Posts Tagged management

Evaluating and Managing the E/M Codes for 2019 and Beyond

Evaluating and Managing the E/M Codes for 2019 and Beyond

Editor’s Note: This article is the first in a series of articles about notable changes in the 2019 Physician Fee Schedule Final Rule.

In the 2019 Physician Fee Schedule (“PFS”) Proposed Rule, the Centers for Medicare and Medicaid Services (“CMS”) proposed some major changes to the PFS, including changes to the way Evaluation and Management (“E/M”) services are reimbursed. The PFS Final Rule[1] contains some good news and bad news. The good news . . . CMS isn’t making any of the major changes it proposed in 2019. The bad news . . . they plan on making some big changes over the next few years.

<<Quick Summary: 2019 Medicare Physician Fee Schedule and Quality Payment Program Final Rule>>


CMS proposed to collapse several levels of E/M Codes into one reimbursement level with add-on codes for certain prolonged or complex visits.

Final Rule

CMS is reducing some documentation redundancies for 2019, but it is not finalizing most of the payment proposals described above until 2021.

The Details

Currently, there are 3 to 5 levels of E/M codes depending on the practice setting (3 to 4 in facility settings and 5 for outpatient or office settings). These codes are billed based on the relative complexity of the E/M service provided, as determined in accordance with either the 1995 or 1997 guidelines issued by CMS.[2] The higher the level of E/M service (and associated relative time and resources required to deliver those services), the higher the reimbursement. According to CMS, E/M codes represent approximately 40 percent of allowed charges for PFS services, and outpatient/office visit E/M codes represent about 20 percent of total PFS allowed charges. Despite the frequency with which E/M services are performed and billed, there are a number of complexities surrounding how they are billed and the documentation required for each level of E/M code.

In an effort to alleviate this burden, CMS proposed to collapse the reimbursement for E/M level 2 through level 5 codes into a single reimbursement amount. In addition, CMS proposed to allow two new add-on codes to represent prolonged services and services with a relatively high degree of complexity. Noting the extensive time and resources that will be needed to adjust to the new coding regime, CMS has delayed the effective date of these rules until 2021. There’s time to prepare for the new E/M coding regime, and it may be altered some between now and 2021, but below is a brief overview of the finalized changes for 2021.

Collapsing Reimbursement for Levels 2-4. Importantly, CMS decided not to change the E/M codes themselves but instead chose to pay the same base reimbursement for E/M code levels 2 through 4.[3] In theory, this will reduce the level of documentation required because physicians will only need to meet the documentation requirements for a level 2 E/M code. However, it will also result in a reduction in reimbursement for many physicians who ordinarily bill higher level E/M codes, unless they also bill for one of the new add-on codes discussed below. Despite the changes in reimbursement levels, physicians do not necessarily have to change how they perform and document E/M services. In fact, CMS expects that physicians will continue to document and bill as they normally would. Noting that other government and private payors (including Medicaid, Blue Cross & Blue Shield, etc.) may continue to use the existing coding structure—or would at least need time to adjust to new coding regimes — CMS decided to retain the existing coding structure, changing the reimbursement only.

Add-On Codes. To account for the reduction in reimbursement associated with the new combined reimbursement rate for E/M levels 2 through 4 and to better align reimbursement with the resources utilized in providing E/M services, CMS decided to add two new add-on codes (again, effective 2021) that can be billed with E/M levels 2 through 4. The first is an add-on code for E/M visits for primary care and certain types of specialized medical care. The second is an add-on code to account for additional resources utilized when physicians have extended visits with patients. Despite the addition of these new codes, CMS indicated that there should not be any additional documentation requirements for E/M services.

Reducing Redundant Data Recording (effective 2019). In response to stakeholder feedback, CMS decided to remove the requirement that physicians document the medical necessity of conducting a visit in the patient’s home instead of in the physician’s office.[4] CMS also decided to streamline documentation requirements by allowing physicians to review information already contained in the medical record (review of systems and past, family and/or social history) and update it as needed, rather than re-recording all of the information.

Proposals Not Adopted. CMS decided not to adopt some of its proposals, including proposals to: (1) reduce reimbursement when E/M services are provided on the same day as a procedure; (2) establish separate podiatric E/M codes; and (3) standardize the amounts of practice expense RVUs for E/M codes.


Overall, there are some changes going into effect in just over a month, and others will likely be reshaped and refined over the next two years before they are implemented in 2021. For now, all physicians need to know is that they can continue to document and bill E/M codes as they always have, but in theory with less redundancy in documentation requirements.

Article contributed by Christopher L. Richard with Gilpin Givhan, PC. Gilpin Givhan, PC, is an official partner with the Medical Association.


[1] CMS-1693-F, available at

[2] 1995 Documentation Guidelines for Evaluation and Management Services, available at; 1997 Guidelines for Evaluation and Management Services, available at

[3] CMS decided to combine levels 2 through 4 instead of 2 through 5, as originally proposed.

[4] CMS reasoned that this decision is best left to the physician and patient, without applying additional payment rules.

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CMS Releases Physician Payment Rule

CMS Releases Physician Payment Rule

This week CMS released the final physician payment rule for CY 2019. In addition to the changes to the physician fee schedule (slightly higher than the CY 2018 rate), the rule expands payment for telehealth and aligns physician interoperability requirements with hospital requirements and allows more flexibility in the physician quality reporting program. The rule finalizes a consolidated payment rate for evaluation and management (E/M) office and outpatient visit levels 2 through 4, while maintaining the payment rate for level 5 E/M visits. It also reduces payment for new Part B drugs and requires hospital outreach laboratories to begin collecting and reporting private payer payment rates and volumes. Finally, the rule will continue to allow non-excepted off-campus provider-based departments of hospitals to bill for non-excepted services on the institutional claim and will maintain payment for non-excepted services at 40 percent of the outpatient prospective payment system amount for CY 2019.

The Medical Association partnered with the American Medical Association to secure the changes.

Removing Restrictions on E/M Coding

CMS finalized several changes to E/M documentation guideline which were strongly supported by the AMA and other members of the Federation:

  • The requirement to document medical necessity of furnishing visits in the home rather than office will be eliminated.
  • Physicians will no longer be required to re-record elements of history and physical exam when there is evidence that the information has been reviewed and updated. In addition,
  • Physicians must only document that they reviewed and verified information regarding chief complaint and history that is already recorded by ancillary staff or the patient.
  • These changes will take effect 1/1/2019.

The Original Proposal Condensing Office Visit Payment Amounts and Documentation Requirements

In the 2019 proposed rule, CMS proposed to implement a single payment rate for level 2 through level 5 office visits and to reduce documentation requirements for this collapsed payment to that of a level 2 CPT visit code. The Agency proposed to continue to use existing CPT structure for office visit codes 99201-99215, though proposed to change CMS guidelines and only enforce certain aspects of the CPT structure by allowing physicians to choose the method of documentation, among the following options:

  • 1995 or 1997 Evaluation and Management Guidelines for history, physical exam and medical decision making (current framework for documentation)
  • Medical decision making only
  • Physician time spent face-to-face with patients
  • CMS had also proposed an add-on code to each office visit performed for primary care purposes and an add-on code for specialities with inherently complex E/M visits
  • CMS relayed that commenters overwhelmingly opposed the Agency’s proposed payment collapse. CMS will not finalize the proposal for CY 2019.

Other Coding/Payment Proposals Related to E/M

The following policies were also opposed and will not be implemented by CMS:

  • Payment reductions by 50 percent for office visits that occur on the same date as procedures (or a physician in the same group practice). The AMA brought attention to the fact that duplicative resources have already been removed from the underlying procedure through the current valuation process.
  • In addition, CMS proposed to no longer allow for podiatry to report CPT codes 99201-99215 and instead would use two proposed G-codes for podiatry office visits. As well as a new prolonged service code that would have been implemented to add-on to any office visit lasting more than 30 minutes beyond the office visit (ie, hour long visits in total).
  • Condensed practice expense payment for the E/M office visits, by creating a new indirect practice expense category solely for office visits, overriding the current methodology for these services by treating Office E/M as a separate Medicare Designated Specialty. This change would also have resulted in the exclusion of the indirect practice costs for office visits when deriving every other specialty’s indirect practice expense amount for all other services that they perform, which would have resulted in large changes in payment for many specialties (ie a greater than 10 percent payment reduction for chemotherapy services).

Download the CMS Factsheet.

Posted in: CMS

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When Is It Wise to Offer Patients a Reduced Fee Schedule?

When Is It Wise to Offer Patients a Reduced Fee Schedule?

Some of our practice management roundtable participants are offering certain patients an opportunity to pay fees of less than the standard fee schedule for their care. Below we will discuss how they are reaching that decision and if it could be appropriate for your practice.

Some patients have no insurance coverage but want to pay for their care. For this group, there is logic to support a price which is less than the standard fee schedule, if that fee schedule is already set above the amounts paid by all insurance companies and Medicare. The fee reduction is based on an acknowledgment that billed fees for health care are generally set at higher amounts than the providers expect anyway, so some discounting is within reason. A problem occurs when your group’s fees are set at precisely the amounts paid by your largest payers and any discount reduces your fee to levels below what insurance companies or government payers pay you. This can get you into big trouble because those payers are willing to pay only your UCR or Usual and Customary Rate, and if you are regularly making a lower rate available to others, the large payers could ask for repayments. However, if your fee schedule is sufficiently high, a discount to an individual might still leave you with enough fee to protect against violating any “most favored nation” clause in your contract with an insurance company.

After this logic is used to support fee reductions to uninsured patients, can it also be applied to patients who are underinsured? Most employers have received significant annual increases in medical insurance premiums for coverage of their employees. As a result, the employers are modifying the coverage to increase the deductibles dramatically. In one client practice, the annual deductibles per person were raised from $750 to $5,000 after premiums increased 18 percent, 18 percent and 15 percent over the most recent three years. As a result, patients are presenting at medical offices with personal liability so great that they are not able to pay for care. Some administrators even indicate that patients are postponing needed care because of their inability to pay for it.

If a practice has made a decision to reduce fees for patients without coverage, and since many patients are facing large deductibles, those physician offices are extending discounts to insured patients who wish to personally pay a lower fee in full at the time of service. Under HIPAA, patients do have the right to pay for care and request that you not file a claim with their insurance company, but there are forms the patient must sign to correctly document this handling.

The danger associated with any discounting is the possibility that all the discounted dollars serve to reduce physician bonuses at year end. The practice overhead will not be reduced by reason of discounting. If these discounts are thought of as the last dollars collected, then they would have been available for MD payment at bonus time. However, if by discounting you are collecting patient payment monies that would otherwise have become a bad debt not collected, then the amounts you receive are incremental money for distribution to doctors at year end. Which of these situations applies to you will depend on whether your group is writing off uncollected patient balances that could have been obtained, in part, at the time of service.

So what is the take away relative to this trend? First, have a practice which is so well known for excellence in care that you may pick the patients you want and avoid discounting fees to anyone. Next, make sure your standard fee schedule is set higher than the reimbursement you receive from your practice’s highest payer. Finally, reach an agreement among all of your physicians on the discounting process you want to consistently apply and implement that process by training all staff. Times are changing in health care and one major change is the shifting of cost risks to the patients from their insurance carriers. Be sure your practice is adapting to this area of change.

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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Medical Association, AMA, Others Take a Stand on New CMS Rule

Medical Association, AMA, Others Take a Stand on New CMS Rule

The Medical Association joined with the American Medical Association and more than 170 other organizations to support some components of CMS’ “Patients Over Paperwork” initiative, and say three of its components need to be enacted immediately to reduce “note bloat” redundancy, yet also to oppose a proposal to collapse payment rates for physician office visit services over concern about unintended consequences included in the proposed 2019 Medicare Physician Fee Schedule and Quality Payment Program rule.

Read the letter here.

The AMA and other organizations called for the immediate adoption of these proposals:

  • Changing the required documentation of a patient’s history to focus only on the interval since the previous visit.
  • Eliminating requirement for physicians to redocument information that has already been documented in the patient’s record by practice staff or by the patient.
  • Removing the need to justify providing a home visit instead of an office visit.

However, the CMS proposal to “collapse” payment rates for five evaluation and management (E/M) office visit services into two has the potential to create unintended negative consequences for patients.

“We oppose the implementation of this proposal because it could hurt physicians and other health care professionals in specialties that treat the sickest patients, as well as those who provide comprehensive primary care, ultimately jeopardizing patients’ access to care,” the letter states. The AMA and the other organizations joining the letter also oppose a proposed policy that would cut payments for multiple services delivered on the same day.

The organizations note their willingness to work with CMS to resolve issues connected with calculating the appropriate coding, payment and documentation requirements for different levels of E/M services. They also declare their support for the workgroup the AMA created of coding experts who would “arrive at concrete solutions” in time for CMS to implement in the 2020 Medicare physician fee schedule.

Posted in: Advocacy

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Big Changes Proposed for Evaluation and Management Services

Big Changes Proposed for Evaluation and Management Services

It’s been more than 20 years since the 1997 revisions to Evaluation and Management guidelines, which focus mainly on physical examination. The 2019 proposed changes provide practitioners a choice in the basis of documenting E/M visits; alleviating the burdens and focusing attention on alternatives that better reflect the current practice of medicine. The implementation of electronic medical records has allowed providers to document more information, yet repetitive templates, cloning and other workflows have pushed the envelope on compliance in documenting the traditional elements of the visit.

The proposed changes to Evaluation and Management were released in the Federal Register on July 27. The Center of Medicare and Medicaid Services is taking comments until Sept. 10, before releasing the Final 2019 Medicare Fee Schedule.

The CPT guidelines are not changing! The American Medical Association is the author of the CPT books, and there is no change in the 1995 or 1997 guidelines for E/M documentation. Medical necessity remains the overarching criteria to select a level of service. There are three proposals to reduce documentation burdens related to CMS:

Proposal One

Simplify History and Exam Documentation, allowing the physicians to focus on changes in health and allow ancillary staff to document chief complaint and history without the physician re-entering it.

Proposal Two

Remove History and Exam from E/M level decision. Currently, history and exam are two of three required elements along with medical decision-making. Medical decision-making would be the sole determinant of E/M level. Providers could use face-to-face time as a determining factor when selecting an E/M service level.

Proposal Three

Pay a single rate for Level E/M visits for the reduced burden in documentation and coding guidelines. Proposals one and two will be a package deal in proposal three. The tables below reflect the proposed payment rates.

Table A – New Patient E/M: Non-facility

Code        2018 Payment Rate     CY 2018 New Payment Rate

99201 $45 $44
99202 $76 $135
99203 $110 $135
99204 $167 $135
99205 $211 $135


Table B – Established Patient E/M: Non-facility

Code           2018 Payment Rate             CY 2018 New Payment Rate

99211 $22 $24
99212 $45 $93
99213 $74 $93
99214 $109 $93
99215 $148 $93


There are two add-on codes proposed, including one for primary care to cover inherent complexity. The primary care add-on code is GPC1X. It can only be utilized by primary care. By adding the G code to Medicare claims, internal medicine and family practice can actually earn up to five percent more revenue and reduce documentation efforts.

The add-on code available to a list of ten specialties is GPC0X. The specialties were chosen due to the inherent complexity related to E/M. The specialties eligible for this add-on code are: endocrinology, rheumatology, hematology/oncology, urology, neurology, obstetrics/gynecology, allergy/immunology, otolaryngology, cardiology or interventional pain. The big loser in this proposal is pulmonary medicine, with a reduction of 6.2 percent in revenue projected by Part B News. The big winner is urology, with a projected increase in revenue of 22 percent with the add-on code.

As a certified coder, I believe the reduction in documentation is a positive change. Most physicians were not educated on CPT coding as part of their clinical training. Physicians want to be compliant, but the guidelines are too complex to analyze during each encounter. The ancillary staff should be trained to effectively gather pertinent information to support the physician. This would allow physicians to focus on the clinical needs of the patient. CMS expects medical necessity to prevail and each encounter to stand alone in relation to the full medical record.

A proposal for 2019, we aren’t hearing about is an E/M multiple procedure payment adjustment related to duplicative resource costs when an E/M is visited and a procedure with global periods are furnished on the same day. CMS would reduce the E/M payment by 50 percent.

Administrators should review the proposed options for documentation to understand the effect on their practice. If your practice has the potential to see a negative adjustment without the option to utilize an add-on code, you should analyze the E/M dispersion pattern to understand the financial impact to your practice. For the most part, the proposed changes are positive in an effort to reduce the burden of redundant documentation. We should continue to hear much more information regarding this game-changing proposal particularly after the comment period ends on Sept. 10. The final 2019 fee schedule will be released around the first week of November. Stay tuned!

If you would like to send a comment to CMS on these changes (and we suggest you do), go to

Article contributed by Tammie Lunceford, Healthcare and Dental Consultant, Warren Averett Healthcare Consulting Group. Warren Averett is an official partner with the Medical Association.

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ProAssurance and Sure Med Compliance Join to Fight Opioid Crisis

ProAssurance and Sure Med Compliance Join to Fight Opioid Crisis

BIRMINGHAM ─ ProAssurance Corporation has announced an exclusive affiliation with Sure Med Compliance® (SMC) to promote the use of SMC’s Care Continuity Program® (CCP) in an effort to help combat the opioid epidemic in the United States.

ProAssurance-insured physicians will be eligible for discounted access to Sure Med’s Care Continuity Program

The CCP helps physicians and other health care providers develop and maintain responsible prescribing practices for opioids and other scheduled medications by equipping them with tools to verify patients suitable for opioid therapy, identify with significant risk factors, and closely monitor the effects of treatment over time.

“As an industry leader, we are acutely aware of the devastating effects of the opioid epidemic in this country. We are concerned about the epidemic’s professional liability implications for physicians and other healthcare providers, as well as its broader effects on the healthcare system in general. We are proud to affiliate with Sure Med Compliance to offer our insureds exclusive discounted access to this cutting-edge approach to patient safety and effective treatment, ” said Howard H. Friedman, president of ProAssurance’s Healthcare Professional Liability Group.

John Bowman, Sure Med Compliance’s Chief Executive Officer, emphasized the importance of the newly formed affiliation.

“Our Care Continuity Program provides a proven path toward optimal outcomes for patients whose treatment requires the use of opioids and other potentially addictive drugs,” Bowman said. “In turn, CCP helps physicians avoid potential liability issues, which has always been a focus of ProAssurance and why we are so excited about this affiliation. We are confident their national footprint will help Sure Med Compliance reach more physicians and assist more patients than ever before.”

Through this affiliation, ProAssurance insureds who meet certain eligibility requirements will have access to an exclusive 30-day free trial of the CCP. ProAssurance insureds who elect to continue using the Care Continuity Program will receive exclusive discounted rates. ProAssurance insureds may contact Sure Med Compliance to determine eligibility and initiate a 30-day free trial by visiting or calling (866) 517-2771.

“As a practicing pain management specialist, I have experienced firsthand the challenges physicians face in deciding to prescribe controlled substances. Using the Sure Med Compliance CCP in my practice has helped me ensure proper documentation and address potential issues before they occur,” said Sure Med Compliance’s Medical Director David Herrick, M.D., of Montgomery. Dr. Herrick is a past president of the Medical Association of the State of Alabama and a former member of the Alabama Board of Medical Examiners.

ProAssurance’s Chief Medical Officer Hayes V. Whiteside, M.D., encouraged physicians with ProAssurance to learn more about the CCP.

“Our commitment to provide our insureds with exclusive discounted access to the Sure Med Compliance CCP underscores ProAssurance’s commitment to ensure physicians and other health care providers are equipped with the risk management tools and services necessary to deal with the ever-changing realities of their chosen profession,” Dr. Whiteside said. “All ProAssurance insureds who regularly prescribe opioids, especially those who prescribe for chronic pain, are encouraged to engage Sure Med Compliance to learn more about how their Care Continuity Program can help them develop and maintain safe and responsible prescribing practices, which should lead to better outcomes for their patients.”

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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

Posted in: Management

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Are Tax Cuts Coming for the Small Business Owner?

Are Tax Cuts Coming for the Small Business Owner?

While physician practices have many specialized health care compliance issues, most are, in essence, small businesses that face the same challenges as any small business. Taxes and regulations are among those challenges affecting all small businesses. And many owners are now eagerly awaiting alleviation of those challenges.

According to the National Federation of Independent Business, small business optimism is at its highest rate since 2004. Small business owners are hopeful that President Trump’s promises of regulatory reform and lower taxes will become a reality, and small businesses will reap the rewards. With Republicans controlling both Houses, that hope appears to be well-founded.

President Trump and the Republican Congress have promised that a repeal of the Affordable Care Act will lower insurance requirements for small businesses, that the deconstruction of the banking regulations of the Dodd-Frank Act will give small businesses more access to credit, and that tax reform will provide small businesses with tax savings. Let’s take a look at some of the specific tax plans President Trump has proposed that have small business owners excited.

Small business owners are hopeful that President Trump’s promises or regulatory reform and lower taxes will become a reality and small businesses will reap the rewards. Small business owners should rightly expect to see tax cuts in the near future.

The new administration has proposed cutting the highest corporate tax rate from 35 percent to 15 percent. S corporations and other pass-through entities may also see a reduced tax rate, as President Trump has proposed a maximum rate of 15 percent on business income that is reinvested into the company. This proposal provides some relief to the business owner on his “phantom income” tax bill. Comparatively, the House GOP tax plan reduces the corporate rate to 20 percent and the pass-through rate to 25 percent.

Of course, small business owners are also individual taxpayers, and President Trump’s tax plan contains several facets to benefit the individual taxpayer. President Trump’s proposal is to reduce the number of personal income tax brackets from seven to three. For joint filers, the proposed marginal rates on taxable income are 12 percent for up to $75,000, 25 percent for $75,000 to $225,000, and 33 percent for more than $225,000. (Dollar amounts for single filers are half of these amounts.) Here, the House GOP tax plan aligns with President Trump’s proposal, save a slight variation in the dollar amounts.

Of particular interest to many high-income earners is the Net Investment Income Tax (“NIIT”). The NIIT was enacted within the Affordable Care Act (“ACA”) and imposes a tax of 3.8 percent on investment income, such as interest, dividends, short-term and long-term capital gains, rental income, royalty income, and passive activity income. It applies only to investment income that exceeds a threshold of $200,000 of adjusted gross income for single filers and $250,000 of adjusted gross income for joint filers. President Trump, however, has proposed to repeal that tax. And because the NIIT is part of the ACA, which is first and foremost on the Republican Congress’s list of laws to repeal, this 3.8 percent tax may be the first tax to go.

President Trump’s tax plan also includes more than doubling the standard deduction, eliminating the estate tax, and providing revised childcare deductions and rebates. Additionally, he has proposed providing for the establishment of Dependent Care Savings Accounts with a government matching program.

It is worth noting, though, that President Trump has a stated goal of tax simplification. To that end, he has proposed to eliminate the reduced capital gains tax rate for carried interest, eliminate personal exemptions, eliminate the head-of-household status, and impose a cap on itemized deductions. As such, not all of President Trump’s proposed tax plan will provide a benefit to the taxpayer’s bottom line.

Even so, small business owners should be energized by the lower rates and simplification. A reduction of tax compliance expenditures could be significant for the small business. Piggyback that on the expected repeal of the Affordable Care Act, and small business owners can anticipate spending less time and effort on the compliance side and more on the business side.

Although portions of the House Republicans’ tax plan are not as aggressive as President Trump’s, the plans set forth similar reductions to the individual and business tax rates. Consequently, small business owners should rightly expect to see tax cuts in the near future.

Article contributed by Leslie H. Pitman, an attorney at Gilpin Givhan. Gilpin Givan is a Bronze Partner with the Medical Association.

Posted in: Management

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Keep Calm & Carry On… Insight for Changes in Post-Election Uncertainty

Keep Calm & Carry On… Insight for Changes in Post-Election Uncertainty

The year 2017 is going to be a year of change like we have not seen for a very long time. For some, it’s a welcomed change. For others, it’s not. The uncertainty of the details/extent of the changes makes planning difficult, if not impossible. As a business owner, you want to be prepared. So how do you get ready when faced with so much uncertainty? We think the best way is to stay the course — Keep Calm & Carry On. In other words, make decisions based on what you know and keep moving forward until you have more certainty.

President Trump promised a lot, especially in his first 100 days in office. The timeline below can help you stay calm and focused when the media begins reporting on the new President’s 100 Day Plan in the coming months.

January 3
Congress returns to Washington

January 20
Inauguration of President-elect Trump

January 23
IRS accepts e-filing of returns. This is the official start of 2017 Tax Season.

January 31
Due date for W-2s and 1099s; new deadline for this year for Forms 1094 and 1095s to employees

February 28
Due date for paper-filed Forms 1094-C and 1095-C to IRS

March 15
Due date for corporate business returns and new this year, partnership/LLC returns

March 31
Due date for e-filed Forms 1094-C and 1095-C to IRS

April 18
Due date for individual tax returns and first quarter estimated tax payment. Due date extended by Federal law through the weekend because of Washington, D.C. holiday on Friday, April 15.

April 30
End of President Trump’s first 100 days

Tax season officially started January 23. The first date e-filed returns will be accepted by the IRS marks the opening of tax season. However, get your tax information ready early and send to your tax preparer. This is going to be a very busy tax season with several new early due dates. As news comes from Washington during the first 100 days, your tax preparer will be bombarded with questions about how the changes impact taxes. President Trump’s tax reform changes will require additional planning by you and your tax preparer. The sooner you get your information to your tax preparer, the better.

Extension for tax return. Additional time may be needed to make decisions for accounting methods that defer income or accelerate deductions. An extension gives certain individuals additional time to make retirement plan contributions or recharacterize contributions to a Roth IRA.

New tax due dates for partnerships and LLCs. Historically, Partnerships and LLCs had a due date of April 15. Starting in 2017, this due date will be March 15. This shortened filing period means a compression of time for filing these returns on the same date as corporation returns. Schedule K-1s are required to be provided to the entity’s partners. LLPs and general partnerships must file their tax returns by March 15 or file extensions.

Affordable Care Act Repeal. As of the writing of this article, the Senate has voted to move ahead with the fiscal 2017 budget resolution that would include reconciliation instructions repealing Obamacare. Both the Senate and House hope to see the budget resolution adopted by January 20. Repeal could come quickly but changes, including ACA’s tax provisions, may not be in place until 2018 or later. Predictions from various members of Congress indicate no changes in 2017.

Mandated penalties. In 2016, ACA penalties increase to $695 per adult or 2.5 percent of income, with a family maximum of $2,085 per person. This is a significant increase from the 2015 penalty of $285 per adult or 2 percent of income above the filing limit. Even with repeal of Obamacare contemplated, this penalty will apply for 2016 tax returns.

Form 1094 and 1095 Reporting. These forms are prepared by employers to report the health insurance coverage offered by employers and accepted by employees. The sole purpose of the form is to assess penalties under the individual mandate penalty and the applicable large employer penalty. Until the law is repealed, employers should continue to follow the law regarding offering of qualified health insurance and file the returns required. Starting with the 2016 reporting year, employers with 50 or more full-time employees must file these forms. The due date of these forms changed in 2017 and are required to be furnished to employees by January 31. An automatic extension was provided by the IRS pushing this date to March 2, 2017. No other extension will be approved for furnishing these forms to employees. However, it’s important to remember the forms are required to be filed with the IRS by February 28 if filing on paper or March 31 if filing electronically. An extension of time can be obtained for filing with the IRS.

MACRA and MIPS. There is no indication that these requirements will be repealed along with the repeal of Obamacare. Opinion from leading experts is that these payment programs will stay in place. What you do in 2017 will determine your MIPS payment adjustment in 2019. It is very important that you not wait but get on board. Penalties start at 4 percent in 2019, 5 percent 2020, 7 percent 2021 and 9 percent in 2022 and forward. In the MACRA final rule, CMS added several ways for doctors to participate. They call the various options Pick Your Pace. With Pick Your Pace, hardly anyone will be penalized – but you must choose how much you will participate in MIPS in 2017 to benefit from the new options.

Delayed Refunds. The IRS expects to issue most refunds in less than 21 days. However, the PATH act of 2015 mandates the IRS hold refunds on tax returns claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) until February 15.

Article contributed by Patti G. Perdue, CPA.CITP, Jackson Thornton CPAs and Consultants. Jackson Thornton is a Bronze Partner with the Medical Association. The information in this article is not intended as tax or legal advice. Please consult your tax advisor for specific information regarding your individual situation.

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Warning! Do You Have Employees Age 65 or Older?

Warning! Do You Have Employees Age 65 or Older?

Editor’s Note: This article is a special edition to the Medical Association — May 27, 2016

In partnership with the Internal Revenue Service (IRS) and Social Security Administration (SSA), the Centers for Medicare and Medicaid Services (CMS) is using their data matching project more aggressively, to compare their records with other federal programs. CMS is looking for Medicare enrollees who are still working and have access to employer-provided coverage. Medicare Secondary Payer rules prohibit an employer from offering an incentive of any kind to an individual who is Medicare-eligible to enroll in Medicare in lieu of the employer’s group health plan. Employers are subject to severe penalties if they are determined to have encouraged those who are 65 or older to switch from employer-provided coverage to Medicare coverage.

Employers with 20 or more employees are the target of the prohibition. The 20 or more employee threshold is determined by head count and not by full-time status. For example, an employer with five part-time employees and 16 full-time employees would be considered as having 21 employees under this rule.

The penalty is $5,000 per instance, which is severe. However, the greater risk and potential penalty for employers found in violation is repaying CMS for payments on claims that Medicare paid as primary that should have been paid as secondary. For Medicare-eligible employees who have chronic illnesses that require ongoing treatment, the repayment could be significant.

While some employers received these letters in prior years, CMS is stepping up their goal of successful recoveries from below 5 percent to close to 100 percent. That is why they have partnered with the IRS and SSA in the joint data match project. If a Medicare-eligible employee shows up on both the income tax withholding list of an employer and on the Medicare list, a data match generates the letter.

Some employers who get the letter may not realize how seriously they should take the request. There is a 30-day deadline, which puts more pressure on busy owners and managers to be alert and respond correctly and in a timely manner.

Responding to the questionnaire can be complicated. If the process is not followed precisely, the employer could face fines and penalties for the wrong employee. There are three steps of which to be aware:

Step 1 Employer sets up account in the data match program.

Step 2 Complete the information about the health plan and the specific questions on the employees identified by the data match program.

Step 3 After certifying the information is correct, wait for the next request for information.

Protect your business by responding timely and accurately to the CMS letter. Evaluate whether you have risks with any employee aged 65 or older. If you have Medicare-eligible employees who voluntarily declined coverage under your business health plan to take Medicare, you need proof on file. Ask your insurance carrier to provide a form for employees to decline coverage.

Be careful advising your employees with comparisons of coverage and premiums. Remember, an employer encouraging an employee to take Medicare and to decline the group health plan is where this problem begins.

The information in this article is not intended as tax or legal advice. Please consult your tax advisor for specific information regarding your individual situation.

bronzemvpContributed by Mark Baker, CPA and Patti Perdue, CPA.CITP, Jackson Thornton. Jackson Thornton is a Certified Public Accounting and Consulting Firm and an official partner with the Medical Association.

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