Reed Tinsley, CPA

Sing your staff’s praises

Many physicians and their managers might think that boosting office morale means having to boost staff salaries. In reality, money does not keep people happy for long, so trying to get their support and involvement with money just isn’t going to work for you in the long run. More times than not, when you give an employee a raise, that satisfaction will last only for two to three weeks. And then what do you do next?

The top reason people leave their workplace is that they don’t feel recognized, valued, and appreciated. I think it’s because our society is involved in what I call passive recognition, meaning that we know people do a good job, but we just don’t say something about it. Acknowledgement goes a long way; a simple “thank you,” “great job,” or “wow” can have a lasting effect on your employees.

Importance of compliance for physician entities

Unfortunately, many physicians believe their activities are “under the radar” when it comes to fraud and abuse enforcement. A settlement announcement by the Office of Inspector General (OIG) of the Department of Health and Human Services illustrates that this is not the case. According to the press release, the OIG has entered into a $7.3 million settlement with three physician-owned entities, United Shockwave Services, United Prostate Centers, and United Urology Centers, for allegedly soliciting and receiving payments in violation of the federal anti-kickback statute.

Among other things, the OIG alleged that certain of the physician investors in the entities had suggested to hospital administrators that if the hospitals did not enter into contractual arrangements to utilize the entities’ services, the physicians would take their cases to other hospitals. In addition to the $7.3 million settlement, the entities also agreed to a five-year corporate integrity agreement under which an independent reviewer will monitor all of the contractual arrangements between the entities and any hospital in Illinois, Iowa and Indiana.

This settlement underscores the need for physicians and physician organizations to get serious about their compliance efforts.  All indications are that we will be seeing more and more enforcement actions against physicians in the months to come.

Estate tax strategies

There has been a great deal of discussion about estate taxes recently because there is no federal estate tax upon death during 2010 (at least for now). We do not know for certain whether Congress will retroactively enact the estate tax in some fashion for 2010 but what is highly likely is that there will be an estate tax in the future. Therefore, taking advantage of certain wealth transfer techniques now may pay big dividends for your heirs.

The economy has taken a toll on valuations in general. For example, if you own a business, investments or real estate it is likely that the value of your assets is less now than they may be in the future. These reduced values present a great opportunity to make lemonade out of lemons by taking advantage of gifting.

It is important to note that even though there is currently no estate tax, the amount of eligible lifetime gifts remains at $1 million ($2 million for married couples). Additionally, you can make an annual gift of up to $13,000 per person ($26,000 if you are married) to as many people as you want in 2010 without impairing your lifetime amount. There are exceptions for medical and education costs that allow for a greater gift under certain circumstances. For families that have significant assets and want to maximize gifts there are many planning opportunities available.

One strategy involves transferring business interests to family members utilizing a family limited liability company (FLLC). Parents can transfer to their children "discounted" units in a FLLC without giving up control of the business or real estate interest. Real estate is an ideal asset to use when utilizing FLLCs. For example, if a married couple owns real estate they can transfer the asset to a FLLC in exchange for membership units. The couple can then gift to their children (or other family members) units at a discounted value. Discounts for lack of marketability and minority interests reduce the value of the units transferred. These units may be "non-voting" which gives the parents all voting rights and further reduces the value of the units gifted to the children. This strategy can result in significant benefits to the family in terms of the transfer of wealth as well as saving estate taxes.

Let's assume that the only asset in a FLLC owned by a husband and wife is real estate with a value of $3 million. The parents want to gift one third of the interest in the FLLC to their children. Using a combined discount rate of 30 percent (minority, non-voting and lack of marketability) the value of the gift would be approximately $700,000. Without the discounts the value of the gift would have been $1 million. In this example, the couple preserved $300,000 of their life time exclusion. If your children are too young to own the LLC units outright you may want to consider trusts.

CMS identified Medicare enrollment problem, adds 48,774 physicians to PECOS ordering/referring list

As first reported by the Medical Group Management Association (www.mgma.com), last week an official at the Centers for Medicare and Medicaid Services (CMS) reported that the agency identified a significant problem with the Medicare Ordering and Referring File. This file contains the National Provider Identifiers (NPIs) and the legal names of all physicians eligible to order and refer in the Medicare program and who have an enrollment record in the Provider Enrollment, Chain, and Ownership System (PECOS). Some 48,774 physicians were incorrectly left off the list, and CMS has indicated it has now added these physicians to the updated list on the CMS Web site. This error may explain any recent inaccuracies with the list, and MGMA says it encourages you to check the updated Ordering and Referring File to ensure that your physicians are listed.  This problem illustrates some of the difficulties practices face when verifying whether physicians are in PECOS and the frustrations they have with the overall Medicare enrollment process.

Managing by the numbers - Part 2

You also want to look at productivity, such as: the number of patient visits (office versus hospital), how many diagnostic tests or other in-house services were provided, and the percentage of available time that is being booked for patient services. You should also look at payer mix revenue distribution, physician work RVUs, collection percentages broken down by individual payer class, and a variety of different accounts receivable agings.

When looking at per-patient numbers it is helpful to look at per-new-patient numbers as well as per-encounter/claim. This distinction provides valuable information about the breakdown of a practice by diagnostic or referral segments. For example, in a clinic such as a physical therapy practice whereby a clinician may see the same patient 12 times per incident, it helps to know the revenue/expense/profit on a per-new-patient basis in order to determine which segments of the practice add to and subtract from the bottom line. Knowing the rev/exp/profit on a per-encounter basis can illustrate the relative efficiency, coding, and diagnostic trending of the practice as a whole, or a segment of the practice. For example, a practice may show increasing profits at the clinic level, however when segmented, it is possible to see that only one or two diagnoses (or referral sources) are really "floating" the practice, and the rest of the diagnoses cause an incremental loss. This is not necessarily good or bad in absolute terms, but is very useful information when managing the operations and marketing efforts of a clinic.

Another area look at and manage per-patient revenue, expense, and profit. While overall revenues and expenses can yield valuable information about the profitability of an entire practice, the evaluation of per-patient financial metrics can yield great understanding about the efficiency by which their practice operates. Furthermore, by segmenting patients by diagnosis, referral source, payer, or other meaningful classifications, one can glean valuable information about the patient groups that have a positive and negative impact on the practice's bottom line. This, of course allows practices to use profitable patients as a means by which to subsidize the care of those with a negative impact on the bottom line.

Finally, look at these metrics on a per hour basis - look at the hours available for patient visits, and divide the total revenue, expense, etc by the number of hours available. Physicians sell their time, and since pricing is pretty much controlled, the way to raise profitability - other than working longer - is to increase revenue (and profit) per hour.

All of these numbers are most useful when put in a context. My main advice to you is always to look at variations over time. You should want to see two years worth of monthly data before getting comfortable making a lot of significant decisions or changes. Usually, the practice hasn’t been capturing data, so you have to start recording data on a monthly basis and build from there. Once you have the basic building block of monthly data, you can look at changes on a quarterly basis. Looking at a data on a quarterly basis smoothes out the month to month variations that occur because of number of days worked (20, 21 or 22), weather, vacations and other factors that impact the workload. Pretty soon, you can see patterns emerge and compare one year to the one past, and then two years and so on.

Remember this: Data vs. information - One leads to the next, but they are not the same thing.

Managing by the numbers - Part I

One of my prior articles cautioned readers on the use of overhead rates as a financial indicator of practice performance. I called it “diddling” the overhead since overhead is an easy target in every medical practice. The point I want to make now is that numbers are important in managing a business. But never confuse fixating on numbers as managing the business.

Numbers are data. What any manager needs is information. In many clinical situations, the numbers are information. In business situations, most numbers are data – the value a practice manager brings to the business is applying his or her knowledge, experience and judgment to turn data into information, information that is the basis for decision making.

For the smaller of small businesses, which would encompass most physician practices, cash is king. On a weekly basis, know what your cash position is – the cash available for use by the practice. You should be budgeting cash each week for payables and payroll. Payroll is pretty fixed, so you have to pay the bills that are starting to get closer to the due date. While you don’t have to pay bills the moment they come in, you do need to be setting aside cash and paying every 1-2 weeks to stay current.

On a regular basis – usually monthly, but for solo practices on a quarterly basis – look at actual revenue and expenses compared to the prior year (notice I don’t make mention of comparing these to your budget; in my opinion most budgets are worthless in a medical practice). Items that are in excess when compared to the prior year are neither a cue to be upset nor a cue to stop spending. You have to ask constant questions – why is an item higher this year than last year? Why are revenues lower or stagnant this year versus last year? Many times, there are seasonal variations in both revenues and costs. Also, sometimes you might order a quantity of supplies in order to gain discounts.

An Online Way to Order Medical Supplies

Esurg.com is an online source of medical, surgical and pharmaceutical supplies to office-based healthcare providers. Its Website is located at www.esurg.com. Esurg.com is a convenient resource that helps practice administrators and physicians in the out-of-hospital market save time and money in the acquisition of medical supplies. 

Recognizing that the needs of multi-tasking physician practice managers differ from those of dedicated purchasing agents in large healthcare institutions, Esurg.com bucked the "marketplace" website trend and developed a single-source "clicks and mortar" business model under which Esurg.com controls pricing, customer service, and product display and selection. This business model allows Esurg.com to maximize customer service while providing competitive pricing. 

"Studies reveal time and time again that the online shopping experience is about ease of use and incredible customer service," said Michael Nelson, Esurg.com vice president of corporate strategy and co-founder. "We have listened to our market and based our service on the ability to provide a quality experience for every customer -- from the first keyboard stroke to complete product support following a purchase." 

Esurg.com customers will find prices, photographs and descriptions of products displayed with one or two clicks of a mouse. Should the customer be unfamiliar with a product or have any question, they will have the ability to email or call toll free at (877) 44-ESURG to speak with knowledgeable customer service representatives. Frequently ordered supplies can be placed on a customized template, making reorders a breeze. Customers will be able track supply costs by product, by manufacturer, by time and soon, by procedure. Customers will also receive one invoice, rather than multiple invoices, making reconciliation of purchases manageable. 

In addition to the efficiencies of ordering online, Esurg.com can also provide specialty-specific news and resources germane to their practices. This will include accreditation and regulatory information on a state-by-state basis.

“Incident To” and drug administration

Medicare utilizes information provided by the Comprehensive Error Rate Testing (CERT) contractor to select topics for education in an effort to reduce the provider compliance error rate and achieve positive CERT findings in the future. This article includes information on “incident to” and drug administration, and education on accurately billing these services.  

 

Requirements:

• In order for subsequent services to be billed “incident to” the Provider Identification Number (PIN), the provider must have initially seen the patient for the problem being treated and established a Plan of Care (POC).
• The service should be one commonly provided in a physician’s office.
  And,
• There should be direct personal supervision by the provider of the auxiliary personnel (regardless of whether the individual is an employee, leased employee or independent contractor of the provider).

 

Documentation should clearly show evidence of these requirements. Evidence may include:

 

• A co-signature or legible identifier and credentials of both the practitioner who provided the service and the supervising provider on documentation entries.
• Some indication of the supervising provider’s involvement with the patient’s care. This indication could be satisfied by:
  • Anotation of the supervising provider’s involvement within the text of the associate medical record.
    Or,
  • Documentation from previous dates of service, establishing the link between the two providers. 

Scenario

 

Dr. Brown originally saw Mr. Smith and established a POC. Sue, a Physician Assistant (PA) employed by Dr. Brown, saw Mr. Smith for his recent visit. Mr. Smith complained of a new problem and Sue provided an Evaluation and Management (E/M) service. She decided it was appropriate to start a series of injections to treat the problem and established a new POC. At the time Mr. Smith presented to the clinic to receive his first injection, which was ordered by Sue, she was not available. A medical assistant administered the injection. The office staff billed this injection “incident to” Dr. Brown (Dr. Brown’s PIN) on this date of service.

 

Conclusion

 

The billing staff potentially billed the service incorrectly. Billing accurately for this scenario is determined by whether or not the PA has her own PIN. 

 

Resolution

 

PA has her own PIN: Dr. Brown must show that he has an active part in the ongoing care of the patient to bill under his PIN. Since Dr. Brown had not participated in the care of Mr. Smith since the new POC was established, this injection should have only been given “incident to” the PA and reported under the PA’s PIN. Therefore, billing the injection “incident to” the physician was inaccurate.

 

PA does not have her own PIN: When a service is provided by a Non-Physician Practitioner (NPP) who does not have her own PIN, it is common for the service to be billed “incident to” the physician’s PIN. If, however, the physician has not been involved with the establishment or approval of the POC, the service provided by the NPP should not be billed “incident to” the physician. 

 

In the above scenario, where the medical assistant administered the injection when the PA was not available, it would be accurate to bill this service under Dr. Brown’s PIN only if Sue’s documentation establishing the POC revealed a notation created by Dr. Brown showing involvement and approval. 

Interim Relief from Reporting the Cost of Employer-sponsored Health Care on Form W-2

Beginning with Forms W-2 issued for 2011, the Affordable Care Act requires employers to report the aggregate cost of employer-sponsored health care coverage on an employee's Form W-2. The IRS has provided interim relief from this reporting requirement by announcing that reporting the cost of coverage under an employer-sponsored group health plan on Form W-2 will not be mandatory for Forms W-2 issued for 2011 (IRS Notice 2010-69). The Treasury Department and the IRS granted the relief because they felt employers needed additional time to make any necessary changes to their payroll systems or procedures in preparation for compliance with the reporting requirement. Even though reporting the cost of overage is optional for 2011, the IRS released a draft of the 2011 Form W-2 that indicates employers that choose to report health care coverage on employees' Forms W-2 will do so in box 12 using code DD.

Want to be a better performing medical practice?

Better performing medical practices use the following techniques to increase profitability: 

• strategic and profit planning;
• cost management;
• evaluation of capital structure and investments;
• evaluation of tax policy and management;
• internal controls; and
• financial reporting and performance evaluation.

Physician practices that have superior levels of performance in four areas:

• profitability and management costs;
• production, capacity and staffing;
• accounts receivable and collections; and
• managed care operations.