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15 posts from March 2011

March 31, 2011

Reporting Employer Provided Health Insurance on Form W-2

The IRS has issued interim guidance on reporting the cost of employer-sponsored health insurance coverage on an employee's Form W-2 (IRS Notice 2011-28). 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. However, last fall, the IRS made the reporting requirement optional for all employers for 2011 Forms W-2. Notice 2011-28 provides further relief for smaller employers (those filing fewer than 250 Forms W-2) by making reporting optional for them for 2012 Forms W-2 and continuing this optional treatment for smaller employers until further guidance is issued. It also explains how to report the coverage on Form W-2, what coverage to include, and how to determine the cost of the coverage. While the guidance in Notice 2011-28 generally is applicable beginning with 2012 Forms W-2, employers may rely on it if they voluntarily choose to report the cost of coverage on 2011 Forms W-2.

March 30, 2011

Succession Planning for Group Medical Practices

Established multiphysician practices typically have succession plans that are driven by the opposing interests of the entering and exiting owners, who might be shareholders, partners, or LLC members. Consider the following:

1. Buy-in and buy-out. Entering physicians seek the lowest possible buy-in and exiting physicians want the highest possible buyout. That is not to say that either seeks an unfair deal, just that they have opposing interests. Therefore, structuring a reasonable buy in and buy out is critically important and often difficult in today’s healthcare environment. The biggest issue here has to do with assigning a value to practice goodwill. Does the practice have value in excess of its net assets?

2. Malpractice insurance. If a practice’s professional liability insurance is claims-made insurance, then the exit plans must include payment of the malpractice tail. Some insurance companies waive the tail in the event of the physician’s retirement. If this issue is not addressed, there could be significant dispute among the physicians because the tail cost is rising along with malpractice premiums in general. Both the practice and the physician must be aware of the potential for uninsured liability if the tail is not purchased.

3. Restrictive covenants. Practice departures that are real retirements do not usually raise restrictive covenant issues. Physician practice owners should not pay practice buyouts to physicians who leave or retire only to set up competing practices. This issue must be covered in the transition documents.

4. Real estate. Practices that lease offices from third parties may not be confronted with this issue. However, real estate investment is often a component of a physician practice and is usually not part of the professional corporation that serves as the practice entity. If the ownership is linked to the practice, then a buyout provision in the transition plan should be included. If not, then the remaining physicians must be prepared to deal with the real estate owners as independent third-party owners.

March 28, 2011

Succession Planning for Solo Medical Practices

Individual physicians must pursue the future of their practice with intensity and thoughtfulness. The good news is that the extra effort can have a direct effect on the financial rewards of succession planning. This process requires realistic evaluation of your financial needs and the emotional effect of passing the practice on to a new physician versus simply closing it. 

Typically, individual physicians have three basic options for succession planning: 

1. Slow down gradually and close the practice when the financial rewards are no longer worth the effort, selling the equipment for a nominal value. 

2. Maintain a full-time schedule until the day of retirement and then sell the practice to a single recruited successor or a potential buyer. 

3. Recruit a successor early, build the practice until it can support two physicians, and then sell the remaining half of this new multiphysician practice to a third physician. 

The timetable for each of these three basic options depends on how long it takes to recruit a successor (or find a buyer for the practice), if one is needed. 

The first option, which doesn’t require a successor physician, is the quickest. Winding down and closing the practice will result in a decline in compensation and, ultimately, a nominal sale price. If you happen to find an eager buyer while you are winding down the practice, you can simply shift to a variation of the second strategy, selling the practice to a single successor upon retirement. 

Selling the practice to one physician produces a fair market value practice purchase. There is reduced compensation during the transition period because your one physician practice must support the income of two physicians. 

The timetable for the second option varies based on whether you are recruiting your successor from a resident or fellowship program or recruiting a physician that is already in practice. The third option requires not only recruitment of two physicians, but also enough time between those recruitments to successfully build a practice to accommodate additional physicians, so it takes twice as long as the second option. 

If you decide to pursue an option that involves selling to a third-party, you should obtain a practice valuation from an experienced financial/practice valuation advisor as a first step. This gives you a realistic expectation and a basis for negotiations that can’t be dismissed as simply a personal opinion of your own practice’s value. 

Finally, use other area resources. Discuss your plans with the hospital or hospitals at which you practice, for example. Hospitals in underserved areas need to maintain physicians. Hospitals in competitive markets need to maintain or build their physician and patient bases.

March 24, 2011

Judge Dismisses Suit Brought by Plaintiffs Seeking to Opt Out of Medicare

Here's something interesting - Recently U.S. District Judge Rosemary Collyer dismissed a suit brought by a group of men seeking to cease their Medicare Part A coverage. In an opinion [.pdf] issued today, Collyer wrote that while the plaintiffs, which include former House Majority Leader Dick Armey, had a point that they are caught in a bind – the statute dictates that they can only opt out of Medicare Part A by forfeiting all of their Social Security retirement benefits – the court did not find that the government is required to provide a different way out.

The plaintiffs are three men over age 65 who want to opt out of Medicare coverage, arguing in their complaint that Medicare Part A coverage is inferior because of budget constraints and that staying enrolled in Medicare Part A could put their private coverage at risk. They also claim that they are entitled to less privacy under Medicare Part A coverage.

In the complaint, filed in U.S. District Court for the District of Columbia, the men claimed that the rules governing Social Security retirement benefits dictated that they could only pull out from Medicare coverage by forfeiting their Social Security benefits entirely. They argued that this statutory scheme is at odds with the Social Security Act and unconstitutional.

Collyer wrote that she agreed the men are “trapped in a government program intended for their benefit,” but that the statutory scheme in question is legal, since the laws governing Medicare are clear that anyone entitled to Social Security retirement benefits is automatically enrolled in Medicare Part A when they turn 65.

“Requiring a mechanism for Plaintiffs and others in their situation to “disenroll” would be contrary to congressional intent, which was to provide “mandatory” benefits under Medicare Part A for those receiving Social Security Retirement benefits,” she wrote.

March 23, 2011

IRS Tips for Pre-Approved Retirement Plans

In the latest edition of Retirement News for Employers (available at www.irs.gov/pub/irs-tege/rne_win11.pdf ), the IRS reminds employers of their responsibilities concerning pre-approved plans that have been purchased. The tips include questions to ask with respect to service agreements, understanding the features chosen in adoption agreements, communicating with the plan sponsor and administrator, coordinating with the employer's payroll processor, and periodic reviews of the plan. Additional tools and resources can be found at www.irs.gov/retirement .

March 21, 2011

RACs Identify High-Risk Vulnerabilities for Physicians

Recent RAC audits have detected two high risk vulnerabilities for physician claims are listed in Table 1 below. These claims were denied because the demonstration RACs determined that either a duplicate claim was billed and paid or the physician reported an incorrect number of units for Current Procedural Terminology (CPT) code billed based on the CPT code descriptor, reporting instructions in the CPT book, and/or other CMS local or national policy. 


Provider Type

Improper Payment Amount (pre-appeal)

RAC Demonstration Findings




Other Services with Excessive Units - Units billed exceeded the number of units per day based on the CPT code descriptor, reporting instructions in the CPT book, and/or other CMS local or national policy.




Duplicate Claims - Physician billed and was paid for two claims for the same beneficiary, for the same date of service, same CPT code, and same physician.

For more information, go to: 



March 17, 2011

Auto Denial of Claim Line(s) Items Submitted With a GZ Modifier

In case you haven’t heard, CMS is establishing an automated edit to deny Part A and B claim line(s) items that contain a GZ modifier. The GZ modifier indicates that the provider does not have an ABN on file and believes the services will not be covered because they were not reasonable and necessary. In addition, the transmittals instruct contractors not to conduct complex medical review on lines with the modifier.

Pub. 100-04, Trans. 2148; Pub. 100-08, Trans. 366: CR 7228 (Feb. 4; eff. July 1/impl. July 5, 2011).

March 15, 2011

Increase Profitability by Reviewing Medical Practice Reports

There is a saying that I truly believe in and that is “You can’t manage what you don’t measure.” I find many physician offices are losing money simply because attention is not being paid to the numbers. So how did you do last year? Like any other business in this country of ours, there is really only one financial benchmark that should matter - “Did I make more money this year than I did last year!” It’s that simple. If you didn’t, then obviously there was a problem or were problems that you need to investigate. If you did make more money, is it sustainable in to the future? As we all know, the profit squeeze is on for most physician practices; this is why it is so important to measure your numbers, analyze them, investigate, and strategize. 

So to conduct this analysis you must retrieve financials reports from your accounting system and medical billing system. To aid you in this endeavor, I have provided you with a list of reports that I think you need to be looking at and what you should do with each. 

Comparative income statement    Compare income and expenses between years and investigate why revenues were flat or declined. Look for spikes in expenses and explanations as to why. How did operating expenses compare to industry benchmarks? Note: Overhead is an easy target; don’t cut just to be cutting otherwise you’ll end up hurting your practice. 

Current aging of vendor accounts payable        Can’t pay your bills on time? A definite sign of trouble. 

Total annual payments to individual vendors  Look for excessive payments to a certain vendor or vendors. Find vendors whose costs have not been subject to the bidding process recently. Compare vendor costs to similar vendors in the marketplace. 

Comparative charges, collections, and adjustments  Look at this for the practice as a whole and by individual provider. Calculate collection ratios and compare to industry benchmarks. Investigate any declines for charges and collections. For adjustments, were there any changes in payer reimbursement? Is billing staff writing off denied charges that could have been appealed and paid? 

Comparative listing of gross charges by specific payer  Is your practice shifting to payers with lower reimbursement? 

Current aging of accounts receivable  Calculate Days in A/R and compare to benchmarks. Review by individual payer class to see if you are having problems collecting from a particular payer. Review A/R over 90 days old and compare to benchmarks; meet with collection staff to find out why these balances are not getting collected. 

Current summary of accounts receivable – credit balances only  Why aren’t these balances getting refunded? You may have a compliance problem on your hands. 

Comparative Daily Patient Visits by Individual Provider  Investigate declines. Strategize on how to increase daily volume. 

Listing of all practice employees and their job duties  Practice inefficiencies often result in too many employees. Take a strong look at how your office operates every day and remove these inefficiencies but never cut staff as a way to simply prop up your bottom line. 

CPT frequency report  Also review for the practice as a whole and by individual provider. Look for missed coding opportunities, undercoding, and possible compliance issues. 

Top 8 managed care payers and current reimbursement rate received from each  Are the current rates acceptable? Which rates pay below Medicare levels? Are there certain services that are underpaid? Look for negotiation opportunities. Now might be the time to drop certain payers. 

Work RVUs by provider  Not all medical billing systems can produce this report but if yours can, compare to industry benchmarks. Investigate why productivity level did not meet the benchmark. 

Referring doctor report Obviously investigate drops is referral patterns. More importantly, look at the bottom of the report and ask yourself why aren’t you getting more referrals from these physicians.

March 14, 2011

What is your physician office visit payment policy

There should be one policy and one policy only for all medical practices: To collect monies owed by patients at the time of their office visit. This policy needs to be communicated to patients on a regular basis, as for example at the time of their appointment as just discussed above. Any breakdown in this part of the billing and collection process will have a direct impact on the cash flow of the practice. Any breakdown also has a direct impact on the receivables management process in that it is costly and a waste of staffs’ time to try to collect small deductibles and copayments. Not having this policy at all has a direct impact on the billing process in that more claims will have to be filed than is ordinarily necessary. This takes up valuable staff time and will obviously delay cash flow. 

Your financial analysis of the accounts receivable is usually a good indicator of whether or not the office has a visit collection policy and whether or not it is being followed. As will be discussed later on in this chapter, the analysis of front desk collections could also be an indicator (refer to section on patient checkout). To further the receivables analysis, obtain a current detailed aged accounts receivable listing by patient name. Scan the report for all balances $200 or less; are there many? Couldn’t these amounts have been collected by front desk personnel as they checked out the patients?

March 10, 2011


After the initial analysis and determination of primary objectives, the next step is to review the existing written policies and procedures for that process. If such documentation doesn’t currently exist – in detailed form, then it will be necessary to review and document the flow of the clinical and business operations pertaining to the process under review. In other words, you will want to flowchart (or outline) each and every office process you want to analyze and improve. 

After flowcharting, stand back and look at your current process. Make sure that each flowcharted area within the process has the rules, procedures, responsible parties, etc. detailed, in writing, in terms of what is required to properly complete that task. It may be found that, even if the office’s documentation does exist, it does not properly support the goals of most effectively and efficiently completing the specific tasks. You need to see that it does. 

When all elements of the process have been substantially documented in writing, management’s responsibility is then to ratify how the processes work, fine tune the policies and procedures, look for inefficiencies that exist, and to look for duplication of personnel that may come to light during a review of all of the processes and procedures. Obviously one result of such a project could be a complete overhaul of certain specific or all of the practices processes and procedures. 

NOW is the time to look at each and every process in your office. You can Increase revenues by simply removing internal inefficiencies. With the continued changes in the marketplace and the continued pressures on your bottom line (can you say “reimbursement”?), there is no time like the present to give your practice a checkup on some of its fundamental processes.