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15 posts from May 2010

May 11, 2010

Steps in the Strategic Planning Process

As listed below, there are logical, distinct steps in the strategic planning process. As you know, I am a vocal advocate that all physician practices, no matter how small, should go through some type of strategic planning process. When go through the planning process, you should complete one step before moving to the next, even though they may occasionally need to go back and make changes to earlier steps. The seven steps listed below represent a systematic, rational, objective approach for developing a Strategic Plan, rather than relying upon politics, emotions, opinions, and subjectivity to determine your organization's future. Now quit wasting time and get to it!


1.   Develop a Vision and Mission Statement

2.   Perform External Audit

3.   Perform Internal Audit

4.   Establish Objectives

5.   Establish Strategies

6.   Implement Strategies

7.   Evaluate Strategies

8. Conclusion

May 07, 2010

Patient Protection and Affordable Care Act – Part I

Following is a list of the highlights of the tax provisions and the employer responsibilities provisions included in the healthcare reform legislation. Soon no fewer than three federal agencies, the Internal Revenue Service, Health and Human Services, and the Department of Labor will begin drafting the necessary regulations that individuals, employers, insurance carriers, and state insurance commissioners and state exchanges will need to follow.

Tax Provisions

Codification of Economic Substance Doctrine and Penalties

The Economic Substance Doctrine is codified as requiring that both of the following requirements must be met to satisfy the doctrine: (1) the transaction changes the taxpayer’s economic position in a meaningful way (apart from Federal income tax effects); and (2) the taxpayer has a substantial purpose for entering into the transaction (apart from Federal income tax effects). The provision is effective for transactions entered into after the date of enactment (March 30, 2010).A section 6662 penalty is created for an underpayment attributable to the disallowance of claimed tax benefits because the transaction lacked economic substance. The penalty is 20 percent (40 percent if the transaction is not adequately disclosed) and there is no reasonable cause exception. 

Increased Threshold for Medical Expense Itemized Deductions

The 7.5% of AGI threshold for a medical expense itemized deduction will increase to 10%, effective for taxable years beginning after 2012. An exception applies through 2016 for taxpayers age 65 or older.

Small Businesses Tax Credits to Offset the Impact of the Employer Mandate

Firms with fewer than 25 employees and average annual wages of less than $50,000 will be eligible for a credit for certain contributions to purchase health insurance for employees.  The credit phases in from 35% of the employers contribution to 50% by 2014. Smaller firms with 10 or fewer employees and average annual wages of less than $25,000 can get up to a 100% credit. Effective for taxable years beginning after 2009.

Not included in the definition of an employee are seasonal workers, self employed individuals, 2 percent shareholders of an S Corporation , 5% owners of a small business, and dependents. Leased employees are eligible for the credit. These rules are effective as of date of enactment.

W-2 Forms will be Required to Include Information on Employee Health Benefits.

Employers will be required to include on an employee’s W-2 the value of health benefits provided to the employee. This will become effective for taxable years beginning after 2010.

Special Cafeteria Plans for Small Employers

Small employers will be permitted to adopt new “simple cafeteria plans” that will include safe harbor participation and contribution rules similar to those in SIMPLE 401(k) or SIMPLE IRA rules effective for taxable years beginning after 2010.  By satisfying the minimum participation and contribution requirements the employer will not be required to meet the non-discrimination rules that otherwise would apply. 

Limitation on Health Flexible Spending Arrangements under Cafeteria Plans

For taxable years after 2012, in order for a health FSA to be a qualified benefit under a cafeteria plan, the maximum amount available for reimbursement of medical expenses incurred by the employee, the employee’s dependents, and other eligible beneficiaries with respect to the employee must not exceed $2,500 for a plan year (indexed for inflation).

Increase in Additional Tax on Distributions from HSA or Archer MSA

The additional tax on distributions from an HSA or an Archer MSA that are not used for qualified medical expenses is increased to 20 percent of those distributions, effective for distributions made during the tax years starting after 2010.

Increased Medicare Tax – Employer Withholding Responsibilities

An employer is required to withhold from wages the employee’s portion of the Medicare tax currently part of the FICA tax and equal to 1.45 percent of covered wages. Employers will be required to withhold the new .9% Medicare surtax on employees whose wages exceed $200,000. However, the employer is not required to take into account a spouses wages if the combined incomes exceeds the threshold.

New Medicare Tax on Unearned Income

Individuals, estates and trusts will be subject to a Medicare tax on unearned income. For individuals, the tax will be 3.8 percent of (1) net investment income or (2) excess of modified AGI over a threshold amount, whichever is lower. The threshold is $250,000 for a joint return, $125,000 for married filing separately, and $200,000 for a single taxpayer. The provision is to apply for taxable years beginning after 2012.

New Excise Tax on Employer based “Cadillac” Group Health Plans

After 2018 a premium excise tax to be paid by the insurance company will apply to medical plans where the premium threshold is greater than $10,200 for individuals and $27,500 for families.  The excise tax is 40% of the excess and is non-deductible.

May 05, 2010

Protect your practice and yourself with overhead disability insurance coverage

As a physician, you must also protect the source of your income: the practice you’ve worked so hard to establish and grow. Special policies, available from the same DI providers who offer high-quality individual coverage, offer your practice protection while you recover from a disability.


To help meet the expenses of running the office while you are disabled, consider a separate type of disability coverage known as Overhead Expense or OE. Benefits reimburse your practice for expenses such as rent for your office, electricity, heat, telephone and utilities and interest on business debts and lease payments on furniture and equipment.


Overhead expense insurance specifically designed for professionals pays some additional costs not included in regular business overhead expense policies—including the salaries of employees except those who are members of your profession. In a practice such as yours, for example, salaries for the receptionist and nurse would be covered, but not the salary of your physician partner or employee. However, high-quality professional overhead policies will cover at least part of the salary of a professional temporary replacement for you, such as a doctor retained to fill in during your total disability.


May 04, 2010

If you use tax preparation software, use it correctly

I know of many people who use tax preparation software, such as TurboTax, to prepare their own tax returns (without the help of a tax professional). Mistakes do get made while using the popular software program and when they do, it isn’t necessarily going to fly as an excuse with the U.S. Tax Court. The Tax Court recently rejected the taxpayer’s use of the “Geithner defense” and held that blaming TurboTax for errors on her return did not excuse her from penalties. Tim Geithner blamed some of his tax issues on problems with tax-preparation software.)

The Tax court opinion reads:

Petitioners’ 2004 and 2005 joint Forms 1040 … were prepared by Ms. Lam using TurboTax…………….. [The IRS] claims that petitioners were negligent in the preparation of their 2004 and 2005 federal income tax returns. . . . At trial respondent argued that petitioners did not seek the help of a tax professional, consult the IRS, visit the IRS’ Web site, or otherwise read any instructions for filing a Schedule C and thus petitioners did not behave reasonably in filing their 2004 and 2005 tax returns.

At trial Ms. Lam repeatedly argued that petitioners consistently filled out their tax returns using TurboTax and that she consistently confused capital gains and losses with ordinary income and expenses. Although the Court concludes the errors in petitioners’ tax preparation were made in good faith, petitioners have not established that they behaved in a manner consistent with that of a prudent person. Before the trial petitioners stipulated that they did not consult a tax professional or visit the IRS’ Web site for instructions on filing the Schedule C.

We do not accept petitioners’ misuse of TurboTax, even if unintentional or accidental, as a defense to the penalties on the basis of the facts presented. . . .

In short, it was not a flaw in the TurboTax software which caused petitioners’ tax deficiencies. “Tax preparation software is only as good as the information one inputs into it.” [Bunney v. Commissioner, 114 T.C. 259, 267 (2000).] Because petitioners have not “shown that any of the conceded issues were anything but the result of [their] own negligence or disregard of regulations”, they are liable for the § 6662(a) penalties.

In other words, it’s not enough to blame TurboTax. You’ve got to make sure you’re using TurboTax correctly.

May 03, 2010

Sharing a patient's PHI

A staff member recognizes an acquaintance, realizes the acquaintance is a patient, and shares this information with someone else. Has the staff member violated HIPAA? The answer is yes if the staff member shared this information for reasons not related to his or her job. Recognizing the patient would be considered an incidental disclosure. Disclosing this information to another person, however, would be considered an inappropriate release of PHI.


Reproduced from HIPAA Weekly Advisor © 2010 HCPro, Inc., 200 Hoods Lane, Marblehead, MA 01945. 781/639-1872. www.hcpro.com. Used with permission.