Archive for Management

Tips for Preserving Tax Deductions in 2018

Tips for Preserving Tax Deductions in 2018

Starting this year, the Tax Cuts and Jobs Act limits an individual’s or a couple’s federal tax deduction for state and local taxes (SALT) to $10,000. SALT deductions include deductions on state and local income, sales and property taxes. High-income earners, such as physicians, frequently have a SALT deduction far exceeding the new $10,000 cap and will, therefore, be negatively impacted by this change.

To illustrate, if you paid $9,000 in property tax and $22,000 in State of Alabama income taxes in 2017, you would have received a $31,000 deduction on your Federal return. In 2018, that deduction would be capped at $10,000. Consequently, the taxpayer will lose $21,000 of deductions. Fortunately for Alabamians, there is a way to help mitigate this adverse tax change in 2018.

The Alabama Accountability Act (AAA) provides an opportunity to preserve your state tax deduction through donations to a Scholarship Granting Organization (SGO). This Act, passed by the Alabama Legislature in 2015, enables Alabama residents to use up to half of their state income tax burden (limited to $50,000) to support approved schools in our state which serve an economically disadvantaged student population. The AAA donation provides state income tax credits (a dollar for dollar reduction in Alabama tax liability) to donors who contribute to a state-approved SGO operating within Alabama. This payment is treated as if you paid Alabama taxes, but for federal purposes, your donation will be reported as a charitable contribution. Otherwise, as described above, the state tax payment would be reported on your federal return as a SALT deduction subject to the $10,000 cap and provide no tax benefit to you.

Let’s update the illustration above to demonstrate the AAA donation benefit. You pay one half of the $22,000 state of Alabama income tax directly to the state as usual. You pay the remaining half of the $22,000 state of Alabama tax liability with an AAA donation ($11,000). The $11,000 AAA donation counts as a state tax payment on the Alabama tax return. However, on the federal tax return, the $11,000 AAA donation is deducted as a charitable contribution and escapes the $10,000 SALT deduction cap. The AAA donation preserves an $11,000 tax deduction which, at top federal tax brackets, is roughly $4,000 in federal income tax dollars.

It is important to emphasize the state allocates $30,000,000 annually for the AAA tax credit program. We expect the 2018 allotment to be reserved quickly, given the significant tax benefit the AAA provides. Therefore, we encourage you to act quickly, if interested, before the opportunity is gone. Based on the current AAA usage rate, we anticipate the $30,000,000 allotment for 2018 could be exhausted by the end of April or earlier.

If you wish to take advantage of this program, there is a two-step process:

1) Reserve your credit on the Alabama Department of Revenue web portal, My Alabama Taxes (MAT); and

2) Write your check for that amount and send it to the Scholarship Granting Organization (SGO) as noted below.

  • Have your 2016 Alabama 1040 with you since you will need your state adjusted gross income to set up your account with the Alabama Department of Revenue.
  • Follow the steps on this website https://myalabamataxes.alabama.gov to create your MAT account, if you do not already have an account.
  • Once that is completed, follow the steps online to reserve your tax credit with the state by clicking on “Report a donation to an SGO” on the right side of the web page.
  • Fill in your personal information and make a selection of an “SGO.”
  • Once you have filled in your personal information, you will then write a check for the amount you reserved to the SGO you selected.

This SGO contribution benefits deserving schools, counts as a payment of your Alabama personal income tax and enables you to gain federal tax deduction for a cost that will be otherwise non-deductible. We encourage immediate action on this mutually beneficial step. If you need help, contact one of our Warren Averett Healthcare Consulting team members.

Article contributed by Sae Evans, Maddox Casey and Jim Stroud, Members, Warren Averett Healthcare Consulting Group. Warren Averett is an official Gold Partner with the Medical Association.

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The Tax Cuts and Jobs Act: How Will It Affect YOU?

The Tax Cuts and Jobs Act: How Will It Affect YOU?

The new tax reform law — commonly referred to as the “Tax Cuts and Jobs Act” (TCJA) — is the most significant tax legislation in decades. Although the law was passed only a few weeks ago, the impact on the economy and business outlook seems undeniable as the stock market rally continues and both individuals and businesses appear the most optimistic in quite some time.

Tax reform was originally sold to us as simplification. In fact, you would be able to file your taxes on a postcard, right? Although some aspects of tax law have been simplified, other new provisions such as the 20 percent Qualified Business Income Deduction are very complex, despite appearing straightforward at first glance.

The law significantly impacts both individuals and businesses. Let’s start with a basic overview of what’s covered in the new law. (Except where noted, these changes are effective for tax years beginning after Dec. 31, 2017.)

INDIVIDUAL PROVISIONS

The new law makes small reductions to income tax rates for most individual tax brackets, and it significantly increases individual AMT and estate tax exemptions. But there’s also some bad news for individuals: the TCJA eliminates or limits many tax breaks. In addition, much of the tax relief for individual taxpayers will be available only temporarily.

Here are some of the key changes. Except where noted, these changes will sunset after 2025:

Individual Tax Rates

The majority of physicians will notice tax savings due to an overall reduction in tax rates. Please see the summary comparing tax rates and income brackets pre- and post-TCJA later in this section.

Physicians will notice not only have the tax rates been reduced, but the upper thresholds of most income brackets have also increased, resulting in more of your income being taxed at lesser rates.

For instance, under the new brackets, the 24 percent bracket extends all the way up to taxable income of $315,000, whereas under the old law, the 25 percent bracket only went up to taxable income of $156,150. For a married filing joint taxpayer with taxable income of $315,000, this results in tax savings of almost $15,000.

Standard vs. Itemized Deductions / Personal Exemptions / Limitations

Every taxpayer has the choice whether to itemize deductions on Schedule A of their 1040 (mortgage interest, charitable contributions, property taxes, state and local taxes, etc.) or take the allowable standard deduction.

Under the new law, the standard deduction nearly doubles as follows:

  • $24,000 for married individuals filing a joint return
  • $18,000 for head-of-household
  • $12,000 for all other individuals

Even with the increased standard deduction, I anticipate it will still be advantageous for most physicians to continue itemizing their deductions as most will exceed the increased thresholds above.

Prior limitations on itemized deductions, known as the Pease limitation (named after Rep. Donald Pease), have now been repealed. Under the Pease limitation, many physicians found their itemized deductions limited because their taxable income exceeded the amount allowed for full deductions. As a result of tax reform, these limitations no longer apply.

Although the benefits noted above are positive, there are some “take-aways” that should be noted, such as:

  • Personal exemptions of $4,050 have been eliminated;
  • Elimination of the deduction for interest on home equity debt;
  • Mortgage interest deduction limited to interest on debt up to $750,000 for new loans (previously $1,000,000). Taxpayers can continue to deduct interest on primary and secondary/vacation home;
  • New $10,000 limit ($5,000 if single) on the deduction for state and local income/property taxes; and
  • Elimination of moving expense deduction.

Since passage of the law, I have had several phone calls and emails from individuals worried that they are losing the ability to deduct charitable contributions. Please note that charitable deductions remain fully deductible under the new law. In fact, taxpayers are able to contribute more under the new law – up to 60 percent of their adjusted gross income as opposed to 50 percent previously. There is one exception, an admittedly BIG exception. Donors are no longer able to deduct 80 percent of the amount paid for the right to purchase tickets for athletic events (i.e. Tide Pride, Tigers Unlimited).

Estate Tax

Although the Estate Tax was not repealed under the TCJA, its impact was significantly reduced through increased gift and estate exemption amounts. Previously, the estate and gift tax exclusion was $5,490,000 in 2017, but under the new law will double to $11,200,000 in 2018 (including inflation). The increased exemption amounts are set to expire Jan. 1, 2026. This creates significant planning opportunities for physicians to transfer wealth using the increased exemption.

Alternative Minimum Tax (AMT)

AMT is a “supplemental” tax that hits many physicians. It essentially taxes those whom the IRS believes are taking too many deductions under the standard income tax system. For instance, under AMT, no deductions are allowed for state and local taxes, real estate and personal taxes, etc.

Many were hopeful AMT would be repealed in its entirety, but that did not happen. Instead, the exemption amount was raised significantly, thereby subjecting fewer individuals to AMT. It’s very likely that if you were subject to AMT tax in the past, you may not be going forward in 2018.

Affordable Care Act

During the final days of the bill’s negotiation process between the House and the Senate, a provision was added for the repeal of the individual mandate called for under the healthcare reform bill. Many took this to mean that the Patient Protection and Affordable Care Act was gone; however, that is not the case. The tax reform bill merely removed the penalty associated with the mandate for individuals to obtain health insurance. PPACA is still very much in play.

There was no change to the 3.8 percent net investment income nor the additional .9 percent payroll tax on high-wage earners. In addition, large employers (generally those with 50 or more FTE’s) are still required to provide affordable minimum essential health care coverage to full-time employees. Those employers are also still required to complete Form’s 1094 and 1095 annually to report the details of healthcare coverage provided to employees.

Alimony

Under the TCJA, individuals will no longer be allowed to deduct payments for alimony or separate maintenance payments. Likewise, the recipient of those payments will no longer include payments in their income. This is generally effective for divorce or separation agreements executed after Dec. 31, 2018. Current rules (i.e. alimony deduction) continue to apply to already-existing divorces and separations, as well as divorces and separations that are executed before 2019.

BUSINESS PROVISIONS

In addition to the individual provisions noted above, the TCJA also has many provisions which will impact businesses both large and small. In general, the law significantly reduces the income tax rate for corporations and eliminates the corporate alternative minimum tax (AMT). It also provides a large new tax deduction for owners of pass-through entities and makes major changes related to the taxation of foreign income. But it also reduces or eliminates many business tax breaks.

Following are some of the key business-related changes:

Corporate Tax Rate Reduction

Under the old law, corporations were subject to graduated tax rates that topped out at 35 percent. Personal service corporations, which include physician practices, were taxed at a flat 35 percent. The TCJA reduced the corporate tax rate to a flat 21 percent rate. Although the tax rate reduction is a positive, most physician practices organized as C Corporations bonus out income at year-end to avoid paying corporate tax at all, making this somewhat irrelevant.

20 Percent Qualified Business Income Pass-Through Deduction

But what if your practice isn’t organized as a C Corporation? It doesn’t seem fair that one entity type receives a reduction in tax rates while others do not. To compensate for this, Congress created an entirely new 20 percent qualified business income (QBI) deduction for owners of flow-through entities (such as partnerships, LLCs and S corporations) and sole proprietorships through 2025. This new deduction is commonly referred to as the “pass-through deduction,” as income from these entities passes through to owners and is included on the individual 1040 income tax return.

Qualified business income is essentially the net income of the practice after physician salaries. It excludes any investment-related items, such as interest, dividends, or capital gains or losses from the sale of property. The deduction is 20 percent of the QBI and is a reduction in taxable income on Form 1040.

What appears rather straightforward at first, quickly becomes complex and illogical with a strict or literal reading of the law. In some cases, the amount calculated for the 20 percent deduction varies among entity types with all else being equal, which doesn’t appear the outcome Congress intended. These ambiguities will most likely be addressed in later regulations and technical corrections that will provide further details on interpretation and application of the law. This will be a key area to monitor for the remainder of 2018.

In addition, the 20 percent deduction is subject to a tangled web of limitations and phase-outs. Service-related entities (i.e. physician practices) are also subject to even more limitations that, depending on income level, quickly eliminate the 20 percent deduction.

Let’s first examine the limits applicable to both service and non-service businesses alike. The 20 percent qualified business income deduction is limited by the greater of:

  • 50 percent of W2 wages paid by the qualifying business, or
  • 25 percent of W2 wages paid plus 2.5 percent of unadjusted basis of all qualified property.

The 20 percent deduction is reduced if an individual’s taxable income as shown on their 1040 exceeds $157,500 if filing single or $315,000 if filing jointly. For service-related businesses such as a physician practice, the 20 percent deduction is completely lost once the physician’s individual taxable income exceeds $207,500 if filing single or $415,000 if filing jointly. Phase out begins at $157,500 filing single and $315,000 filing jointly.

To illustrate, assume Dr. A is a solo practitioner who files a joint return. Her practice is organized as a single-member LLC. The qualified business income as reported on Schedule C of Dr. A’s 1040 is $240,000 after $195,000 in wages paid to her staff. Dr. A and her husband’s taxable income for the year is $295,000.

In this example, Dr. A’s tentative 20 percent deduction is $48,000 ($240,000 QBI * 20 percent). Since this amount is less than 50 percent of wages ($195,000 * 50 percent = $97,500), the deduction is not reduced. Also, since Dr. A’s overall taxable income is less than $315,000, she is able to take the full deduction of $48,000.

This is perhaps the most complex area of the tax reform law. This is an area which will merit monitoring in the coming months as the IRS provides additional guidance on the implementation of this provision of the law.

Depreciation Deductions

For physician practices, several favorable changes were made to the existing rules regarding depreciation. Most notably, equipment purchased after Sept. 27, 2017, and before Jan. 1, 2023 (in most cases) can by fully expensed or deducted in the year of purchase rather than depreciating over the equipment’s useful life. Previously, this “bonus” depreciation was limited to 50 percent of the asset’s cost, but has now been increased to 100 percent. In addition, the equipment no longer has to be original use or new property — used property also qualifies for the deduction.

In addition to bonus depreciation, the provisions of Code Section 179 were also modified to allow for more property types to qualify for immediate write-off, including subsequent improvements to commercial property such as roofs, heating and A/C systems, fire protection, alarm and security systems.

Other Business Impacts

In addition to the major overhauls noted above, there were several other impacts to businesses, including but not limited to:

  • Repeal of the 20 percent corporate Alternative Minimum Tax
  • New limits on net operating loss deductions
  • Elimination of the Section 199 deduction
  • Like-kind exchanges now limited to real estate only
  • New tax credit for employer-paid family and medical leave — only through 2019
  • New limitations on excessive employee compensation
  • New limitations on deductions for employee fringe benefits, such as entertainment and, in certain circumstances, meals and transportation

Summary

The TCJA will have a significant impact on business and individuals. These items highlight the major provisions of the law that are most impactful to physicians. The new tax law is certainly broad-reaching and complicated.

Article contributed by Mark Baker, Principal, Jackson Thornton CPAs and Consultants. Jackson Thornton is a Preferred Partner of the Medical Association.

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Amazon, Berkshire Hathaway and JPMorgan Venture into Health Care Industry

Amazon, Berkshire Hathaway and JPMorgan Venture into Health Care Industry

Three of the world’s leading companies — Amazon, Berkshire Hathaway and JPMorgan — are teaming up to take on the health care industry.

Amazon announced on Tuesday, Jan. 30, that it would be partnering with Berkshire Hathaway and JPMorgan on an initiative to create an independent health care company for its employees with the hopes of improving employee satisfaction and reducing costs, according to a release from Berkshire Hathaway.

The new independent company is said to be “free from profit-making incentives and constraints,” according to Berkshire Hathaway. “The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent health care at a reasonable cost.”

The alliance was established as a result of the nation’s current health care system and the increasing costs of medical treatment. “The health care system is complex, and we enter into this challenge open-eyed about the degree of difficulty,” said Jeff Bezos, Amazon’s founder and chief executive. “Hard as it might be, reducing health care’s burden on the economy while improving outcomes for employees and their families would be worth the effort.”

While the companies have not explicitly detailed their plans, they have stated that they will be using technology to bring down health care costs for employees.

Even before Tuesday’s announcement, there have been signs that Amazon is preparing to enter the health care market. Earlier this month, the company posted a job for an “experienced HIPAA professional.” The company is also said to be exploring plans of entering into the pharmacy supply chain market as a drug distributor.

According to Mickey Chadna, vice president of Moody’s Investor Service, the new venture could create “further competitive pressure” for pharmacy giants like Walgreens and CVS. “In light of the announcement,” Chadna said, “the potential merger of CVS and Aetna is even more compelling as a more coordinated approach to medical care is necessary to lower the overall health care costs for consumers.”

Health care professionals and strategists are still inquiring about the potential of this plan. “Whether and how this initiative will benefit employees directly,” said Benjamin Gomes-Casseres, a professor of strategy at Brandeis University International Business School, “and whether solutions the company develops will scale and be a model that could be used by other employers remains uncertain.”

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Three Common Mistakes in Transferring Ownership of a Medical Practice

Three Common Mistakes in Transferring Ownership of a Medical Practice

Physicians spend their careers building top-quality practices, but many devote too little attention to the architecture and terms by which the practices will be transferred at their retirement, death or disability. In our experience, there are three areas, which if neglected, will lead to problems at the crucial point when the ownership of this valuable asset changes hands.

Determining Value

Our clients are most concerned with the value of their practice. While some practitioners underestimate the value of their practice, many overestimate the amount which can be captured in the sale of the practice interest they own. A common mistake is to use a value that was read or heard about from a transaction elsewhere. That transaction price might have been determined by a purchaser who was limited in the amount they could pay, such as a hospital. The transaction might have occurred in a state with a higher managed care payer mix than your practice, or in a state with different non-compete laws regarding health care professionals. Practice valuations vary widely and for many reasons. Two practices in the same city and same specialty could have much different values. The terms of the transaction are another powerful force on sales prices and are rarely publicized. Even if you get the value accurately determined, there are still ways to create problems in the monetization of your practice value.

Clear Conversations

The documents relative to the transfer of a group practice ownership percentage should reflect the plan to sell at a future date, and the design of the manner by which the price will be determined. Even for valuable practice interests absent a clear design, potential buyers may feel tricked by a plan to transfer your share of the practice if it is developed late in your career. The time for this understanding is when younger doctors are brought in to the ownership. Buy-sell agreements and cross-purchase agreements serve to clarify expectations at the time of their drafting but should be reviewed every few years for relevance to the current situation, and any needed changes made. The greater the price desired for a practice, the more the need for clear design, pricing and terms. With a good legal architecture and a fairly determined price, your practice liquidation is almost ready for your time to sell, except for one additional issue.

The Fine Print

The legal obligation to pay the fairly determined price is often accomplished by the purchase of life and/or disability insurance on the selling practitioner. That can become a problem if the policies are never obtained, or the premiums payments are halted. In this situation, the buyer has a responsibility to pay a price agreed but with no funds to pay it. No one will be pleased with the outcome of this situation. Compound this problem with the common mistake of letting the practice price be set by the amount of life insurance proceeds, which could be afforded when the transfer architecture was designed, and you have a purchaser obligated to pay too much and with nothing but after-tax dollars from their future earnings. The CEO, chief emotional officer, at home will not respond well to this deal.

If you have a valuable practice, and you negotiate a fair price and terms for its sale, this can be a valuable way to exit your professional career and move to your next endeavor of success. It takes a little planning and periodic monitoring to gain top value.

Article contributed by Warren Averett CPAs and Advisors, official Gold Partner with the Medical Association.

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Changes in Patient Access

Changes in Patient Access

Physicians have struggled with the impact of the Affordable Care Act since its passage in 2010, but there is a new, more powerful and insidious change underway which will have dramatic impact on all medical practices. The free enterprise system together with an emergence of the Millennial generation has begun to break medicine of some traditional bad habits. Historically, a medical practice could take patient phone calls when it had time, book patient visits at the convenience of the physician and permit patients to sit in the waiting room well after the scheduled appointment time, before seeing the physician.

The Millennial generation population, which now exceeds the Baby Boomers in our population, has not been raised to wait patiently for service providers. They reply to texts while waiting for their name to be called for a customized coffee order. When the texts are handled, they are ready to move to the next multi-tasking activity. The prospect of sitting for two hours in a physician waiting room is not acceptable to them. Our nation’s capitalist system is eager to respond to this high value placed on personal time by the Millennials. Several developments signal the opening of care access alternatives.

The appearance of urgent care facilities was the initial sign of changing times. These care delivery offices are now in many cities, and are as near to each other as fast food sources in some locations. Urgent care facilities are a way to avoid the cost of a parking deck, eliminate the need to navigate a physician office building and avoid waiting long past a scheduled appointment time to be seen. Patients expect to pay out of pocket for the ability to obtain quick care and return to their busy schedules. Traditional office-based physicians might be surprised to know how many of their longstanding patients are seeking more convenient help at urgent care facilities.

Patients who want greater convenience can be seen in the comfort of their own home. Several states have this “Uber” healthcare service, as it was called in a recent Wall Street Journal article. The health care service commits to have a physician or mid-level provider to the home within a short period of time. In Colorado, a home health provider is also dispatched in response to some 911 calls. If the situation can be treated in the home, insurance pays the $300 cost per call rather than incurring the $3,000 ambulance transport cost. Certainly, the $100 fee for these normal house calls is affordable by only the more affluent families, but these are exactly the families a medical practice most needs to retain because they can pay for their care out of pocket.

Telemedicine is the next game-changing element in the provision of care. Hospitals are offering telemedicine consultations for certain specialties rather than paying M.D.s to be on call weekends and nights. Insurance providers offer telemedicine consultations for $10 per consult and this service is available 24 hours a day, every day of the week. These consults may be limited to the more simple medical issues, but these matters enable physicians to generate the incremental patient volume which produces year-end profit and bonuses. When this group can receive their prescriptions via a telemedicine visit at night, physician practices are left with the more complex patient problems and limited ability to bill more for the increased time to treat.

What do these easier points of patient access mean to medical practices? If you want to keep your entire patient base, it is time to make certain that care at your practice is eagerly being offered to your patients. Phones should be answered within three rings. Call your main office line from another number, and see how many rings your patients hear before an answer. Listen for the tone with which the phone is answered. Is it tired and bothered, or happy to take the call? Once a call is answered, how soon can the patient be seen? A sick patient might accept an appointment 10 days out, but they will likely heal or see an urgent care facility before the 10 days passes. That means you will find out in 10 days that you have another no-show on your schedule. When a patient wins the appointment lottery and gets an appointment tomorrow, how long do they have to wait past your promised time to see them? Be careful about long wait times. Most of our population are multi-taskers and have something on their schedule after their office visit. Some will even leave before being seen. Most will say nothing about their displeasure and simply not come back.

In short, the growing medical practices are treating patients like they are being served by a luxury hotel. Your practice is either growing or suffering atrophy. Look at your new patient numbers by month for the last 24 months, and see into which category you fall. If you know your group needs to improve, contact one of our healthcare team members for ways to become a survivor in the new world of patient access.

Article contributed by Warren Averett CPAs and Advisors, official Gold Partner with the Medical Association

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Physicians Spend More Than Half of Work Day on Electronic Health Records

Physicians Spend More Than Half of Work Day on Electronic Health Records

Primary-care physicians spend more than half of their workday on electronic health records during and after clinic hours, a University of Wisconsin School of Medicine and Public Health and American Medical Association study has found. The study, published online in the Annals of Family Medicine, shows physicians spent 5.9 hours of an 11.4 hour work day on electronic health records.

“While physician burnout happens for a number of reasons, spending a good deal of the work day and beyond on electronic health records is one of the things that leads to burnout,” said Dr. Brian Arndt, associate professor of family medicine and community health.

Arndt said 142 family-medicine physicians in the UW Health system were part of the study and all EHR interactions were tracked over a three-year period from 2013 to 2016 for both direct patient care and non-face-to-face activities.

He found that clinicians spent 4.5 hours during clinic each day on electronic health records. Another 1.4 hours before or after clinic were used for electronic health records documentation for a total of 5.9 hours each day.

That means that primary-care physicians spent nearly two hours on electronic health records per hour of direct patient care.

“When you factor in the non-electronic health records duties, it adds up to a workday of 11.4 hours, representing a significant intrusion on physicians’ personal and family lives,” said Arndt.

Order entry, billing and coding, and system security accounted for nearly half of the total electronic health records time (2.6 hours). Clerical duties like medication refills, interpretation of lab and imaging results, letters to patients, responding by e-mail to questions about medications and incoming and outgoing phone calls accounted for another 1.4 hours of every work day.

“It is imperative to find ways to reduce documentation burden on physicians,” said Arndt. “There are a couple of things to consider. Having clinical staff enter verbal or handwritten notes (based on a standardized checklist) could save time and allow physicians to focus more on the patient. In addition, documentation support by staff and additional training in documentation optimization should be available for interested physicians.”

Arndt said the electronic health records event logs used in the study can identify areas of electronic health records-related work that could be delegated to reduce workload, improve professional satisfaction and reduce burnout.

UW Health Chief Medical Information Officer and Senior Vice President Dr. Shannon Dean said the health system leadership supports and appreciates the work of Dr. Arndt and his colleagues in identifying areas of concern and supports reducing any undue burdens on physicians by proactively looking for ways to make the electronic health records system more efficient and distributing appropriate work amongst the clinical care team. Electronic health records systems do offer major benefits to patient care, so preserving their value is also a key goal.

Dean said initiatives include the recent deployment of single sign-on technology that addresses the time spent simply logging in and out of the system and the rollout of advanced voice-recognition software to allow providers to “dictate” directly into the system rather than type.

“UW Health acknowledges that the electronic health records and increased documentation requirements are contributing factors to physician burnout and has invested significant resources in education, optimization and support teams to ensure providers have ‘at the elbow’ support for doing their work,” said Dean. “Our support teams are currently meeting one-on-one with every provider to review their use of the electronic health records and provide them with tips and tricks to improve efficiency.”

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Five Keys Will Make Your Retirement Dreams Come True

Five Keys Will Make Your Retirement Dreams Come True

This year, Baby Boomers will delay retirement because of poor investment and lifestyle decisions. In other words, your decisions today determine your retirement choices later.

Insured Retirement Institute reports in Boomer Expectations for Retirement 2017 that only 54 percent of Boomers have any retirement savings, and only four in 10 have tried to calculate how much they need to save to retire. Fifty-six million Baby Boomers will not receive income from a pension and need significant savings to cover the gap. The No. 1 mistake most people make in planning for retirement is thinking they have plenty of time to save or they have too little to start saving. Both decisions will bring you to the same place on the road to retirement.

According to Employee Benefit Research Institute (EBRI), the average IRA balance for people ages 45- to 49-years-old was just over $72,000. For those in their 40s with 401(k) accounts, who’ve been employed more than 20 years, their average balance was just at $159,000. Like the average people in EBRI’s survey, you may have a small balance and a short amount of time. You can reach your dream IF you plan for retirement and follow your plan, consistently.

Key 1: The most important key to planning for your retirement dream is to start. You need a plan, you need to follow the plan and you need to stay consistent. Thanks to the power of compound interest, time is your greatest ally. MoneyUnder30.com describes three individuals, each who save $1,000 per month for 10 years and then stop until retirement. Their starting age for saving was 25, 35 and 45 years old. All three retire at age 65. With 7 percent return on their savings, each had substantially different retirement account balances yet they all saved $120,000 over the 10-year period. The first saver had $1,444,969. The second had $734,549. The last had $373,407. Compound interest and time was the difference.

Key 2 for your dream retirement is to spend less than you make. This is simple but not easy to do. There are many pressures to spend more than you make when credit is easy and debt is accepted as normal. Dave Ramsey says simply, “Don’t be normal!” A majority of doctors live with debt that could be avoided. White Coat Investor (WCI) blog writer, Dr. Jim Dahle, dispels conventional wisdom of good debt and bad debt. WCI recommends ways to minimize the debt that entangles the majority of physicians for most of their careers. His article, “Don’t Buy Stuff You Cannot Afford,” gives practical and straightforward ideas to get out of debt.

Key 3 in the countdown to your dream retirement is from PhysicianonFire.com (POF). This is a physician blog writer whose stated goal is financial independence and to retire early. Related to Key 2, this will make you financially independent. POF challenges his readers to “Live on Half.” Living on half of your take-home pay, or saving and investing as much as you spend, will lead to financial independence in 15 to 20 years. Work becomes optional. Imagine waking up and deciding today is the day I retire and sail into the sunset. Or waking up and deciding, I could
close the doors, but I want to work because I love what I do.

Key 4 is one you might think should be the No. 1 Key. However, if you don’t get good habits started early, No. 4 will not guarantee a dream retirement or life. Key 4 is a no brainer but without it, you don’t get off home base: earning as much as you can for as long as you can. Work smart, manage your practice like a business, and maximize the income from your practice. In my 36 years of consulting with physicians in their practices, managing the business side of medicine can be the biggest challenge.

Key 5 is to choose your investment advisor wisely. A lot of physicians with whom I work have a friend, a brother, or neighbor who does their investing. This decision locks the doctor in an advisory arrangement that cannot be changed for fear of losing the relationship. Resist those kind offers and instead find an advisor who will be accountable for the results of their recommendations. Tommy West at Jackson Thornton Asset Management offers this: “A good advisor will provide a well thought out plan to succeed­ – to act rather than react.” The best relationship occurs when your financial advisor is both accountable and trusted.

Article contributed by By Patti G. Perdue, CPA.CITP, Jackson Thornton CPAs and Consultants. Jackson Thornton is a Bronze Partner with the Medical Association.

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Report: EMR Industry Must Reckon with Physician User Frustration

Report: EMR Industry Must Reckon with Physician User Frustration

ROCKVILLE, MD – A new study by health care market researcher Kalorama Information has found that physician frustration over the use of EMR systems will be a trend for vendors to deal with. Previously, incentives paid to providers to buy and use electronic medical records were enough for a market boost, but now user frustration is driving vendor switches and contributing to implementation costs. Kalorama has covered EMR for a decade and has issued a new report: EMR Market 2017: Electronic Medical Records in an Era of Disruption.

Kalorama based its findings on attendance at the 2017 HIMSS conference, and from vendor and end-user consults.

“During the HIMSS 2017 conference, discussions revolved around physician dissatisfaction with EMRs,” said Mary Ann Crandall, author of the report. “Physicians still feel that vendors are missing the mark when addressing the needs of physicians.”

Physicians have repeatedly complained that EHRs are difficult to use. Many EHR interfaces are awkward and non-intuitive creating more problems than solutions. Physicians are not convinced that EMRs will cut costs or help to provide better and safer care. One of the reasons for this may be that vendors do not seem to be in touch with what physicians need in their individual practices. Furthermore, EHRs often get in the way and slow users down because of the way they are configured or are not convenient to use. Most EHRs are not designed to help physicians juggle the simultaneous tasks they all face, like answering a question about one patient while in the middle of writing a prescription for another. In addition, because most of the programs that are on the market were developed many years ago before today’s sophisticated interface tools were developed, it compounds the problems.

“Furthermore, physicians get tired of having to sign into multiple hospital systems to locate data on their patients. Smartphones, iPads and the Internet are so intuitive and well integrated that they make EHRs look even worse,” said Crandall in the report.

A survey of nearly 3,000 physicians reported that most physicians do not like the Affordable Care Act and many of them do not like EMRs. Only 30 percent of the physicians surveyed think that EMRs will have a positive effect on the quality of care. One big reason for the sour feeling it that  Medicaid and Medicare reimbursement continues to fall, and Medicaid will cover many of the 32 million uninsured individuals targeted to be insured under the law. The survey also did not show a lot of support for accountable care organizations, which is an emerging payment model authorized in the reform bill.

Crandall said physicians feel that there needs to be a concentrated effort to focus on evidence, accuracy, how it is integrated with the physician’s EMR and how it is integrated within the practice. According to Michael Hodgkins, AMA CMIO, physicians are spending twice the amount of time on deskwork and EHR maintenance, including 38 hours a month spent on EHRs after work hours. This is creating dissatisfaction and contributing to burnout for physicians. Michael Hodgkins further stated that physicians just want to provide high-quality care, but EHR work seems to get in the way. At the same time, practice sustainability and changing reimbursement models that favor scale and shift risk to the providers is leading many practices to merge or sell out altogether.  Simply, physicians are overwhelmed with platforms, apps, regulations and computer work.

Several vendors are listening to the physician complaints and are attempting to make changes. Kalorama reported in April that Allscripts is developing separate workflows for mobile devices and desktop computers, and will focus on touch speech recognition and other non-keyboard interfacing techniques that will help to improve physician perception.

Kalorama notes that while there are a few leaders in the EMR market, there isn’t much brand and mind share and few favorites among physician users. Greater detail on these trends are included in Kalorama Information’s report, EMR 2017: Electronic Medical Records in an Era of Disruption.

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A Physician is Leaving Your Practice – “Must Have” Employment Agreement Provisions (Part III)

A Physician is Leaving Your Practice – “Must Have” Employment Agreement Provisions (Part III)

Editor’s Note: The following is the final installment of a three-part series discussing important provisions in physician employment agreements.

When a physician leaves a medical practice, especially if the physician stays in the area to compete against his/her former employer, the situation can become stressful and acrimonious. During the final weeks of employment, the departing physician can start to focus more on his/her new practice to the detriment of the current employer, and disputes often arise regarding access to medical records, soliciting patients and employees and when to schedule procedures – before or after termination. We have seen both medical practices and departing physicians engage in questionable conduct in order to keep as many patients as possible. Lawyers are often engaged in negotiating the terms of separation or, in a worse-case scenario, filing or defending a lawsuit.

Over the years, we have counseled hundreds of physician practices on how to successfully navigate the various issues that arise when a physician departs, regardless of whether the physician is an employee or an owner. Careful planning on the front end through a comprehensive employment agreement is the most important element in an amicable and fair separation. More often than not, we have found that disputes and subsequent litigation can arise when the employment agreement is not properly drafted or does not adequately address the specific terms of separation.

This three-part series provides a summary of the key provisions (with sample language) that can be incorporated into a physician employment agreement to help mitigate problems when a physician leaves your practice. Since each medical practice is unique, please consult with your own attorney before using any of the provided sample provisions in a physician employment agreement.

Protecting the Practice’s Confidential Information. Especially if the departing physician will continue to practice in the same service area as the medical practice, it is very important that the practice protects its sensitive and confidential information, including medical records, charge masters and policies and procedures. As such, the employment agreement should address the confidentiality of such items. Failure to do so will make it more difficult for the medical practice to protect its sensitive information.

Physician agrees that all data and information which he/she receives from Employer, whether directly or indirectly, in connection with this Employment Agreement or Physician’s employment with Employer shall be considered confidential and proprietary information belonging solely to Employer (the “Confidential Information”). Without limiting the foregoing, “Confidential Information” shall mean any written or oral information of Employer, including, without limitation, all business or management studies, patient lists and records, financial information, Employer documents, forms, business or management methods, marketing data, fee schedules, employee and operating manuals, trade secrets as defined by the Alabama Trade Secret Act, as amended from time to time, accounting information, and any other information treated by Employer as being confidential or labeled “Confidential” by Employer. Physician shall hold such Confidential Information in strictest confidence and shall not make use of such Confidential Information except in the performance of his/her services for Employer. Physician shall not disclose, distribute or otherwise divulge such Confidential Information to any other third-party without the prior written consent of Employer, except in the performance of his/her services for Employer. Notwithstanding anything contained in this Section to the contrary, the obligations of Physician under this Section shall not apply to information or property which Physician can demonstrate is: (a) now in the public domain or later publicly available through no fault of Physician, (b) has been or is in the future rightfully obtained without restriction by Physician from other sources not subject to a confidentiality agreement, or (c) independently developed without use of Employer’s Confidential Information. Upon request of Employer and upon termination of this Employment Agreement, Physician shall immediately return to Employer all Confidential Information which Physician received from Employer or any Confidential Information within Physician’s possession. The terms of this Section shall survive termination of the Employment Agreement.

Protecting the Practice from Future Liabilities. When a physician leaves a medical practice it is still possible for the practice to face liability stemming from the physician’s past conduct. For example, federal payers, such as Medicare and Medicaid, as well as commercial payers, can audit medical practices for professional services rendered several years prior to the date of the audit.  Further, HIPAA violations, malpractice issues and other misconduct may not surface until after a physician leaves a medical practice. Unless the employment agreement continues to hold the departing physician responsible after termination for his/her conduct during employment the medical practice may have insufficient remedies in the event a problem arises.

Physician shall hold harmless, indemnify and defend Employer, and its members, partners, officers, directors, employees, successors, representatives and assigns, from and against any and all liabilities, costs, damages, suits, judgments, fines, losses, demands or expenses of any kind whatsoever (including, but not limited to, court costs, arbitration fees, if applicable, and attorneys’ fees and expenses actually and reasonably incurred) from or attributable to: (a) any breach by Physician of this Employment Agreement, (b) any and all negligent or intentional acts and/or omissions of Physician, and/or (c) any overpayment, refunds, offsets or recoupments related to claims for medical services provided or ordered by the Physician, but only to the extent the Physician received compensation from the claims subject to the refund, offset or recoupment.  The terms of this Section shall survive termination of the Employment Agreement.

While it may take more work on the front-end, having a well-thought out and comprehensive physician employment agreement will save significant time, effort and potentially money when a physician leaves your medical practice.

Read the full series:

A Physician is Leaving Your Practice – “Must Have” Employment Agreement Provisions (Part I)

A Physician is Leaving Your Practice – “Must Have” Employment Agreement Provisions (Part II)

Howard Bogard is a Partner with Burr & Forman LLP and serves as the Chair of the firm’s Health Care Industry Group. Kelli Fleming is a Partner with Burr & Forman LLP practicing in the firm’s Health Care Industry Group.

Posted in: Legal Watch, Management, MVP

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A Physician is Leaving Your Practice – “Must Have” Employment Agreement Provisions (Part II)

A Physician is Leaving Your Practice – “Must Have” Employment Agreement Provisions (Part II)

Editor’s Note: The following is the second installment of a three-part series discussing important provisions in physician employment agreements.

When a physician leaves a medical practice, especially if the physician stays in the area to compete against his/her former employer, the situation can become stressful and acrimonious. During the final weeks of employment, the departing physician can start to focus more on his/her new practice to the detriment of the current employer, and disputes often arise regarding access to medical records, soliciting patients and employees and when to schedule procedures – before or after termination. We have seen both medical practices and departing physicians engage in questionable conduct in order to keep as many patients as possible. Lawyers are often engaged to try and negotiate the terms of separation or, in a worse-case scenario, to file or defend a lawsuit.

Over the years, we have counseled hundreds of physician practices on how to successfully navigate the various issues that arise when a physician departs, regardless of whether the physician is an employee or an owner. Careful planning on the front end through a comprehensive employment agreement is the most important element in an amicable and fair separation. More often than not, we have found that disputes and subsequent litigation can arise when the employment agreement is not properly drafted or does not adequately address the specific terms of separation.

This three-part series provides a summary of the key provisions (with sample language) that can be incorporated into a physician employment agreement to help mitigate problems when a physician leaves your practice. Since each medical practice is unique, please consult with your own attorney before using any of the provided sample provisions in a physician employment agreement.

Protecting Other Practice Employees. When a physician leaves a medical practice he/she may want to encourage other practice employees (i.e., nurses, technicians, receptionists, etc.) to leave and work for the physician. These employees are a valuable asset to the medical practice and oftentimes the medical practice has invested significant time and resources in training its employees. Under Alabama Code Section 8-1-1, which was amended Jan. 1, 2016, a medical practice can protect an employee from being hired by a departing physician; provided, however, that the practice can demonstrate that the employee is “uniquely essential” to the medical practice. The term “uniquely essential” has not been specifically interpreted by the courts, but appears to require that the medical practice demonstrate that the protected employee(s) is not easily replaced due to a unique skill set or training, and the loss of the employee(s) would be detrimental to the medical practice.

Physician agrees that, during the term of this Employment Agreement and for a period of one (1) year following termination of this Employment Agreement, regardless of the cause of such termination, Physician shall not, directly or indirectly, through any individual, person or entity, without the prior written consent of Employer: (a) solicit, induce or attempt to solicit or induce away, or aid, assist, or abet any other party or person in soliciting, inducing or attempting to solicit or induce away from employment or other association with Employer, any employee of Employer, or (b) employ, hire or contract for services with any employee of Employer, or any person who was an employee of Employer during the six (6) month period prior to termination of Physician’s employment with Employer. The Employer and Physician acknowledge that the restrictions contained in this Section are reasonable and necessary to protect the protectable interests of Employer which include, without limitation, Employer’s confidential information, Employer’s commercial relationships with its patients, patient goodwill associated with its business, and the unique training of its employees, which was and is provided by Employer at considerable expense.  Physician acknowledges and agrees that the Employer’s employees hold positions uniquely essential to the management, organization and service of the Employer.

Compensation.  When a physician leaves a medical practice he/she will be compensated through the date of termination. If, however, the employment agreement provides for some form of bonus compensation based on, for example, collections or other measures of productivity, the employment agreement should address whether the physician is eligible for a bonus, pro-rated through the date of termination, or if termination before the end of the bonus measurement period results in the physician forfeiting any bonus. In addition, if the physician is paid based on production (e.g., collections less allocated expenses), then the employment agreement should address whether accounts receivable generated by the physician which are collected after termination for some designated time period will be counted toward the physician’s final paycheck, or if only collections received through the date of termination will be allocated to the physician. With either a bonus or production compensation model, some employment agreements provide that the departing physician will not be eligible for a bonus or the allocation of any post-termination collections if the physician terminates the employment agreement without cause or if the medical practice terminates the employment agreement with cause. Regardless, it is very important to clearly delineate in the employment agreement how compensation will be addressed upon termination.

Continuing Malpractice Insurance.  When a physician leaves a medical practice it is critical that medical malpractice insurance is maintained which provides continuing insurance for the physician’s professional services if a claim arises after the date of termination. Payment of a reporting endorsement (sometimes referred to as “tail insurance”) is typically an item negotiated by the parties. Regardless of how the costs are allocated, it is important that the employment agreement require either the purchase of a reporting endorsement or that the departing physician be obligated to maintain his/her then current malpractice insurance without interruption for a period of at least four years (eight years if minor patients are involved) after termination of employment. The following sample provision obligates the departing physician to pay for tail insurance, but can be modified as appropriate to provide that the medical practice will cover the costs of such insurance.

Immediately upon termination of employment with Employer, Physician shall, at Physician’s sole expense: (a) purchase or obtain a professional liability insurance reporting endorsement (e.g., tail coverage) with the same base and excess coverage limits and annual aggregate as the professional liability policy made available by the Employer for the Physician (the “Professional Liability Insurance Policy”) in order to provide continuing insurance protection for Physician and Employer against claims for malpractice or negligence occasioned by the acts of Physician while he/she was an employee of Employer (hereinafter referred to as the “Reporting Endorsement”), or (b) make arrangements for the continuation of the Professional Liability Insurance Policy with the same professional liability insurance carrier and with the same base and excess coverage limits and annual aggregate as the Professional Liability Insurance Policy, and listing Employer as an additional insured on such policy (hereinafter referred to as the “Continuation Policy”).

To evidence compliance, Physician shall provide to Employer within ten (10) days following the date of termination of this Employment Agreement either: (a) a copy of the Reporting Endorsement, or (b) a copy of the Continuation Policy, a “Certificate of Insurance Holder,” evidencing the existence of the Continuation Policy and written confirmation from the insurance carrier that Employer is listed as an additional insured on the Continuation Policy. If Physician obtains the Continuation Policy, and within ____ (____) years after termination of employment with Employer, should the Continuation Policy lapse, terminate or be modified so as not to satisfy the definition of a “Continuation Policy” in this Employment Agreement, or should Physician ever change professional liability insurance carriers, Physician agrees that he/she shall immediately purchase the Reporting Endorsement and that he/she shall provide Employer with a copy of the Reporting Endorsement at that time. If Physician fails to purchase such coverage and/or provide Employer with a certificate of same in accordance with the above‑stated requirements, Employer shall have the right, as hereby acknowledged by Physician, but not the obligation, to purchase such coverage and notify Physician in writing of the total premium costs thereof. Physician hereby expressly acknowledges and agrees that the total premium cost for such coverage purchased by Employer under this Section (plus a ten percent (10%) administrative fee) shall be immediately due and payable by Physician to Employer upon Physician’s receipt of said notice and Employer shall have the right to offset Physician’s cost of insurance against any amounts due Physician, with Physician reimbursing Employer for any deficiency. The terms of this Section shall survive termination of the Employment Agreement.

While it may take more work on the front-end, having a well-thought out and comprehensive physician employment agreement will save significant time, effort and potentially money when a physician leaves your medical practice. Stay tuned for Part III of this three-part series which will discuss protecting confidential information and protection from future liabilities.

Read the full series:

A Physician is Leaving Your Practice – “Must Have” Employment Agreement Provisions (Part I)

A Physician is Leaving Your Practice – “Must Have” Employment Agreement Provisions (Part II)

A Physician is Leaving Your Practice – “Must Have” Employment Agreement Provisions (Part III)

Howard Bogard is a Partner with Burr & Forman LLP and serves as the Chair of the firm’s Health Care Industry Group. Kelli Fleming is a Partner with Burr & Forman LLP practicing in the firm’s Health Care Industry Group. Burr & Forman, LLP, is an official Bronze Partner with the Medical Association.

Posted in: Legal Watch, Management, MVP

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