employment agreement approved by a board of directors’ resolution.

Taxes: Pay federal and state withholding taxes promptly. Officers, directors, and principal employees of a company may be personally liable for payment of withheld taxes if the corporation fails to pay these obligations.

Records: Keep your corporate record book up to date. At least once a year, hold meetings of shareholders and directors. Your corporate record book should contain either minutes of these meetings or resolutions showing actions taken. Some of the information these records should contain include salaries set for the key employees, bonuses declared during the year, contributions made to the retirement plans, equipment purchases, loans obtained and any decisions made by the board of directors.

Cosigning: If the business borrows money from a bank and you're asked to cosign a promissory note, be sure you fully understand the extent of your personal liability in case the business fails.

Annual Reports: File the annual report on time with the proper state authorities. Otherwise, you may face fines and even the dissolution of your business. This form, the Michigan Annual Report or referred to as the M.A.R., is due in May of each year. Typically, you will receive this form in the mail, which requires an update to any changed information, your signature, and a check.

Stock Transfers: Before you transfer stock or sell additional shares, get legal advice so you don't run afoul of federal and state securities regulation statutes. In most cases, an exemption is available, but you don't want to get involved inadvertently in a nonexempt transfer or issuance. Penalties for noncompliance with these laws can be substantial.
Insurance: Check with your insurance agent to make sure that there is proper liability coverage not only for property owned by the corporation but also property leased to the corporation and your own property that may informally be used for corporate business.

With a little extra effort and a small amount of paperwork you can benefit from the structure of your business entity. If you still operate as a sole-proprietor, you might want to consider the benefits of becoming a professional limited liability company.

Year-End Tax Planning 2008

2008-11-10T09:19:00.002-05:00

As we approach the end of the year, consider the following for lowering your 2008 tax bill. Use caution in applying some of these year-end tax planning strategies as some will not work because of Alternative Minimum Tax (AMT). We are finding that many of our doctor clients now find themselves subject to AMT.

Accelerate year-end state income tax and real estate tax deductions: State income tax withholding and state estimated tax payments made before December 31, 2008 may generate tax savings on your 2008 federal income tax return. If your 2008 income has increased, you should consider making an extra payment of state income tax before year-end in order to boost your 2008 income tax deduction. Also, consider paying up and even prepay real estate taxes and automobile property taxes before year-end.

Caution: If you have any hint that you might be subject to AMT (and you probably are), you should consider not prepaying the above taxes.

Consider your stock portfolio: The maximum capital gains rate is 15% for gains from the sale of qualifying assets held more than one year. The 15% maximum tax rate is available for both the regular and alternative minimum tax (AMT). In addition, qualifying dividends received during 2008 will generally be taxed at a rate of 15%. Keep in mind that if your losses exceed your capital gains, the maximum loss you may deduct is $3,000; the remaining loss will be applied to future tax years. Keep in mind that any security sold at a loss may not be repurchased within 30 days before or after the sale of the security. This situation would create a “wash sale” and the loss would not be deductible.

Contribute to your IRA: You can contribute up to $5,000 ($6,000 if you are age 50 or older by year-end) to your IRA for 2008. Most likely, if you are participating in your employer sponsored retirement plan, you will not be able to deduct your IRA contribution. However, doctors should still consider funding a traditional IRA even though the deduction may not be allowed. Funding a non-deductible IRA this year and going forward until the year 2010 could put you in the position to take advantage of the Roth IRA conversion feature available in 2010. Speaking of Roth IRA's, doctors with adjusted gross income of less than $116,000 ($169,000 for married filing joint return) should consider funding a Roth IRA for 2008. Remember, that IRA contributions for 2008 are due by April 15, 2009. Consider making your contribution early.

Contribute to your Employer-Sponsored Retirement Plan: The 2008 annual 401(k) deferral limit for qualified retirement plans is $15,500. If you are age 50 or older by year-end, you can contribute an additional $5,000. Be sure to check your pay check stubs now to be certain that you are deferring the maximum to decrease your taxable income. If your Practice doesn't currently have a qualified plan, you may still establish a plan for 2008, but the deadline is December 31st for establishing a plan for the current year.

Maximize your deductible interest: Deductible interest for itemized deduction purposes includes mortgage interest on a principal or second residence on up to $1,000,000 of debt, which is used to acquire or improve your home, as long as the debt is secured by the home. Also, you may deduct the interest on up to $100,000 of home equity indebtedness, which is secured by your home. Interest may be deductible on margin loans as long as you have adequate investment interest and dividend income. Interest borrowed for rental properties may be limited due to the passive loss rules.

Boost Your Personal Interest Deductions: If you're paying interest on credit cards, auto loans, student loans, and other non-business debt, consider a home equity loan so long as the interest rates are lower. You will be able to deduct this interest as home mortgage interest on loans of up to $100,000 as apposed to receiving no deduction for personal interest. Note, however, if you are subject to AMT, you may not want to follow this strategy as this interest (home equity loans for personal items other than for improving or buying a home) is not deductible for AMT purposes.

Consider 50% Bonus Depreciation: Thanks to recent legislation, qualified equipment, which includes most tangible personal property and software and certain leasehold improvements acquired and placed in use during 2008, is eligible for an immediate 50% bonus depreciation deduction. This is in addition to the normal depreciation deduction on the remaining balance. If you anticipate that your business income will be higher in future years and suspect that your tax rates will be higher, then it would be best to elect out of the bonus depreciation for 2008.

Use Section 179 Expensing Option: For eligible business property, you may elect to expense otherwise depreciable assets up to the recently increased limit of $250,000 for tax years beginning in 2008. There are limits to this election for businesses that purchase more than $800,000 of assets.

Don't loose on Leasehold Improvements: Leasehold improvements made to your office space must be depreciated over 39.5 years. Be sure to clarify what you are paying for when negotiating with your landlord. Attempt to pay for things that might fall into a lower asset life and be sure these items are separately identified on the invoices you pay. Items such as carpeting, flooring, lighting in patient areas, removable cabinetry, and wiring and plumbing for medical or dental equipment can be depreciated over shorter periods.

Take Advantage of the Increased Vehicle Depreciation Limits: For vehicles, the luxury auto limits still apply. However, the limits for 2008 have been adjusted to account for the new 50% bonus depreciation by adding $8,000 to the luxury auto first-year depreciation limit, allowing a deduction up to $11,060 for a passenger vehicle (The normal $3,060 cap plus the additional $8,000). For qualifying trucks and vans, the cap increased by $200 (to $11,260). When a vehicle is used partially for business and personal use, some proration may apply. Doctors also need to keep in mind when taking a business deduction for their vehicle they should have some form of records that would substantiate their business use of the vehicle.

Make Charitable Contributions to 501(c) 3 Non-Profit Organizations: In most situations, charitable contributions to qualified organizations are deductible up to 50% of your income. If you are looking for a way to reduce your taxable income, making charitable contributions is a great way to reduce your taxable income. Retaining a receipt for your deduction is becoming more important, so don't overlook obtaining a receipt for contributions over $250. Remember, a contribution made with cash without a receipt is not allowed as a deduction any longer. Donating appreciated stock or mutual funds is also an effective way for making contributions. Using this approach you can avoid the capital gains on the asset being transferred in addition to obtaining a charitable deduction.

Put your Children on the Payroll: If your children are able to provide some form of service to your Practice, consider paying them a reasonable salary for the work done. Typically, the first $5,450 of earned income they receive will not be subject to federal taxes. Consider using the money they earn to fund a Roth IRA, which can be used later for college, a first home purchase, or providing a great start towards retirement.

Accelerate Business Deductions: If you use your line of credit or a business credit card to pay for business expenses at year-end, you will receive a deduction for 2008, even though the actual cash-flow payment of the debt is made in 2009. If you are able to make payments in December for items such as rent, clinical supplies, dues & journals, Michigan Business Tax estimates, staff salaries, etc. that are due in early January do so.

This is not meant to be an all-inclusive listing of tax planning strategies. A number of tax deductions or credits are available to tax payers in lower tax brackets. Given that most doctors do not qualify for these programs they have been omitted from this listing. Keep in mind also that the above listing is based upon general rules and as noted should be considered carefully in regards to Alternative Minimum Tax.

Steps to Creating a Marketing Plan

2008-10-03T13:06:00.004-04:00

Price, value, quality, perception, and many other factors may enter into the decision process of a consumer purchasing a product or a service. Typically, the business selling the goods or services will market directly to the customer that pays for the product or service. However, in healthcare this wasn’t always the case. Rather, patients had “rich” employee benefits that would cover most, if not all, of the cost. And if the third-party insurance didn’t pay for all of the cost, the medical or dental practice may have accepted the insurance company’s payment and granted a discount of sorts to the patient. Many of you might regard this scenario as the “good ole days”! With the introduction of high deductible plans, health saving accounts and the reduction of fully paid employee benefits your patient is increasingly becoming the actual payor of your services. This is being compounded by the fact that healthcare offices are also offering more services that are simply not covered by the insurance policy in which the patient is covered. This creates more of a need for your practice to be conscious of the patient’s purchasing decisions.

John Jantch, small business marketing expert and author of Duct Tape Marketing, suggests the following seven steps to create the Ultimate Marketing System. I took his steps and adjusted them to be used by a medical or dental practice wishing to market their services to the new “informed patient”.

Narrow Your Focus – Don’t try to be all things to all patients. After all, that is why we have various specialties, right? Even within a specific specialty take time to identify your ideal patient. Write out the characteristics and types of patient you desire as though you were literally meeting with the patient, which will help in your planning process.
Find and Communicate a Core Difference – How will patients differentiate your practice from your competition? When the patient picks up the phone and calls your office for the first time, will they hear the difference? Will they experience it when they arrive to the first appointment or when they meet with you? Stress the differences with your staff so that they are aware of the message you wish your ideal patient to hear.
Package Your Business – It’s the old saying, “image is everything” that counts here. The images and the colors you use within your patient information booklet or website can say a lot about you. The name of your practice or a particular service provided could help package your services. Put yourself in the place of your patient – what would cause you to feel good about going to the doctor’s office?
Create Materials that Educate – In your patient information brochure or other communications, don’t use the bulk of your print talking about technical aspects of your specialty or how long you have been in practice. Rather, dedicate a good portion of the piece communicating the benefits the patient will gain by coming to your office. I suspect that some patients are telling you why they chose your office – use their actual words or examples. Use stories, which are great ways to relate to others, educate, and build trust.
Establish your Lead Generation Trio – The three components are advertising, a referral system and public relations. Your advertising efforts should focus on getting the patient to allow you to educate them about your services. This might be an initial appointment with a staff member or an initial service that allows the patient to be educated on how they will benefit from your services. It could also be something as simple as providing them with something like “Ten things you must know before you select a doctor”. Create a system to regularly communicate with your referral sources. Be sure to thank them regularly and educate them about your practice as well. Keep in mind that your staff will be able to assist you with this process. Most everyone is interested in how to live healthy, so identify ways in which you can be a resource to the general public. This might involve being available for an interview that will air on a local radio station, or that will assist a reporter inform the general public on healthcare matters. Working with schools might be another way to provide resources to the general public. Availing your expertise to a broad audience will help build recognition and trust with the patient you ultimately want to see.
Automate and Dominate – Learn to use technology to your advantage. Writing letters to referrals, providing resources, or getting the word out about your services may seem to be daunting tasks, but with the use of computers and your staff the process is achievable. During a recent meeting with one of my clients, a physician demonstrated to me how he used the Auto Text feature in a Word document to quickly send out a consult report. I’m certain your practice management or EMR systems have powerful tools that can be used to shorten the time it takes to communicate or gather information – empower your staff to learn how to use these functions. The use of a Web site will also help you in getting the word out to your patients. Keep in mind that patients today are using the Internet to search for and learn more about their healthcare providers.
Live by the Calendar – Being able to attend to the care of your patients is most likely why you went into practice – this is where I find most clients find their joy. However, marketing your practice is an extremely important aspect of maintaining your independence in private practice. So, rather than trying to do everything at once, schedule an appointment in your scheduling calendar on a regular basis over the next year to work on steps of your overall plan. Use a marketing calendar to list out the tactics you wish to take and when during the year they will be done.

In his book, Raving Fans, Ken Blanchard writes the following in the Foreword – “Successful organizations have one common central focus: customers. It doesn’t matter if it’s a business, a professional practice, a hospital, or a government agency, success comes to those, and only those, who are obsessed with the looking after customers.” Whether it is assisting you with your marketing efforts, coaching you in other aspects of your business, or simply presenting the financial picture of where you are; It is our sincere desire to look after you, help you meet your goals and to improve the bottom line of your business. Thank you for your trust in us.

Is Your Practice Looking Healthy?

2008-09-08T16:46:00.002-04:00

Over the past several years, Physician practices have experienced the pressure of insurance based fee reductions and at the same time the costs associated with running their practices continue to rise. Revenue optimization, cost containment, and avoiding pitfalls of procedural coding are increasingly important to running a profitable medical practice. Dental practices, while not subjected to the same amount of pressure from insurance companies, have noted the economic pressures of late.

This month I will be presenting to a group of office managers and administrators of a presentation entitled – “Show Me the Money”. Not to be confused with the movie, Jerry McGuire, starring Tom Cruise; my talk will be outlining 5 Golden Rules of managing Cash for your practice. Since many of you will not be in attendance, I thought I would simply share a summary here.

When you are trying to determine if your practice is healthy you may look to several “key indicators” such as profits, gross charges, number of patients, your production compared to that of your peers, or other statistics. Best run practices examine specific performance measures and monitor these measures as a “report card” on a regular basis. In my opinion, one of the most important factors in running a successful business is the status of your cash. For the presentation I have outlined 5 Rules of Cash – they are:

Know how to measure it - The financials that are presented in your monthly management reports are designed to keep you informed on your cash position from month to month. The balance sheet provides a point of reference at the end of each month; the graphs and other supplemental information provides a monthly historical look at your cash; and a cash flow statement reflects the movement of your cash over a period of time. Understanding and watching how long it takes for your cash to be collected is also a measurement that you need to manage. Our “At a Glance” dashboard summary provides collection percentages, the number of days your accounts receivable is outstanding, as well as the percentage of accounts receivable that are over 90 days. Looking at these measurements on a regular basis and identifying issues that may be affecting your cash position is critical.

Work on Strategies for Maximizing Cash – The options for maximizing your cash may take work, but in the end the results are worth the time invested. One of the largest general overhead items on your profit and loss statement will be staffing costs. So, having the right staff and right amount of staff working for you is important. Taking the time to analyze the work that is needed to be done and creating job descriptions will help you in making sure that you have the right people on your team or hire appropriately. In some cases, we have found that outsourcing a particular function serves you better and enhances the cash flow. I’m also a proponent for data mining, which refers to analyzing data from different sources and different perspectives to gain useful information that will help you manage your practice – not intuitively, not subjectively, but based upon real data.

Know the Causes of Cash-Flow Problems – Investing in equipment and leasehold improvements with current cash rather than leveraging the purchase with an appropriate loan can lead to less flexibility to take care of the business. Slow collections or offering inappropriate payment plans to patients can also lead to cash flow problems. There is typically a relationship between the charges on the books today and the cash received tomorrow – so, keep an eye on your charges and estimate what your cash might be in the coming months and compare it to actual. This analysis will help you plan appropriately for lump-sum costs that may be approaching.

Prepare for the Worst - I can’t think of a better example than the one we are in today as it relates to the current banking environment. Be sure to get a jump on any financing you may need. Having and renewing your line of credit on an annual basis is crucial. Also, match the sources of your cash and uses appropriately – for example, use your line of credit and credit cards for short-term needs; whereas you should use long term or secured notes only for purchases of equipment or leasehold improvements. Be conservative with any bonuses you might declare and keep a comfortable reserve of cash available for working capital.

Grow Smart – Creating a marketing plan for your practice will keep you from allocating cash resources to ineffective means of growing your practice or taking actions that will not produce the required rate of return on your money. Take time to do strategic planning which will encompass looking back to discover how your business arrived where it is today and then looking forward to determine where you would like to go – ask yourself, how might things look in your practice a year or two from now? Establish goals, targets, and benchmarks to make sure you are progressing in the direction you desire.

Your New Patients - And Their First Impressions

2008-08-15T19:21:00.003-04:00

In today’s practice environment, new patients in your practice are jewels. The following is a reprint of an old Management Planner that I have ran in the past, but I believe it is worth reading again and sharing with your staff because this is still very appropriate today.

A popular saying says, "You don't get a second chance to make a first impression". You should also remember that those first impressions last. If we consider these two ideas to be true, how should your practice handle new patients?

A new patient's first visit to your practice is a delicate situation. Why? Because he or she will undoubtedly base their decision to return to your practice based on the reception and treatment he receives by your staff and you in less than an hour's time. You, as the clinician, are obviously a vital component of the total, however, you staff members are also a vital part of the health care package that the patient is buying. The choice that your new patient has made to visit your practice will be confirmed or denied based on the overall impression this patient has when he or she leaves after the first visit.

Therefore, consider the following advice about how you and your staff can contribute to a favorable first impression.

Schedule Appointments ASAP
When a new patient calls your office to make his first appointment, they usually want the appointment soon. If they don't get an appointment, they are quite likely to go elsewhere because they have no relationship established with you or a loyalty to your practice. Therefore, it is important to schedule the new patient as soon as you possibly can.

If the patient asks, "Is that the earliest the doctor can see me?" you must instruct your staff to do their best at being firm (if there is no earlier date possible) but accommodating. An appropriate response by your staff would be, "Yes it is, however, I can call you if an earlier appointment opens up. Could you come in on short notice?" By asking this question, or any question for that matter, you're the one who remains in control of the conversation. If the patient wants to be called about an earlier appointment, first confirm the original time and let them know that you'll call if something earlier becomes available.

What's in the Name?
Everyone likes to have his or her name spelled correctly. When talking with colleagues, friends, and in introductions to new people, we all want our names pronounced correctly, too. This is vitally important when new patients come to your practice. The initial telephone conversation may be the only time you feel comfortable asking patients to repeat their names and tell you how they are spelled or pronounced. Insist on getting the patient's name right in the beginning to avoid confusion and embarrassment later. Once you've established the pronunciation, jot it down phonetically. Be sure that other staff members with whom the new patients come in contact with also know how to pronounce their names.

Inform Your New Patients
Once you have made an appointment for a new patient, be sure you or your staff covers these topics:
· Ask if the patient knows where you are located or needs directions to your office. If you have a printed map prepared, send one to the patient.
· Be certain that your staff tells new patients how long the first appointment will last. Be considerate of the patient's time because time is important to them also.
· If you have a practice brochure, your staff should be trained to explain it to all new patients. Let them know that they will receive this information in the mail before their appointment date or at the time of their first visit.
· Ask each new patient for a daytime telephone number where they can be reached and explain why you need it.
· Tell your new patients what your procedure is for confirming appointments. If you used a letter or postcard to convey the date and time of their appointment, that's fine. Or, if you call the day before their appointment, ask whether the morning or afternoon is a better time to reach them.
· Request that your new patients bring their insurance identification cards (or better yet, their insurance policy), social security number and other documentation you routinely require and need. By requesting their insurance policy, you are able to photocopy any "summary of benefits" explanation page they might have attached to the policy itself.

Give Them the Red Carpet Treatment
You will want to do your best to make your new patients feel that their arrival at your office was eagerly anticipated. Your receptionist will be greeting these patients, so be certain that she greets them in a friendly and pleasant tone of voice and that she also introduces herself too them. Invite your patients to make themselves comfortable in you reception area and tell them to feel free to browse through the reading material you have available for them. If you need to obtain personal information from the patient for your files, invite them to a private area for this purpose. To make the task even more pleasant, complete the form yourself, using their answers to your verbal questions. If possible, offer the patient a beverage while completing this task.

When it is time for the patient to see you, have a staff member quietly walk up to the patient in the reception area and ask them to come along and meet the doctor. As the staff member is walking the patient back, he or she can be acquainting the patient with the different areas of the office. If the introduction is to be made in the doctor's office, make sure that the office is welcoming, and when the staff member brings the patient in, let them make a formal introduction.

You may decide that these suggestions are not quite right for you and if that's the case, feel free to modify them to suit your personality and style. You must be comfortable with whatever methods you utilize in making certain that new patients have a favorable first impression about their first visit to your practice.

Stretch the Tax Benefits of Your Retirement Plan

2008-07-05T20:13:00.002-04:00

Choosing and planning for beneficiaries of your individual retirement account (IRA) and other qualified retirement plan are often overlooked as a tax saving strategy. If you are like most of my physician/dentist clients, you have built up a sizable nest egg by making regular contributions to your retirement plan. At retirement when you begin taking distributions from your retirement plan these distributions are taxable. Failing to designate a beneficiary, or choosing the wrong beneficiary, may cause un-wanted tax consequences.
Typically, at age 70 1/2 you are required to start taking distributions from your plan. April 1st, following the year in which you reach this age, is termed your required beginning date (RBD). The designation of your beneficiary will affect the speed at which you will be required to take these distributions and how they will be treated at your death. Depending upon your personal financial planning, it is generally most advantageous to keep the tax-deferral aspect of your retirement plan going for long as possible.

If you die without having named a beneficiary, the distributions and income taxes are generally accelerated. Should you die prior to your RBD, the entire retirement plan account becomes a part of your estate and must be distributed to your heirs by the end of the fifth year following the year of your death. If you die after your RBD, the plan must be distributed at least as quickly as it would have if you were alive - based upon life expectancy tables.

By naming a beneficiary, you enable your spouse or children to defer taxation of the plan distributions and thus "stretching-out" the benefits of the tax-deferral aspects of your plan. If your spouse is the beneficiary of your plan benefits, he or she can roll the funds into his or her own IRA allowing the distributions to be delayed until your spouse's Required Beginning Date. If you name someone other than your spouse, such as a child, your beneficiary must start taking distributions, but can generally elect to do so over his or her life expectancy. If you are planning on making a charitable bequest at your death, naming a charity as a beneficiary can be a great strategy. Since the charity is a tax-exempt organization, these distributions from your IRA avoid taxation all together.

Recently, a client of mine died and the planning of beneficiaries we did several years ago provided more estate dollars for the family. In fact, his children including his "adopted child - charity" received their share of the estate without having to turn any funds over to Uncle Sam. With the establishment of multiple IRA's and the proper planning of your beneficiaries, you can use your "nest egg" to better provide for the ones you love.

Business Buy/Sell Agreements

2008-06-02T10:07:00.010-04:00

It is important that a practice with more than one owner have a written buy/sell agreement that specifies what happens when an owner withdraws from the business. A buy/sell agreement is a contract between the owners (or the owners and the business entity itself) that establishes rules and restrictions applicable to changes in ownership.

Typically, the buy/sell agreement provides that an owner's interest in the business will be sold at a specified price to the other owner professionals and/or to the business entity itself upon the occurrence of specified events. This prevents unwanted or unqualified persons from becoming members of the ownership group and ensures a ready market for closely held ownership interests. It also provides liquidity to a deceased owner's family and assures the remaining owners that they will be able to continue the business without interference from the family of the deceased owner. Buy/sell agreements also offer estate planning benefits by establishing a value for the practice prior to an owner's death.

The common methods that I see for determining the purchase price under a buy/sell agreement include: establishing a fixed price in the contract at the stipulated share price; simply using a percentage of book value; or specifying a formula that adjusts the book value for certain factors such as accelerated depreciation or deferred liabilities. Events that trigger a buy/sell agreement are specified by the owners in the contract. Generally, these events include death, disability, other reasons for the inability to practice medicine/dentistry, or retirement.

The best time to establish a buy/sell agreement is now while all the doctor owners are on good terms with one another and before a problem develops. If you do not have a buy/sell agreement or if you have not reviewed your current buy/sell agreement as a group within the last year, I would recommend that you do so. Review together the consequences to you and your practice should an event discussed above occur. A good time to do this type of review together is during an annual meeting where you invite the attendance of your attorney and accountant. Your attorney should be consulted in formulating the terms of the buy/sell agreement, or prior to changing an existing agreement and your accountant will be instrumental in helping you with tax compliance and planning matters.

Virtually Yours

2008-03-21T19:08:00.005-04:00

In her time management book, Take Back Time - Bringing Time Management to Medicine, Judy Capko dedicates a chapter to using technology in a medical practice. Judy writes, "Healthcare leaders must seize every opportunity to improve practice performance, adapt to new technologies, and encourage their workers to take advantage of automation. It's all about optimal productivity and giving people the tools to do their jobs better. And it enables you to make the best use of resources without compromising quality."

Since cutting my teeth on a Texas Instrument Professional computer more than twenty years ago, I have enjoyed exploring the use of technology for my business as well as assisting medical and dental office staff take advantage of automation. Today we hold in the palm of our hand cell phones, labeled "smart-phones", that have more resources available than that first computer I used to print a set of financial statements. Reminiscing of the way things "used to be" every now and then is good to gain a perspective of the future and the way we will conduct our business. I'm not convinced that every technological change has been for the better, but I do agree with Judy that we need to embrace new technology for opportunities to improve outcomes, manage quality care and resources, and improve profitability.

Much of the new technology that will be presented to us will be virtual. Let's explore just a few uses of technology that may help you whether you work in a large group practice, small group practice, or as a solo practitioner.

Checkbook Solution ASP (http://www.vmde.com/) is a virtual checkbook program that we support. I have found this program to be a better solution than the old version that was installed on your local computer. It is always current and allows for better support and management of your checkbook activities. You can view a demonstration of the software on our website by clicking on the "View a Demo" link found under the "Login Here" menu option.

GoToMyPC (http://www.gotomypc.com/) allows you to remotely access your computer from any other Internet-connected computer in the world with almost any operating system through a secure, private connection. I have physician clients and office managers that use this tool to access their office computers from home or while they are attending meetings.

LogMeIn (http://www.logmein.com/) also allows you to remotely access your computer. The free version offers a great way to access your computer at the office if you don't need all the "bells and whistles". If you prefer more options, the pricing of this product is reasonable.

Jott (http://www.jott.com/) converts your voice into e-mails, text messages, reminders, lists and appointments. Currently, this is a free service of which you can subscribe. This program is still in its infancy stage, but I find it works quite well.

Google (http://www.google.com/) is more than just a search engine. The use of the Google Calendar, Google Documents, and Google Reader are all very useful tools that can be integrated into the way you do your business.

Virtual technology and the ability to outsource some of your practice management duties offer you opportunities to keep your staff performing efficiently and adds profit to your "bottom line". Sure, some of this technology comes at a cost, but it is also an investment in you and your business. I end this post with another quote from Judy's book - "If you fail to keep up with technology, the competition will pass you by and the cost of doing business will continue to rise. There's no slow lane on the information highway, so buckle your seat belt and enjoy the ride."

Can I withdraw money from my retirement plan for post graduate courses?

2008-03-17T09:14:00.003-04:00

Given the fact that it is "tax season", this month I will not be posting a general management planner as I have for several months. Rather, this month as I come across tax questions or practice management situations I will post them here for your review.

I received this question over the weekend - Mike, I had asked you previously about withdrawing money from our retirement plan. You responded that with all the penalties and obvious disadvantages to withdrawing early, it would not be in our best interest. I am considering going to graduate school and was told that there wasn't a penalty for withdrawing early if it was for educational purposes. Would this make a difference based on what the money would be used for?

My Response:

Dear (participant in a qualified retirement plan):

I would encourage you to review the rules regarding this with your tax preparer.

The law lets individuals receive distributions from their qualified retirement plans (including IRAs, Roth IRAs) to pay higher education expenses without incurring the 10% early withdrawal penalty that usually applies to withdrawals from an IRA before age 591/2 . (The regular income tax on the distribution still applies.)

The penalty-free withdrawal is available for “qualified higher education expenses,” meaning tuition at a post-secondary educational institution, as well as room and board, fees, books, supplies, and equipment required for enrollment or attendance. Expenses for graduate level courses are also covered.

The expenses can be incurred by the IRA owner, his or her spouse, or any child or grandchild of either spouse. There is no requirement that the child or grandchild be a dependent of the IRA owner.

Using retirement plan money for this type of an expense is really a personal decision. Since I'm not familiar with your personal financial situation, it is difficult for me to comment on your situation specifically. Generally, I would encourage the use of funds outside of those set aside for the goal of retirement for this purpose, but if it is the only means for reaching other financial goals then just be sure to educate yourself on the tax consequences of taking this action.

Spyware Strikes Close to Home

2008-02-08T09:34:00.000-05:00

Computers are a fundamental tool in a medical, dental, or other healthcare office. Managing your patient appointments, insurance billing, financial and medical records by way of a computer is more the norm rather than the exception. Many of these computers are also connected to the Internet. While efficiencies can be gained by utilizing these tools, they can also prove to be very costly if not properly equipped with proper security measures. Recently, it was discovered that a client’s business checking account had a couple of unusual bank debits in their account. These unusual debits turned out to be the results of a computer “hacker” who utilized a form of spyware to gain access to their bank account.

Spyware is computer software that is installed secretly on a personal computer to intercept or take partial control over the user's interaction with the computer, without the user's informed consent. While the term suggests that this software is secretly monitoring your behavior, the functions of spyware extend well beyond simple monitoring. Spyware programs can collect various types of personal information, but can also interfere with the control of your computer.

To assist my client and for the purpose of writing this topical management planner for your benefit, I called upon Ben Johnson (http://www.benztronics.com/) to provide solutions. Ben suggests the following for keeping you or your staff safely on the web; avoiding the malicious software programs that are looking to gain access to your computer.

Install a hardware firewall like Sonicwall or Watchguard. Although it costs the equivalent of another PC, it is by far the safest route. It not only blocks incoming attacks but offers packet level virus and malware protection for all traffic in and out. These products also offer content filtering so you can decide where users on your system are allowed to go on the web based on a genre, keeping them from going to sites that are more susceptible to Spyware.
Run spyware protection on each PC. There are some free products out there like AVG Antispy, but Ben suggests combining your virus and spyware scanning software to keep it simple - AVG, Norton, and Mcafee all work fine. These programs are relatively inexpensive and effective. But remember, your scanner is only as good as its updates, so make sure the database is up to date and scan your computer often or turn on the automatic update options within the software.

Look for signs of spyware. If you notice that your computer is slowing down considerably, you may be infected. Seeing “pop-up” advertisements on your computer is another telltale sign. If you suspect that you may be infected, you can go to http://www.antivirus.com/ for a free virus and malware scan. If your scanners are not removing the programs, you may need a professional to assist you remove the spyware. I would suggest that you contact Ben at (269) 209-2635, if you don’t have an experienced computer technician already assisting you.

Don't ever install a spyware scanner that pops up and says you need it. These are a hoax and will simply install more unwanted software on your computer. In fact, be careful about ANY box that pops up with a “Yes or No” option with Internet Explorer in the title bar. If you don't know why it popped up, close the window with the “X” in the upper right corner.
Consider using Mozilla Firefoz as your Internet Browser. While it is debatable, Microsoft products are the main targets for most Malware. By utilizing Firefox as your Internet browser, you decrease the amount of threats that are pointed your way. You can find this free software at www.mozilla.com/firefox/

By applying Ben Johnson's suggestions above, you should be ready to lead a "hack-free" life on the web!

2008 Holiday Schedule for your Personnel Policy Manuals

2008-01-22T12:52:00.001-05:00

Here is a list of the most common employer-paid holidays and their 2008 dates of observance:

Martin Luther King's Birthday
Presidents Day
Good Friday
Memorial Day
Independence Day
Labor Day
Thanksgiving Day
Day After Thanksgiving
Christmas
New Year's Day

Monday, January 21, 2008
Monday, February 18, 2008
Friday, March 21, 2008
Monday, May 26, 2008
Friday, July 4, 2007
Monday, September 1, 2008
Thursday, November 27, 2008
Friday, November 28, 2008
Thursday, December 25, 2008
Thursday, January 1, 2009

Provide Your Staff with a 2007 Total Pay Statement

2008-01-22T12:46:00.000-05:00

Remember to let your employees know how much you appreciate them for all the work they do for you. Without their help it would really be difficult to run a medical or dental practice. In addition to saying thank you or doing something special for them (like buying them lunch on a special day or giving them tickets to a movie), you might consider educating your employees about their importance by providing them with a compensation summary for 2007. Prepare it now while the year-end data is still readily available and then hand it to then and say, "Thanks for all you did for me last year!"

(If you would like the form in an Excel Worksheet Format, simply send an e-mail to mike@vmde.com requesting the form by putting Compensation Summary in the subject line)

Key Figures for the New Year

2008-01-22T12:41:00.000-05:00

IRS Standard Business Mileage Rate for 2008 - Under the standard mileage rate method, a taxpayer who owns or leases an automobile (including a van, pickup or panel truck) and uses it for business may claim an expense deduction equal to the standard mileage rate time the number of business miles traveled in the year. I find that medical and dental offices use this figure frequently for reimbursing employees when they use their automobile for the business. The new IRS prescribed rate for 2008 is 50.5 cents per mile an increase from the 48.5 cents per mile for 2007.

Payroll Tax Figures – For those of you who are completing payroll for your employees, please take note of the following:

The Social Security Administration has announced that the wage base for computing the Social Security tax (OASDI) in 2008 will rise to $102,000 from $97,500 in 2007, an increase of 4.6%.

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

The FICA tax rate for employees and employers is 7.65% each - 6.2% for OASDI and 1.45% for HI. For self-employed workers, the FICA tax is 15.3% - 12.4% for OASDI and 2.9% for HI. There is a maximum amount of compensation ($102,000 in 2008) subject to the OASDI tax, but no maximum for HI.

On a salary of $102,000 (or more) in 2008, an employee and employer will each have to pay $279 more ($6,324.00 instead of $6,045.00) in Social Security tax this year compared to last.

Election to expense capital purchases – In 2008 up to $128,000 of qualified equipment purchases can be written off in the year it is purchased. This election is phased out once your new asset purchases for the year reach $510,000.

Retirement Plan Limits Increase in 2008 – The maximum elective deferral amount (voluntary contribution) for 401(k) plans remains the same amount as last year; $15,500 and those who are 50 years or older can continue to contribute an additional $5,000 as “catch-up” contribution. For those with SIMPLE plans the elective deferral amount also stays the same at $10,500 and for those over 50 an additional $2,500 can be deferred.

Employer Health Savings Accounts – Up to $5,800 may be put into an HSA for those with family coverage and $2,900 for individual coverage. Account owners born before 1953 can put an additional $900 in their account. Minimum deductibles for HSA’s remain $2,200 for family coverage and $1,100 for individual coverage.

Medicare Update

2007-12-20T21:17:00.000-05:00

The Senate late Tuesday Dec 18th passed the Medicare, Medicaid and State Children's Health Insurance Program (SCHIP) Extension Act of 2007 (S. 2499). Today the House of Representatives also passed the bill which replaces the 10.1 percent reduction in Medicare Part B payments scheduled for 2008 with a six-month, 0.5 percent increase. The President is expected to sign this bill into law. Physicians will face a payment reduction in Part B payments in July 2008 unless Congress once again intervenes.

However, keep in mind that this increase really means that practices will experience an overall decrease. Frank Cohen, our CMPA partner (see this link), pointed out the following:

I checked with an analyst at CMS and he assured me that, irrespective of the outcome in today’s vote on the CF for 2008, the BNA work reduction factor will be applied. How it works is this:

When calculating the MFS allowable amount, the work RVU is first multiplied by 0.8806, rounded to two decimals and then multiplied by the work GPCI. The work RVU makes up around 53% of the total RVU value for a procedure (a lot more for E/M procedures). Factoring the work RVU by 0.8806, in effect, reduces the value of that component by around 12%. If the work RVU makes up 50% of the total RVU value, it reduces the MFS allowable for that code by 6%. If the work RVU is 75% (as in several of the E/M codes), it reduces the MFS value of the code by 9%. Either way, whatever the CF turns out to be, it is hiding a reduction overall. Let’s say that they increase the CF to 38.08 this year. That is an increase of 0.48%. Even in the best case, this still results in a 5.5% decrease in what the MFS allowable should be.

If you have a contract with a payor, other than Medicare, that is based upon RBRVS, make sure that this reduction factor is not used when they calculate your payment. If the contract is based upon the Medicare fee schedule (check the wording in your contract), you may want to renegotiate the contract.

Looking for a new staff member?

2007-12-08T11:12:00.000-05:00

A couple of months ago I had an individual that I haven’t talked to in years call me at home. She was currently employed as an accountant and was looking for a new job. It just so happened that we were in the process of hiring an additional staff member when I received her call and possibility of hiring this person seemed to be “just what the doctor ordered”. It’s not everyday that situations like that occur – you just can’t expect great employees to find you. When you are looking for a new employee for your office consider the following:

Seek out a wide range of recruiting sources – Don’t rely on just running a Help Wanted ad in your local newspaper. Look to the Internet for an online job board, call local colleges that specialize in educating the person you seek for your office, work with employment agencies, let us (your accounting firm) know of the position you hope to fill, and even post the job on your own website. More and more businesses are finding that new hires are coming from Internet-based sources. Also, don’t forget that you have a resource pool right in your office with the employees you currently employ. Great employees will look for other great employees with whom they wish to work.
Offer a competitive compensation package – More often than not this means more than just cash. Potential employees are looking for health insurance and what your office offers in the way of retirement plans. Getting creative with your benefit structure and keeping a focus on the overall package will highlight your practice as a top choice for the candidate. (Be sure to compare your salary package for the position to our recently conducted Salary & Benefits survey.)
Market yourself and your practice – Keep in mind that while you are evaluating a candidate for the job, they are also checking you out. Potential employees are looking to join positive work environments, opportunities to use the skills they have acquired, and an employer that appreciates their work. So, tailor your interview process to include presenting the strengths of your office.
Be prepared to hire - Turnover in your office is sure to happen. Keep a “talent pipeline” listing and document a hiring process that you can turn to when a position opens so that you can quickly fill the position with a top candidate. Your staff will appreciate your attentiveness to the team of employees that remain and “office stress” will be reduced by not having to tread water for a long time while you get the recruiting process started.
Hire people that “fit-in” – Too often emphasis is put on finding a candidate that will fit the job description rather than focusing on how the person would fit into the office culture. Recently a client called me to explain that he had found a good candidate for a position that he was trying to fill but he was concerned about how she would fit in with the rest of the staff. After some discussion, it was determined that it would be easier to teach skills to another candidate than having to deter attitude or habits of the qualified individual. Asking potential new hires to write down the 50 things for which they are most thankful or utilizing a testing tool that measures a persons natural abilities are just a couple of ways that you can increase your chances of having the next person you hire “fit in”.

Year-End Tax Planning

2007-11-05T10:11:00.000-05:00

As we near the end of the year, there is still plenty of time to lower your 2007 tax bill, add to your tax-advantaged retirement accounts, and do a little planning for next year. Here are a few ideas:

IRAs. You can contribute up to $4,000 ($5,000 if you are age 50 or older by year-end) to your IRA for 2007 if certain conditions are met. For married couples, the combined contribution limits are $8,000 ($4,000 each) and $10,000 ($5,000 each if both are age 50 by year-end) when a joint return is filed, provided one or both spouses had at least that much earned income. The IRA contribution amount is scheduled to increase to $5,000 for 2008, creating an even better opportunity to increase your tax-deferred savings. Keep in mind that contributions to traditional IRAs may not be deductible for many of you who are participants in retirement plans, but you may contribute to an IRA and treat it as a “non-deductible” IRA. Non-deductible IRA’s offer tax deferred earnings that an IRA provides and in the future you may be able to convert this IRA to a Roth IRA making it even more appealing.

Capital Gains Tax Rates. It may be a good time to consider selling capital assets (e.g., common stock) with a low cost basis. The maximum capital gains tax rate is 15% for gains from the sale of qualifying assets held more than one year. The 15% maximum tax rate is available for both the regular and alternative minimum tax (AMT). In addition, qualifying dividends individuals receive during 2007 will generally be taxed at the 15% (or less) capital gains rate.

Elective Deferrals. The 2007 annual deferral limit for qualified retirement plans is $15,500. If you are at least age 50 by year-end, you can contribute an additional $5,000 to your 401(k) plan for 2007. Be sure to take a look at a recent payroll stub to see if you are deferring the maximum for your situation. Make any changes necessary before the end of the year.

Section 179 Expensing. For your business, the Section 179 (election to expense otherwise depreciable assets) limit is $125,000 for eligible property placed in service during 2007 and includes qualifying property placed in service as late as December 31, 2007. However, the Section 179 deduction phases out, dollar-for-dollar, after eligible equipment purchases reach $500,000. So, the $125,000 deduction amount for 2007 is completely phased-out when eligible equipment purchases reach $625,000. If you know that you will be purchasing qualified assets in December, please be sure to let us know so that we can effectively plan with you.

Phishing Scams - Not "Fishing Scams"

2007-11-01T08:40:00.000-04:00

This isn't a "Fishing story" about the big one that got away. Phishing is a term used to describe the practice of tricking victims into revealing private personal or financial information over the internet, telephone, or by other means. Recently the Internal Revenue Service warned taxpayers of a new phishing scam in which a phony IRS email informs recipients that they can receive an $80 credit from the IRS by filling out an on-line customer satisfaction survey. In addition to the standard customer satisfaction survey questions, the survey requests the name and phone number of the participant - the survey also asks for credit card information.

Note this - the IRS does not initiate contact with taxpayers via email! If you receive a suspicious email claiming to have come from the IRS, you can report it by sending an email to phishing@irs.gov.

Don't take the bait that is being offered by Phishing techniques - instead take the bait and a child to the lake or stream near you and go after the "Big One"!

Staff Salary Survey

2007-09-07T10:34:00.000-04:00

Occasionally, I’ll have a doctor or an office manager call me asking for the going rate of a particular staff position. Everyone would like to know if what they are paying and the benefits they provide their employees fall within a “fair” range. I often receive this question when the office is hiring new personnel and especially when they are hiring a position that they have not had in their office in the past. Sources are available to gain a perspective on pay rates, but finding out what common healthcare businesses are doing specifically in our market is always useful information. Last year we compiled information submitted by way of a survey sent to medical and dental offices and then made this information available to those who participated. This year we are pleased to be offering our survey on-line and ask that you participate. The link for this survey can be found on our website located at http://www.vmde.com/. To make this survey meaningful, I would ask that you do just two things:

One, please take a few minutes now to complete the survey on-line or ask your office manager to do so for your office. And two, please invite a colleague physician, dentist, or fellow office manager to participate in taking this as well. Simply direct them to our website and to click on the “Take our Healthcare Salary Survey” link prominently displayed. It really is quite simple to complete. In the end, the more participation we receive, the more useful this information will be to you. Everyone that participates in the survey will receive a complimentary copy of the compiled results; the office need not be a client of ours to participate or receive a copy of the results.

New Healthcare Consultant

2007-09-07T10:32:00.000-04:00

Our Healthcare Team recently expanded with the addition of Scott Flickema, CPA, CHBC. Scott comes to us from Spring Lake where he has been servicing healthcare clients in the Muskegon and other Lakeshore areas. I’m personally excited to have Scott joining us. Scott brings twenty three years of working with doctors and their staff to our firm and I’m confident that his experiences as a fellow Certified Healthcare Business Consultant will be a valuable resource in our efforts and my goal of assisting you manage your healthcare practice. We welcome Scott and our new clients to VMDE and look forward to introducing him to you more in the future.

First Appointments & First Impressions

2007-07-10T16:04:00.000-04:00

Have you ever walked into a place for the first time and felt like a fish out of water? Recently, I visited a client during the lunch hour and rather than skipping lunch altogether, my typical decision, I decided to grab a quick sandwich at a Jimmy John’s Gourmet Sandwiches on my way back to the office. Signs touting “World Class Catering” and “World’s Greatest Sandwich” caught my eye as did the red JJ logo conveying that they have been around since 1983. I had never been to JJ’s in the past so I thought this just might be worth a try. I walked in ahead of some other customers who appeared to be experienced JJ diners and the person in front of me rattled off his menu selection really fast leaving me little time to check out the menu board. When the friendly gal behind the counter asked, “May I help you?”, I was feeling a little pressure to pick something to keep the flow of the crowd behind me going. I quickly selected a number 4 and then, having observed the guy in front of me, I moved to the side looking for my next move. I was thinking, OK, where do you get the chips? Where is the beverage machine? It wasn’t a horrible feeling, but it was definitely feeling like a rookie experience.

As I was driving back to the office and thinking about this experience the thought crossed my mind, what do patients (also customers, mind you) experience the first time they walk into a medical or dental office? Do they, too, feel like a fish out of water? It would be no surprise to learn that patients aren’t real eager to go see the doctor about whatever brought them to your office. So, what if the experience could be made better by educating the patient on what to expect when they walk through the door?

Later during the week I ran across a special marketing feature by Melinda Spitek of Hycomb Marketing that addressed the matter of easing doubts and fears of a patient. Imagine this, Melinda writes: Your new patient receives your colorful, professional New Patient packet the day after they called to make the first appointment. There’s a brochure, an appointment card, health history forms, even a welcome letter – plus a complimentary copy of your newsletter. Effectively, each piece responds to a different unasked question, building confidence and commitment on the spot!

How the components work together:

The Welcome Letter is a conversational greeting between you and your new patient – the equivalent of eye contact and a handshake.
The Welcome Brochure introduces you and your office philosophy. It outlines your clinical credibility, maps your location, and lists your services. And, most importantly, it answers the unasked questions: Will you understand my fears? How do you handle an emergency? Will you accept my insurance? What other payment arrangements are available? This brochure would also point the patient to a website that might have additional frequently asked questions and answers.
The Appointment Card confirms the date and time – subconsciously strengthening resolve to keep the appointment.
The Health History forms let patients know what information must be gathered before you can provide treatment.
Your Practice Newsletter demonstrates your commitment to informative communication with your patients.

The above approach seems like a great start to making the patient’s first office visit a pleasant one. Today’s healthcare consumer, who is becoming more vested in their personal healthcare options, will also be more likely to tell their family and friends of the great treatment they received from your office.

How about your office? Are you doing this? Are you doing other great things for new or established patients and creating customer loyalty? Please send me an e-mail with what you are uniquely doing for your patients – put “Customer Service Ideas” in the subject line so I don’t miss it. For the best suggestion in July, I’ll send you a gift certificate for a lunch at Jimmy John’s Greatest Sandwiches – I recommend the Number 4!

Developing a Practice Brochure & Website

2007-06-07T16:32:00.000-04:00

Today, and even more so in the future, the emphasis in health care is and will be consumer-driven. Your current patients, as well as many prospective patients, have a real interest in health care information. They want to know about you, your specialty, special skills you have, and about the range of services your practice offers.

How effectively you are able to communicate these facts to your present and prospective patients will help develop a tie that binds them to your practice. A carefully planned and developed practice brochure or website – that conveys to the reader your desired image and flavor of our practice – assures the reader that your are the overriding choice in your specialty. These tools also serve as a handy reference guide to your office procedures and eliminate repeating this basic information time and again.

Before you jump into writing or developing your communication piece, ask yourself what the objective for having such a publication is. You must think about the readers first! Who are they? Your patients – present and prospective ones. Do you want to convince prospective patients to try your services? Do you want to reinforce the ties you have with your existing patients? Or, do you want to create an identity for your practice? By answering these questions first you will have done an effective job at planning your communication piece.

Next, identify your target audience. Really, there is more than one – probably three at least. Current patients, prospective patients, and referring doctors all should know about you and your practice, and you want to tell all of them what you have to offer. List several reasons why patients should choose your practice over another. Tell patients what makes your practice special. Put yourself in your patients’ shoes; they are your readers. Ask yourself, can the reader answer -“What’s in it for me?” If your practice brochure or website answers this question, you’re on the right track.

If you wish, focus on one specific benefit or feature about your practice that makes your practice different from the practice down the street. Then you can stress that benefit and appeal to your readers’ personal interests. Support the benefit or feature with convincing reasons to believe your message.

Choose a writing style that clearly communicates to your readers. Your style of writing should positively reflect upon you and your practice. A distinctive personality may just be the quality that sets you apart from the competition.

To ensure that your readers understand your message, answer these questions:
· Is the text simple and straightforward?
· Does the text reinforce the benefit or feature you focused upon earlier?
· Does the text follow a logical flow?
· Does your information intrigue the reader’s interest causing them to read on?

In order to highlight important information and more visually interesting you can use subheadings, bullets, and varied typefaces where they are appropriate. Be careful, however, not to overuse any of these techniques as they can work to your disadvantage as well.

If you prefer to hire professionals to do the majority of the work in preparing a practice brochure, select someone who has worked for doctors previously and ask to see some samples of their work. References are also appropriate here. Ask for at least three and check them out thoroughly. Was the work done according to the bid or estimate? Did the firm, or person, help with artwork or photograph selections? Some firms can supply stock photographs or artwork that is quite appropriate for your brochure needs and at substantial savings over a photo taken professionally. It won’t hurt to ask the firm such questions.

It is important to remember that your practice communication piece looks professional, or it shouldn’t be done at all. Select a size for your brochure that will easily fit into a coat pocket or purse and can be mailed out in a standard business envelope. You can design your brochure to be a self-mailer, as well as an item available at the counter in your office. You must decide early on in the development process because its size and shape will ultimately affect every aspect of its layout. When you get to the brochure layout stage of development, remember to keep the content simple and don’t pack every inch of the brochure with pictures or text. Leave plenty of white space to give your reader’s eye a rest. This also prevents your brochure from looking “busy” or cluttered. Many of these same concepts apply to a website as well.

Select a style that enhances your image and will be pleasing to your target audiences. Do you want to convey the image of an up-to-date, modern practice? If so, select a glossy paper and brighter colors. Or, for a more traditional image, choose textured paper and subdued colors. Look at samples of other practices’ brochures and websites to see what they have done. Don’t forget to ask you staff for their input throughout this process. They can be an invaluable resource for providing excellent suggestions on the contents, physical appearance, and design.

As a final step in this process, be consistent. Your brochures, letterhead, and website should all present the same image of your practice. Keep your practice’s name and logo in a prominent position on each one. Keep similar color schemes and design formats to maintain and reinforce the identity you’re trying to create and communicate to your patients. Once you have developed a communication piece, use it at every opportunity. New patients should receive a brochure on their first office visit. Point to your website with a hyperlink in every e-mail you send. This creates a powerful and positive first impression of you and your practice.

Be sure to send a brochure or a post card introducing your website to all of your current patients to reinforce your doctor-patient relationship with them. Finally, pass these marketing tools on to each prospective patient in you target audiences and to your referring doctors. In fact, send your referral sources a quantity of them with a personal note, thanking each one for past referrals and inviting each doctor to continue referring patients in the future.

Whenever you are invited to speak publicly, be sure to have these resources readily available for your audience. Your objective should be to put these resources into as many hands as possible.

Unclaimed Property Filing Requirements

2007-03-22T22:07:00.000-04:00

About a year ago several clients received a letter from the State of Michigan informing them of Michigan’s Unclaimed Property Filing Requirements. Recently, I have received copies of another letter that the State of Michigan is sending out informing my clients that State of Michigan has yet to receive an unclaimed property report from them. Attached to the letter they received is a State form which basically allows the client to attest to the fact that they have no unclaimed property subject to the reporting requirements. Because we typically assist with the filing of tax forms, many of my clients are sending this form on to us; however, we do not have the information needed in our office to assist you with the filing of this form. So, I thought it might be a good idea to provide some information to you here regarding the Unclaimed Property Filing Requirements.

Michigan’s Uniform Unclaimed Property Act, a little known law made effective March 28, 1996, requires holders of unclaimed property to report and remit property belonging to owners who cannot be located, or for whom there is no known address. So what might a medical or dental practice have in the way of Unclaimed Property?

Well, it could be that you sent a check to a patient for duplicate medical payments and the patient never cashed the check. Maybe you have tried to contact the patient, but he or she no longer lives at the address you had on file. Since this money can not be sent to its rightful owner, the State steps in as the trustee of this person and holds the money until the rightful owner can be found. The same situation could occur for payments you make to vendors that provide services to your practice or for a payroll check that a former employee never cashed. The form you would use to remit this unclaimed property (form 1223) to the State of Michigan can be found on the State’s website – www.michigan.gov. Simply, type the words – “Unclaimed Property” on the site’s search area and the results will produce a link that will take you to information on the filing requirements and the forms to use.

By providing the Michigan Department of Treasury, Unclaimed Property Division, with complete and accurate information on your annual unclaimed property report, your practice will not only be in compliance with the law, but will assist in returning the property to its rightful owner. How does this happen, you ask? Well the State of Michigan also has a search engine allowing people and businesses the ability to search for this Unclaimed Property. Last year during one of my visits to a client’s office I was explaining this process to the office manager. We walked over to her computer and I directed her to the State’s site and had her search for money that might be due the business. Surprisingly, we found money due the practice that was from an insurance company in excess of $3,000. Naturally, the office manager’s next question was – I wonder if the State has any of my money? My next thought was – how many other clients have this situation? And why didn’t their accounts receivable management process catch this missing check?

Do you have unclaimed property on hand? If so, you now know that you are to remit this to the Michigan Department of Treasury. Do you have any money due you or your business? Search for it by utilizing www.missingmoney.com. Just out of curiosity as I was writing this for you I typed in a client’s name in the search engine and found some more missing money. Is it yours?

Computers in Practice

2007-02-10T20:25:00.000-05:00

As a Certified Healthcare Business Consultant for physicians and dentists I have found the area of technology to be of interest. In 1994 I wrote an article published in the Medical Practice Management magazine entitled “Computers in Practice”. The subject matter encompassed how computers have changed the way in which healthcare practices process information. The main topic addressed installing computerized checkbook systems for paying the practice’s payroll and payables. Recently, I pulled the article from my file and was surprised to see just how far we have progressed since writing that article. Systems that we were just implementing at the time of the article are now fully embraced. In fact, much of the technology that I had surmised to be on the horizon is also now in place.

We initially began installing software on client’s computers so that they could pay their bills and process payroll checks --- today most every client that uses the same checkbook software does so through the Internet by way of a secure portal that they enter through our website. This portal also contains a file cabinet of sorts that presents their financial statements and other business documents. If we do the payroll for a client, they simply enter the hours for the employees on a worksheet contained in this portal and then submit the file directly to us. Because the client’s checkbook information resides on a networked computer our staff is able to download the information directly from the client’s checkbook eliminating the need to send us diskettes or backups of their files. The use of this portal has allowed us to support our clients using the computerized checkbook system more efficiently as well.

Using software via the Internet has also allowed us to offer clients real-time support on their computers; hold meetings with clients; and in some cases actually process their monthly practice management reports. When needed our clients log into meeting software that we use and within a few minutes they are looking at our computer screen. If the client wants to show us something on their computer, no problem, we simply switch who is doing the presenting and then we are looking at their computer. When I reflect on the advancement of technology over the past several years I find it amazing how far things have come in a short period of time. I wonder how will be using technology in five to ten years from now. How might the use of technology assist healthcare providers care for their patients in the future?
Today I came across an interesting article presented in Healthcare IT News on how technology is being used to treat patients in an innovative way. Seeking efficiency, cost-effectiveness and improved communications with patients, physicians at the Henry Ford Health System in Michigan are piloting a Web based portal for virtual office visits. Patients and physicians conduct online consultations by sending questions and responses through MEDSEEK’s eVisit tool. Its use is intended for brief, non-emergency assessments. The Medical Director of HFHS, Dr. Diane Sayers, is quoted in the article saying, “We’ve decided to allocate .6 work RVU’s per eVisit. A live visit worth the same physician work RVU would typically take 15 minutes, whereas the eVisit only takes about three minutes to complete.” Today the use of this type of technology may seem a bit futuristic, but then twelve years ago the idea of electronic banking, meeting with clients on-line was a bit futuristic as well.

Using computers to store and create Electronic Medical Records (EMR) is a concept still trying to find its way into medical practices. Some doctors are using these systems, but its success in the practice is still being debated. What’s not being debated is the cost of providing care to patients – everyone seems to be on the same page when it comes to this topic – costs are going up and reimbursements are going down. Therefore, finding ways to improve the bottom line may need to include using technology in ways we have not used it in the past.

I find that while many offices have replaced the long forgotten pegboard systems with a robust computerized practice management system to make things more efficient in the office, much of the valuable data found in their computer systems remains un-tapped. The typical busy practitioner just doesn’t have the time at the end of a busy day to explore ways to mine the data. Most office managers desire what is best for the practice, but they too are busy wearing many “hats” for the practice, which limits what they can do in this area. And yet the information contained in the practice management system, if reviewed, may point to ways that will increase the bottom line of the business. Over the past year, the healthcare team at VMDE has been investing and testing a process of utilizing technology to analyze client’s practice management data. By partnering with the practice we have used our technology in a way which has proven to be very valuable for focusing on the processes responsible for generating revenue, addressing compliance and increasing efficiency within the medical practice.

As we move forward together this year and in the years to come, it is my goal to keep a watchful eye on, and present to you, ways in which we can use technology together to assist you increasing your bottom line; keeping you in the business of treating your patients.

2007 Holiday Schedule for your Personnel Policy Manuals

2007-01-15T13:02:00.000-05:00

Here is a list of the most common employer-paid holidays and their 2007 dates of observance:

Martin Luther King's Birthday - Monday, January 15, 2007
Presidents Day - Monday, February 19, 2007
Good Friday - Friday, April 14, 2007
Memorial Day - Monday, May 28, 2007
Independence Day - Wednesday, July 4, 2007
Labor Day - Monday, September 3, 2007
Thanksgiving Day - Thursday, November 22, 2007
Day After Thanksgiving - Friday, November 23, 2007
Christmas - Tuesday, December 25, 2007
New Year's Day - Tuesday, January 1, 2008

Provide Your Staff with a 2006 Total Pay Statement

2007-01-15T12:57:00.000-05:00

Remember to let your employees know how much you appreciate them for all the work they do for you. Without their help it would really be difficult to run a medical or dental practice. In addition to saying thank you or doing something special for them (like buying them lunch on a special day or giving them tickets to a movie), you might consider educating your employees of their importance by providing them with a compensation summary for 2006 that includes their salary amount and any additional benefits you provide. Prepare it now while the year-end data is still fresh in your mind and then hand it to them and say, “Thanks for all you did for me last year!”

(If you would like the form in an Excel Worksheet Format, simply send an e-mail to mike@vmde.com requesting the form by putting Compensation Summary in the subject line)

Key Figures for the New Year

2007-01-15T12:47:00.000-05:00

IRS Standard Business Mileage Rate for 2007 - Under the standard mileage rate method, a taxpayer who owns or leases an automobile (including a van, pickup or panel truck) and uses it for business may claim an expense deduction equal to the standard mileage rate time the number of business miles traveled in the year. I find that medical and dental offices use this figure frequently for reimbursing employees when they use their automobile for the business. The new IRS prescribed rate for 2007 is 48.5 cents per mile and increase from the 44.5 cents per mile for 2006.
Payroll Tax Figures – For those of you who are completing payroll for your employees, please take note of the following:

The Social Security Administration has announced that the wage base for computing the Social Security tax (OASDI) in 2007 will rise to $97,500 from $94,200 in 2006, an increase of 3.5%. The $3,300 increase is due to an increase in average total wages.

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

The FICA tax rate for employees and employers is 7.65% each - 6.2% for OASDI and 1.45% for HI. For self-employed workers, the FICA tax is 15.3% - 12.4% for OASDI and 2.9% for HI. There is a maximum amount of compensation ($97,500 in 2007) subject to the OASDI tax, but no maximum for HI.

On a salary of $97,500 (or more) in 2007, an employee and employer will each have to pay $204.60 more ($6,045.00 instead of $5,840.40) in Social Security tax this year compared to last.
Election to expense capital purchases – In 2007 up to $112,000 of qualified equipment purchases can be written off in the year it is purchased. This election is phased out once your new asset purchases for the year reach $450,000.
Retirement Plan Limits Increase in 2007 – Beginning in 2007 the maximum elective deferral amount (voluntary contribution of doctors/employees) for 401(k) plans increases from $15,000 to $15,500 and those who are 50 years or older an additional $5,000 can be deferred. For those with SIMPLE plans the elective deferral amount increases from $10,000 to $10,500 and for those over 50 an additional $2,500 can be deferred.
Employer Health Savings Accounts – Up to $5,650 may be put into an HSA for those with family coverage and as much as $4,830 for individual coverage. Account owners born before 1953 can put an additional $800 in their account. Deductions can now exceed the plan’s deductible amount. Minimum deductibles for HSA’s remain $2,200 for family coverage and $1,000 for individual coverage.

Internal Financial Controls

2006-12-12T21:41:00.000-05:00

For the past twenty-two years I have worked with small, medium and large sized medical and dental offices. Occasionally, I have discovered employee theft. Sometimes a suspecting doctor brings it to my attention. On occasion employees have brought a matter to my attention that resulted in finding theft occurring in the office. In at least one instance an office manager convinced her employers that a change in the accounting system was warranted with the intention of saving accounting costs. A couple of years later I received a call from the physician informing me that the office manager that made the recommendation embezzled hundreds of thousands of dollars from the practice.

Recently, I have heard of offices experiencing employee theft and I have personally discovered some situations once again. Our discoveries usually arise from preparing monthly accounting services for many of our medical and dental clients. While we attempt to assist you in protecting your business and would make you aware of possibilities, you need to understand that the scope of our services and engagement with your office does not include specific services relating to the discovery of employee fraud.

I believe that many healthcare providers fall prey to the possibilities of employee fraud. Practicing medicine and dentistry in today’s business environment is difficult and practitioners find out too late that their assets are not as well protected as they thought. It seems to me that the “checks and balances” used to verify the accuracy of transactions have been less of a business focus in recent years. The implementation of computer systems have in some cases made the process more efficient, but less understandable by “technology challenged” business owners. Consistent internal controls are important to assure the accuracy of financial reports and company taxes. In addition to providing good management practices, these procedures give the owner of the business the control over the cash flow. The advantages of improved internal controls include discovery of errors and omissions, it discourages employee theft, and it protects your assets. The following is a listing of some questions that you should ask yourself in reviewing your internal financial controls.

Cash Collections & Receipts

Is a change fund being maintained?
Are receipts issued for cash payments?
Are payments received indicated as check or cash on receipts and daysheets/computer?
Is cash totaled daily to agree with the daysheets/computer?
Are employees who handle cash bonded?

Deposits

Is a deposit prepared daily?
Are deposits held overnight stored safely?
Are the carbon copy deposit slips attached to the daysheet/computer run?
Is the bank statement opened only by the doctor or accountant?
Is the bank statement mailed to the doctor’s home or the accountant’s office?
Does the amount deposited into the business account reconcile to the receipts reported for the month by your computer system?

Daysheets & Financial Cards

If you are using a manual/pegboard system, is it used correctly?
If you are using a computer system, do you have a manual system should the computer go down during the day?
Is there an individual daysheet/computer run for each day?
Does the doctor review and initial each daysheet/computer run?
Are all accounts with balances billed? Even those pending insurance?
Are billing and collection duties done by separate persons?
Is a back-up on the computer system performed daily?
Is back-up media stored off-site in a safe place?

Petty Cash

Do you itemize cash expenditures?
Are receipts kept for petty cash expenditures?
Do you keep a running balance of petty cash?
Dose the cash balance agree with the records? Is it balanced monthly?
Are employees’ purses and personal belongings kept in a separate location away from the front office area?

Employees

Are employees’ required to rotate duties and responsibilities where possible?
Are refund checks approved by the doctor?
Are “write-offs” and adjustments reviewed by the doctor monthly?
Are accounts in internal collections contacted at least monthly?

Accounts Payable and Miscellaneous

Does doctor sign all checks? And are the appropriate invoices attached with the check to be signed?
Do you refuse to keep a signature stamp in the office?
Does the doctor refrain from “skimming” or “dipping” into the petty cash?
Do you have your CPA or an outside person perform periodic reviews on your internal controls?

The above questions are intended to assist you in identifying areas that might need better controls. If you would like us to assist you with a “Check-Up” in any of these areas of your practice, please let me know.

Nine Guides to “Keeping Your Staff”

2006-11-20T22:35:00.000-05:00

Last month we took a look at ways to evaluate your office staff. Giving staff members’ regular evaluations is vital, but maintaining a productive, dedicated staff also requires other positive steps on your part. Following are nine key guidelines to consider:

Promote Continuous Interacting. Giving your staff members constant feedback, both positive and critical, lets them know what standards you require for everything from business correspondence to patient care. When you praise an employee, it’s also vital to let them know that they’re doing something unique that you and the other staff members can’t do. Try to have this kind of interchange at least once a week with each employee, picking out some accomplishment that you can sincerely praise. And remember to “praise in public and reprimand in private”.
Hold Regular Staff Meetings. Plan to have regular staff meetings at least once a month or every two months. These should be short, businesslike, open sessions with brief agendas listing discussion points. At each one, staffers should meet with the office supervisor or business manager, who in turn should hold regular meetings with the doctors. In smaller practices, the whole staff should meet with you. All staff meetings should be used to solve problems and report on progress, and should incorporate suggestions from all staff levels. In some practices, brief meetings are held each morning before patients arrive to keep the staff more aware of schedules and problems on a daily basis.
Monitor Satisfaction. Sometime during the next twelve months, ask each member of your staff what she likes most (and least) about her job—and what needs to be done to make the job more interesting and satisfying.
Restructure Job Descriptions. By putting some variety and balance into an employee’s job, you can cut down on possible monotony. We suggest looking at job descriptions carefully and matching them to the employees’ current capabilities; perhaps others can share in some particularly tedious work done by one person.
Offer New Responsibilities. Between evaluations, you may want to offer a staff member an additional duty that will increase their sense of usefulness, such as attendance at a workshop or conference that relates to performing their job.
Keep a Clear Chain of Command. Each staffer should know that they report to only one boss. Without direct, explicit lines of authority, efficiency suffers—especially in the high-tension office situation found in most practices today.
Maintain Consistent Staff Quality. One of the best things you can do for your staff members is to keep the quality of staff high. When a new member is hired, check the credentials and experience to see that they fit in with the skill levels of your current employees. By the same token, support and reward your staff by getting rid of any staff member who proves unsuitable. This will assure your long-time staff members that they won’t have to carry extra burdens or suffer for unnecessary errors—encouraging them to stay with you.
Give Smart Bonuses & Raises. Rather than giving Christmas bonuses make sure that any salary-related “extras” are seen as just that. The bonus should not come around a holiday but should be connected with especially hard work or high productivity; in some cases, the bonus will stem from a staff-wide effort; at other times, it will apply to the work of only one member. As for salary raises, be certain they come through when promised, since people become discouraged quickly and permanently by delays.
Review Supervision. Periodically, you, the supervisor and the business manager should take stock individually to see that none of you is hindering the office operation by improper exercise of authority. Too often, a casual comment to a patient by a doctor, such as “Don’t worry about the bill”, or “Drop in any time”, can be taken too seriously by the patient—causing difficulties in billing or scheduling.

Remember that any staff evaluation program you use must be reviewed and modified as changes occur in your practice patterns, or in the composition of your office employees. I hope the suggestions and guides offered last month and this month will assist you with this process.

Accurately Evaluating Your Office Staff

2006-10-10T09:52:00.000-04:00

Any conscientious practitioner for various reasons can easily overlook evaluating office staff. Two basic reasons are: one, it is extra, seemingly thankless work, and second, many doctors simply believe that all is working well in their offices and do not want to "rock the boat". Yet it is very important for you to know that your office is operating as efficiently as it can, and with a well-planned, routinely conducted staff evaluation program, you can achieve several advantages.

First, you will be able to uncover staff problems and have the chance to solve them before they get out of control.

Second, the channels of communication between you and your staff will be improved, and staff members will feel more able to approach you in the future.

Third, you can readily determine your staff's efficiency level so that you are positive your staff members are doing what they were hired to do.

Fourth, you can find out if each staff member has the skills and motivation needed for his or her present job (which may easily have changed since he/she was hired). You can also set up the basis for future raises, promotions, new hires, and dismissals.

Fifth, eventually you will find a marked decrease in staff turnover, because job duties will have been clarified and evaluation made a regular part of your office routine.

The Tools You Need First

In order to get the best results from any staff performance analysis, you need four basic kinds of information on each employee. (If you don't have the data in complete, up-to-date condition now, you should make sure you do by the time the next evaluation comes up.) The following are the four key evaluation tools.

 Personnel File: A complete file will contain the staff member's original job application, resume, record of salary increases, and attendance record, as well as day-to-day notes or reminders you've made about positive or negative performance. Any letters from patients, comments from your accountant, or management consultant should be in this file. Your own comments during the year, say on punctuality or efficiency, are vital at evaluation time. Even though they may be no more than hastily scratched notations, they'll help you recall, in detail, that individual's activities during the past several months.

 Policy Manual: This gives you a reliable benchmark against which to measure each staff member at review time and helps you get more consistent results. A good policy manual, for example, spells out general office limitations, the codes of practice, attendance rules, and standard professional conduct.

 Job Description: From the job description, you'll quickly see what specific requirements each employee should be fulfilling. Job descriptions should be reviewed on an annual basis, preferably midpoint between performance reviews, which will keep the job descriptions reasonably current, a necessity in case an employee should unexpectedly leave. Frequent job description rewriting also lets you know if an employee's job has grown measurably without your knowledge, causing undue stress for that staff member.

 Performance Evaluation Form: A standard form can be used for evaluating all employees, since the areas of accomplishment listed on it apply basically to nurses, medical assistants, hygienists, and others in similar positions who work in medical or dental offices.
In general, performance evaluation forms measure the larger factors, from goal achievement to major tasks and accomplishments. On a different level, the performance form furnishes both a qualitative and quantitative means for measuring a staffer's work output, skill level and initiative, as well as dependability, and overall attitude.

It's probably wise that your policy manual specifies that staff members can have access to a sample copy of your performance evaluation form. That way each employee has a clear idea of what she is going to be rated on and what goals and accomplishments are generally expected in your office.

The Best Time for Performance Evaluations

The first evaluation should come three months after the employee's hiring date or at the end of your stated probationary period. After that, it's best done on an annual basis, preferably on the anniversary date of hiring the employee.

It is far better in the long run to do performance evaluations independent of salary reviews. When an employee anticipates a salary review at the conclusion of the performance evaluation, he/she tends to listen less carefully to the evaluation. For that reason alone, you'll get better response to your evaluation if you let the employee know at the outset that you?ll discuss salary in, say, two weeks.

How to Prepare Employees for Evaluations

One to two weeks before any evaluation, you should provide the employee with a blank copy of the performance evaluation form and have them fill it out. Next, the employee should review both the job description and the office policy manual; set goals for themselves for the following year and put together an overall job rating. (NOTE: In many cases you can expect the performance rating an employee gives themselves will be substantially lower than the one you give.)

At the same time, the staff member's immediate supervisor should be filling out a separate performance evaluation form. In a clinic with several partners, the supervisor needs to ask the doctors for their informal comments on the employee's general performance; that makes the supervisor's analysis much more valuable during the final evaluation.

Though it occurs only infrequently today, using any input from a staff member's office peers will only interfere with evaluations by supervisors and yourself.

The Evaluation Itself

The evaluation conference should be confidential. Before it begins, you should look over the self evaluation rating done by the staff member who's being rated, since it sometimes offers unexpected insight into the employee's goals and problems; you should also check over any comments made by your partners. You should be prepared to spend as much time as possible on the positive aspects of the person's performance; this means praising an employee's accomplishments and letting her know that you are well aware that she has successfully completed a number of useful projects.

At the same time, you should be clear about things that still need to be worked on and goals that need to be set. Be sure to put deadlines on most of the goals - from one month to three months, according to the effort involved. In order to best present these goals, construct them and write them up before the evaluation session.

Remember, too, that staff members - especially, those in managerial or upper administrative positions - like to have the feeling that they are making progress. They look for a change to break their daily routines. So, attempt to add some new or different job responsibilities, which will encourage a new approach to the job. It's important, too, that you give the employee enough time for the new responsibility.

In your evaluation, stress the staff member's dependability. If you know that a new member has learned certain lab or office techniques so well that they don't need to be supervised, be sure to let her know you noticed. You actually do have to give most people independence, rather than just letting them go on with their job duties not knowing if you approve of their efforts wholeheartedly.

Pension Protection Act of 2006

2006-09-16T15:22:00.000-04:00

The Pension Protection Act of 2006 was approved by both the House of Representatives and the Senate before the Congressional summer recess and was signed into law by the President on Aug. 17, 2006. Among other changes, this massive 900-plus-page law overhauls the funding and disclosure rules for defined benefit plans, revises the deduction limits for qualified plans, addresses conversions of pension plans to cash balance plans, carries liberalized payout and rollover rules, and makes a host of other changes relating to pension plans and their beneficiaries. It also revises key charitable giving rules and makes a number of charitable reforms. Here is a summary of some of the key tax changes in this important new legislation that may affect doctors and their business:

New and Enhanced Retirement-Savings Incentives

Although new rules for defined benefit plans account for more than half of the Pension Protection Act, the new law also addresses retirement savings held in IRAs, 401(k) and other defined contribution plans. These provisions affect tens of millions more taxpayers than do the pension rules. In future planners I will address Roth IRA changes, which doctors may wish to consider in their planning this year.

New investment advice rules

- permits qualified “fiduciary advisers” to offer investment advice to help employees manage their 401(k) and other retirement options;

- puts in place fiduciary and disclosure safeguards to ensure that advice provided to employees is solely in their best interest;

- requires fiduciary advisers for employer-sponsored plans to base their recommendations on a computer model that is certified and audited by an independent party; and

- requires fiduciary advisers for non-employer sponsored plans to charge a flat rate fee for one year (with no computer model).

Liberalized plan payout and rollover rules

Provisions in the Act that liberalize plan payout and rollover rules include the following:

- after 2007, taxpayers will be permitted to make direct rollovers from qualified plans to Roth IRAs;

- for purposes of the 401(k) hardship distribution rules, “hardship” includes hardship of a beneficiary under the plan (even if the beneficiary is not a spouse or dependent). This provision is effective on August 17, 2006;

- members of the National Guard and Reserves called to active duty through 2007 can make penalty-free withdrawals from retirement plans. Withdrawn amounts may be repaid to the IRA or pension plan within two years of the distribution;

- effective for post-2006 distributions, nonspouse designated beneficiaries are allowed to make rollovers of inherited amounts in qualified plans, governmental Section 457 plans, or tax-sheltered annuities to their own IRAs (treated as inherited IRAs); and

- effective for distributions in plan years beginning after 2006, defined benefit plans can make in-service distributions to age-62-or-older participants.

Retirement savings provisions made permanent

The Act makes permanent a number of retirement plan and IRA liberalizations that were added to the tax laws in 2001 but were set to sunset after 2010. By making the 2001 changes permanent, the new law preserves the advantages of higher employee contribution limits for employer plans, higher IRA contribution limits, more flexible plan rules, portability, a catch-up for those over 50, and an increase in employer contribution limits. The new law also makes permanent the saver's credit, which would not have been available after 2006 absent the extension.

Charitable Contributions

The new law narrows the allowed contribution deduction for cash, clothing, household goods and other items. However, for the first time it also allows for certain contributions of IRA funds to charities.

Under the new provisions when making charitable contributions, regardless of the amount, the donor must maintain a cancelled check, bank record or receipt from the charitable organization that reflects the date and amount of the contribution. The new recordkeeping requirements appear to give taxpayers absolutely no leeway for small non-documented cash contributions.

Over the more recent years of preparing tax returns; I have noted an increase in the use of non-cash contributions. While it is an allowed deduction and seems reasonable to expect that a deduction would be allowed for donating goods that have value, it is often questionable as to the perceived value that these items have in the eyes of the person receiving a charitable contribution. It appears from the changes being made in the Act, that this area of itemized deductions has and will receive more scutiny. A change that is effective immediately under the new law is that no deduction will be allowed for used clothing and household items unless the items are in “good” condition.

Under the new law, taxpayers 70 ½ years and older will be able to make tax-free distributions from IRAs for charitable purposes through December 31, 2007. The maximum annual cap is $100,000. For estate tax planning, I know some clients have declared their favorite charitable organizations to be beneficiaries of their IRA’s – this provision might be a great opportunity to assist the cause now rather than later.

Please keep in mind that I've described only some of the highlights and important changes in the new law that may affect you and your healthcare business. Please give call me at your earliest convenience if you need more details on how you may be affected by this important tax legislation.

Cash Flow Note Regarding Medicare Payments

2006-08-16T09:47:00.000-04:00

A brief hold will be placed on Medicare payments for all claims during the last 9 days of the Federal fiscal year (September 22 through September 30, 2006). These payment delays are mandated by section 5203 of the Deficit Reduction Act of 2005. No interest will be accrued and no late penalties will be paid to an entity or individual by reason of this one-time hold on payments. All claims held during this time will be paid on October 2, 2006.

This policy only applies to claims subject to payment. It does not apply to full denials, no-pay claims, and other non-claim payments such as periodic interim payments, home health requests for anticipated payments, and cost report settlements.

Please note that payments will not be staggered and no advance payments will be allowed during this 9-day hold. Be sure to take this into consideration as a possible decrease in cash flow for September.

Effective Management of Accounts Receivable - July, 2006

2006-08-15T16:10:00.000-04:00

Effective Management of Accounts Receivable

As summer draws near to the end, so does our discussion on effective management of accounts receivable. These steps represent some of the final steps in the process and focus on turning the account over to a collection agency. I hope these discussions over the past few months have prompted you to take a closer look at your procedures, discuss them with your staff, and simply evaluate the management of your accounts receivables. Beginning with financial statements presented for July I have asked our staff to gather additional information from each practice regarding the accounts receivable – specifically, the aging report. This information will be used to present additional graphs which can be used to benchmark your practice over a period of time – all done in an effort to assist you in managing your business and increasing your “bottom line”.

PUBLIC RELATIONS

In formulating and revising collection policies, be sensitive to public relations considerations. Harsh collection policies can negate goodwill built up over the years. Moreover, a “soft” approach yields higher collection rates than does taking a hard line.

MAXIMIZE COLLECTION AGENCY RECOVERY

Develop a detailed procedure for determining when to send an account to an agency for collection. This should be based on a determination of the point at which it becomes uneconomical for your practice to continue the collection of the account.

Collection agencies usually charge on a contingency basis - - 30 to 50% of the amount collected. Compare your current agency’s fees to the cost of internal collection efforts. Is the probability of collection greater with the agency than with your own staff?

Set up a system for referring accounts on a regular basis - - for example, every two weeks - - to minimize the time lag between the decision to refer and actual referral. Remember, an extended time lapse may make an account uncollectible, especially if proper follow-up has not been carried out periodically.

Be sure to set up a system for notifying the agency promptly of any payment received by your office on accounts they are handling so they do not continue to attempt to collect.
If you decide it is necessary to cancel your account with a collection agency, be sure to do so in writing.

CHOOSING A COLLECTION AGENCY

In choosing a collection agency, be sure to assess their experience in dealing with medical practices -- after all, you wouldn’t want the agency to use the same techniques for collecting bills from your patients as they use for collecting used car payments. Does the agency have special policies for handling medical accounts receivable? Do they have staff that specializes in medical accounts?

Be sure to ask for names of medical practices that are clients of any agency you are considering and check with them to see if they are happy with services received.

In comparing collection agencies, it is important to examine agencies’ rates of recovery as well as their commissions.

Other factors to consider in choosing a collection agency include the following:
a) Does the agency accurately account for and report all funds collected?
b) Does the agency promptly remit all collections?
c) Is the agency attentive to public relations considerations?
d) Is the agency willing to accommodate your special needs?

EVALUATE PERIODICALLY

Periodically step back to evaluate your collection system and pinpoint problem areas. Keep track of the percentage of patients who pay at the time of service. Do a three-month analysis of the payment history of individual third party payors by recording the number of billings, total days it took to pay each bill, and average number of days before payment.

Analyze your history of sending bills to agencies for collection by determining the average months from time of service to write-off by patient, the average number of calls placed before going to collection, and the percentage of gross dollars collected by the agency. Also review accounts written off as bad debts. Develop new goals and procedures based on these analyses.

Mike DeVries - www.vmde.com

Effective Management of Accounts Receivable - June, 2006

2006-08-15T15:57:00.000-04:00

Effective Management of Accounts Receivable – 90 Days

Are you tiring of having the subject of accounts receivable be my subject of these monthly general comments? I’m ready to move on to something else as well, but I can’t stress how important a good collection process can be to your business. Consider this – this will be the third month discussing effective management of accounts receivable. We are at the 90 day mark, which is the maximum amount of time you want your accounts receivable to age. Go to your computer system and request a listing of all balances that are older than 90 days. Do you have any balances on that report? If so, do you know why? Have they been worked recently? I suspect that you have balances in your total receivable figure that are losing value each month. The following three steps focus on working your aging report and increasing your “bottom line.”

IMPROVE STAFF’S ABILITY TO COLLECT

When working the patient A/R aging report, callers should follow a step-by-step process in making collection calls.

a) Define the goal you want to achieve for the call. Prepare a collection plan with deadlines.
b) Gather all pertinent information on the party before making the call.
c) Try to predict the other party’s position.
d) When you make the call to the debtor identify yourself, your organization, state what you are calling about, cite the outstanding balance, and then wait. The debtor’s reaction may reveal why he or she has not paid, and will indicate how you should proceed.
e) Direct the conversation by asking questions. Try to set the agenda in getting the debtor to make a commitment to pay by a certain date. Don’t say: “When can you get us the first payment? Say: “If we agree to let you pay in installments, do you agree to make X monthly payments by Y date?”

CONCENTRATE ON THIRD PARTY PAYORS

Third party payors may be the largest portion of your outstanding accounts receivable. Insurance balances that are older than 30 days should be worked right away – don’t wait for these to hit the 90 day mark. If you have insurance balances on your 90 day report, then you should be reviewing your systems in place to be sure steps are not being missed. You should be concentrating the bulk of your collections efforts -- say, 80% -- towards insurance companies. Make it a priority to get to know each major insurer’s policies, procedures, and employee benefits staff.

Many insurance companies now have Internet sites that allow you the ability to status or check claims that have been submitted and should be in process. Going online to check claims is a good way to spot issues early and make corrections or re-submit the claim, if necessary.

Visit all major insurance carriers - - those that collectively represent 80% of the medical group’s cash flow. Establish a relationship with key personnel. Learn their current procedures thoroughly. Build a file on major carriers and keep information on all changes in policy. Find out why carriers are not paying and take remedial action.

Because accurate, complete information on insurers is vital, the data gathering and verification system set up at pre-registration and day of visit will greatly enhance collection efforts with regard to third party payors.

In addition to the pre-registration phase, focusing your attention on the billing and follow-up action should begin within 30 days of when the claim was first filed.

Instruct staff to follow these steps in discussing specific claims with third party payors.

a) Review the patient’s file, including all previous letters and calls made to the insurance company.
b) Discuss the claim with the responsible claims handler. Establish firm payment dates. Ask if any additional information is required and to whom to send it. Set aside time at the end of the day to gather all needed information.
c) Get the patient and employer involved in seeking payment on long-standing bills. Ask them to call the insurer to find out the status of the claim and why it has not been paid. Give them the name, address and phone number of the person you have been dealing with at the insurance company.
d) Appeal to the state insurance commissioner as a last resort.

AVOID EXTENDING CREDIT TO PATIENTS

Extending credit to patients ties up cash and may require repeated collection follow-up. Offer patients the ability to use a credit card to make their payment in full. Many people are willing to use their credit card to finance purchases, including health care services. Some patients may not be able to use that “priceless” piece of plastic. For those situations -- instead of setting up installment payments on large balances, get some other entity to finance large self pay receivables -- for example, a bank or credit union.

In seeking a bank that will extend credit to your patients, start with your own bank -- they may be willing to perform this service as a courtesy.

For larger balances, arrange to have the patient borrow the sum due from the bank by signing a promissory note. This eliminates the need for additional billing, paperwork, and phone calls. Under this arrangement, the medical group must re-purchase the note if it becomes 90 days past due. If re-purchase is necessary, send the claim directly to a collection agency.

I recently attended a weekend basketball tournament of which my twelve year old son participated. I was observing how well some of the kids have progressed in the game of basketball – their dribbling and shooting skills have improved greatly from a few years ago when they first started playing the game. While each child was better at playing the game, it was the team that executed the fundamentals of the game best that ended up winning. Some of the above steps in accounts receivable management may seem elementary and basic, but revisiting the fundamentals in any game is a good idea and implementing them as a “team” works even better! Should you desire an assessment of your team or wish to have a little coaching done, give me a call. We have consultants that specialize in helping your staff improve your bottom line through effective collection methods. Next month we will focus on the final steps in the collection process.

Mike DeVries - www.vmde.com

Effective Management of Accounts Receivable - May, 2006

2006-08-15T15:47:00.000-04:00

Effective Management of Accounts Receivable

As a follow-up to last month’s general guidelines of establishing an effective accounts receivable management system, over the summer months I will be outlining more specific steps for you to consider and discuss with your billing team. Below are the first three steps:

Pre-visit Registration System:

The first step in developing an effective AR program is to set up a system for obtaining accurate insurance and financial data before a new patient walks in the door.
Booking personnel should be instructed to obtain the following essential information when a new patient makes an appointment: the patient’s complete name, address, and telephone number, the full name and address of his or her employer, the name and complete address of the patient’s insurance company, and patient’s policy number. Patients should be advised of the medical group’s financial policies by scheduling personnel and asked to bring all necessary forms or cards to their first appointment.

Some practices check patient records for outstanding balances at this point, and refer repeat offenders to the credit manager. Or the clerk may discuss any outstanding balance on the day of the visit.
In addition to streamlining registration, pre-registration information gathering minimizes “surprises” when the patient receives his or her bill.

Set numerical goals for the pre-registration of patients - - say, 80 to 90% of all newly scheduled patients.

Collection at the time of visit:

On the day of the scheduled visit, all information collected during pre-registration should be verified. All necessary credit information should be obtained for walk-in patients. The patient’s outstanding balance, including an estimate of costs incurred that day, should be tabulated while the patient is in the office.

After the patient has seen the physician, the total outstanding balance should be discussed, with a breakdown of the portion covered by insurance and amount owed by the patient. The patient accounts manager should then seek to collect the amount owed by the patient, asking: “Are you able to pay this amount now?” If not, a realistic payment plan should be worked out. (Remember, a realistic plan is more likely to lead to payment in full.) Remember, co-payments should always be collected at time of service. In fact, it just may be a requirement of your contract with the insurance agency.

A system should be set up to keep track daily of money collected from patients. The credit manager should put someone in charge of screening the previous day’s charges to spot problems for immediate follow-up.

Distinguish between small and large balances:

One of the goals of your AR system should be to focus staff effort on accounts that will yield significant returns with a minimum of effort. Therefore, it is necessary to develop separate policies for small versus large outstanding accounts.

First, define a cutoff for small accounts - - usually $100. Special efforts should be made to minimize staff time spent on these accounts. Small bills should have a shorter payment schedule.
It is especially important to seek payment in full at the time of the visit for small outstanding balances. Allow your patients to use a charge card only if necessary. If full payment cannot be made at the time of service, agree to a date on which the payment will be paid in full - - preferably within 30 days. Note this date on the patient’s bill.

For small A/R balances that do go to the billing process, use a short billing sequence of, say, 30 days, 10 days, 10 days, 10 days. The last bill should read “Going to agency in 7 days.” Then telephone contact or referral to an agency should take place. A policy on writing off very small bills should be considered.

Phone contact should be limited perhaps to bills exceeding $200, and should begin only after all statements have been sent - - usually after 90 days have elapsed from the date of service.

The total time lapse from the day of service to telephone contact or referral should be 70 to 95 days. Set a final write-off for bad debts - - usually 120 days after receipt of service.

Give careful thought to the design of bills and notices. They should be concise and authoritative. The amount owed should be clearly highlighted. Be sure to provide a self-addressed return envelope.

Next month, we will look at three more steps – “Improving your staff’s ability to collect”; “Concentrating on third-party payors”; and “Avoiding extending credit to your patients”. As I mentioned last month, if your Accounts Receivable Management (ARM) system needs "a hand", let me know - we have consultants that specialize in helping your staff improve your bottom line through effective collection methods.

Effective Management of Accounts Receivable - April, 2006

2006-08-15T15:43:00.000-04:00

Effective Management of Accounts Receivable

Effective accounts receivable (AR) management requires above all effective communication: with patients, to explain charge and payment policies; with staff, so policies are implemented appropriately; and with third party payors, to assure that their procedures are carried out in ways that minimize delays as much as possible.

The primary goal of AR management is to maintain maximum cash flow into the practice. Collection has become more important in recent years as insurers are moving to shift more costs to patients in the form of deductibles, co-pays, and implementation of Health Savings plans.

SOME GUIDELINES

The paramount rule of thumb to follow in developing an effective AR system is to concentrate your energies where there is the greatest promise of return for the least amount of effort. This means focus the most attention on third party payors, who have the resources and obligation to pay outstanding bills, and minimize the time spent on small accounts or those with little likelihood of repayment.

The key to implementing an effective AR program is to set numerical goals for all phases of the operation. Monitor actual performance at all stages - - and analyze operations when achievement falls short of goals. Recognizing good performance and periodically update goals to encourage continued effort.

THE HUMAN TOUCH

Because health care is primarily a service, care must be taken to train collection staff to deal with patients sensitively. They must be able to evaluate the reasons behind nonpayment, and to distinguish excuses from valid reasons. If nonpayment is due to dissatisfaction with services received, an attempt to resolve the problem must be made.

AR staff should strive at all times to be positive and polite, and should be sensitive to payment problems that may be exacerbated by illness. Staff should be trained to recognize emergency situations where no payment is required at the time of service.

It is crucial that all discussions of patient accounts be kept strictly confidential. All conversations should be private, and interruptions should be minimized.

All practice staff should be kept up-to-date on collection policies and procedures. AR staff should have intensive training in collection procedures, including role playing and periodic refresher courses.

Collection personal should:

· Avoid treating the patient as an adversary - - assume he or she wants to pay unless there are indications to the contrary.
· Remain professional and stick to the facts. Avoid getting into arguments.
· Be flexible, but don’t cave in.
· Appeal to the debtor’s needs - - his or her honesty, pride, and anxiety. Point out the importance of retaining a good credit rating.
· Try to build a desire to cooperate with you rather than creating an adversarial relationship.

IMPORTANCE OF GOAL SETTING

Setting numerical goals for the AR department and individual staff members is a key technique for spotting problem areas and improving overall productivity. Goal setting gives employees a sense of direction and achievement and can serve as a powerful motivator.

Be sure to involve AR staff members in setting goals and brainstorming about ways to improve procedures to achieve them. Provide regular feedback comparing actual performance to goals, and devise methods for improving procedures where performance consistently falls short. If desirable, use goal achievement as a key factor in employee performance evaluations, and celebrate achievement of group goals with a special event.

Consider setting numerical goals in the following areas: monthly outstanding bookings; percentage of bad debt to charges; gross collection ratio; average time span from charge to billing; total outstanding dollars; number of billings per week; dollars outstanding as a percentage of accounts receivable; collection ratio by financial class.

Give thought to redesigning jobs to give individual employees responsibility for discreet areas. By making a specific task his or her “baby” the employee’s sense of proprietorship is heightened.

Don’t go overboard in segmenting tasks, however. Each job should have sufficient variety to keep it interesting. Moreover, a certain degree of task sharing provides adequate coverage in case of employee absence.

In the coming months my general comments will include more specific steps that you can use in “Building an Accounts Receivable System” – the basics which are needed to manage your practice and have an effective collection system.

If your Accounts Receivable Management (ARM) system needs "a hand", let me know - we have consultants that specialize in helping your staff improve your bottom line through effective collection methods.