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15 posts from August 2011

August 10, 2011

Sale of residence

The IRS provided tips for taxpayers who have sold or are about to sell their principal residence. In general, sellers can exclude up to $250,000 of the gain ($500,000 on a joint return) from income if they owned and used the home as their principal residence for two of the five years prior to the date of its sale. If all of the gain is excludable, the sale need not be reported; if part of the gain cannot be excluded, it must be reported on Form 1040 (Capital Gains and Losses). If the seller claimed the first-time homebuyer credit and the property is no longer used as the principal residence within 36 months of the date of purchase, the credit must be repaid. Finally, sellers should notify the IRS of their new address by filing Form 8822 (Change of Address). Summertime Tax Tip 2011-15.

August 09, 2011

Update on Recent Physician Prosecutions

From the American Health Lawyers Association (www.healthlawyers.org) authored by Judd Harwood, Esquire (Balch & Bingham LLP, Birmingham, AL), and David Ivers, Esquire (Mitchell Blackstock Ivers & Sneddon PLLC, Little Rock, AR)

Maryland Cardiologist Convicted for Inserting Unnecessary Cardiac Stents

A federal jury in Baltimore, MD, convicted cardiologist, John McLean, MD, fifty-nine years old, on six healthcare fraud offenses on July 26, 2011, for inserting unnecessary cardiac stents, ordering unnecessary follow-up tests, and falsifying medical records to justify the stents.

From at least 2003 to May 2007, McLean performed cardiac cathertizations and implanted unnecessary stents in more than 100 patients at Peninsula Regional Medical Center, according to the U.S. Department of Justice (DOJ). He then falsely recorded the existence of lesions observed during the procedures to justify the stents and the claims he submitted to Medicare and Medicaid. In addition, McLean ordered his cardiac patients to undergo medically unnecessary follow-up tests, including cardiolite stress tests, echocardiograms, and EKGs.

McLean faces a maximum sentence of ten years in prison for healthcare fraud and five years in prison for each of five counts of making false statements related to healthcare matters. Sentencing is scheduled for November 10, 2011. The government is also seeking forfeiture of $711,583 in proceeds from the billings.

The case was investigated by DOJ and Office of Inspector General. The case was tried by the U.S. Attorney's Office for the District of Maryland.

California Oncologist Sentenced to Prison for Billing for Cancer Medications That Were Never Provided

An Orange County, CA, oncologist was sentenced on July 25, 2011, to eighteen months in federal prison for submitting bills for cancer medications that were never provided.

U.S. District Judge Cormac J. Carney sentenced Glen R. Justice, MD, sixty-six years old, of Corona del Mar, after Justice pleaded guilty to five counts of healthcare fraud. Justice operated the Pacific Coast Hematology/Oncology Medical Group in Fountain Valley, CA. He billed for injectable cancer medications when patients never received them. In some cases where patients did receive medications, Justice upcoded claims by billing for more expensive injectable medications than were actually provided.

The medications involved were Neulasta, Neupogen, Procrit/Epogen/Aranesp, and Neumega. According to the U.S. Attorney's Office, the fraudulent billing occurred between 2004 through October 2009, despite Justice being advised about thee issue and subjected to a search warrant at his office in November 2006.

Improper billings amounted to between $400,000-$1 million. Insurers he billed included Medicare, Tricare, the Federal Employees Health Benefit Program, and Blue Cross and Blue Shield of California. The judge ordered Justice to pay $1 million in restitution.

The prosecution resulted from an investigation by the Federal Bureau of Investigation, U.S. Department of Health and Human Services Office of Inspector General, Internal Revenue Service Criminal Investigation Division, and U.S. Department of Defense Office of Inspector General.

Washington Oncologist and Wife Indicted for Twenty Counts of Healthcare Fraud

Alfred Hongleung Chan, MD, sixty-three years old, and his wife, Judy Yuan Chan, sixty-two years old, both of Lakewood, WA, were indicted by a federal grand jury for twenty counts of healthcare fraud, obstruction of justice, and money laundering. Alfred Chan was also indicted on two counts of making false statements. The indictment was unsealed in July.

According to the indictment and the civil litigation, Alfred Chan would make patient treatment notes on individual slips of paper that were given to his nurse. The notes specified the amount of drugs to be provided to a specific patient. After the nurse provided the drugs to patients by injection or infusion, the slips of paper were returned to Alfred Chan who shredded them. The doctor then made entries into a "superbill" form, ostensibly recording the amount of medications the patients had received. However, he allegedly recorded more medication administered than actually received by the patient, and inflated the time spent administering the medication. Judy Chan allegedly prepared the bills for Medicare and other government and private healthcare programs using the inflated amounts, which substantially increased the amount of money paid to the Chan clinic for medication. The government alleges the scheme resulted in inflated payments to the clinic in the amount of $1.7 million.

August 05, 2011

A few ideas for improving physician practice cash flow

Filing claims and collecting co-pays promptly are keys to having a profitable practice.  Is your practice attaining the benchmarks for filing claims and collecting co-pays? Office visits should be filed no later than the next day; for all other services – 5 working days. For every patient that can pay you $1.00 at the time of service, you should be collecting on 90% of these visits EVERY DAY. 

Staying on top of the latest requirements for coding helps maintain positive cash flow.  It’s amazing how many physicians lose money due to poor coding practices. Many don’t bill all of the services they are entitled to bill. Remember that Medicare coding practices do not stay "static" throughout the year - are you on top of any changes this year?

Practices that succeed in maintaining positive cash flow also tend to keep a close eye on expenses. Overhead should be lean and mean right now. However instead of nickel and diming your overhead, concentrate on how to improve your practice’s top line revenue. 

Because of concern over physician fees, some doctors are reconsidering their participation in Medicare and reviewing other options such as cash-only practices. Look hard at your patient demographics and see what cash-paying services you can add to the practice. Aesthetic services are a good starting point. Also included here is continued participation in managed care plans – sometimes being an out-of-network provider is a good strategy to consider.

August 03, 2011

Allocations to a noncompete - how long to amortize for tax purposes

Here is a recent case that might interest any medical practice that has to allocate a sum of money to a covenant not to compete. This usually occurs when a medical practice interest is purchased.

An S corporation agreed to redeem a 23% shareholder's stock for $255,908 plus a $400,000 for a one year covenant not to compete. Taxpayers (the S corporation plus 13 shareholders) argued that the covenant was not subject to IRC Sec. 197 and so was deductible over its one-year life. The IRS countered that the covenant was a Section 197 intangible asset amortizable over 15 years, beginning with the month of the acquisition. In affirming the Tax Court's decision that the covenant is 15-year amortizable property, the 1st Circuit concluded that IRC Sec. 197(d)(1)(E) (which includes a covenant not to compete in the list of Section 197 intangibles) "includes any covenant not to compete entered into in connection with the acquisition of any shares—substantial or not—of stock in a corporation that is engaged in a trade or business." In other words, Congress intended IRC Sec. 197(d)(1)(E) to apply to any stock acquisition, not just stock acquisitions that are considered "substantial." Recovery Group, Inc. v. Comm. , 108 AFTR 2d 2011-XXXX (1st Cir.).

August 02, 2011

Developing a Merger Team for a Physician Practice Merger

Well, the first date turned out to be a good one and everyone wants to move forward.  The physicians have decided to form a merger committee, participants from the respective medical practices have been selected and everyone is raring to get started.  What’s next?  One of the first things the merger committee needs to do is to implement a merger team.  This merger team will be composed of legal counsel and the merger consultant and/or CPA (Certified Public Accountant).  One of these team members, usually the merger consultant, will facilitate the entire due diligence and merger process.  

This merger team member should be very familiar with medical practice mergers and operations.  The merger facilitator not only has the responsibilities for providing a formal structure to the merger negotiations and helping the groups adhere to a defined timeline but he or she will also have the responsibility to ask the difficult questions.   A facilitator with experience in health care and specifically, medical practice operations knowledge, will know what questions to ask and will understand potential solutions to some of these difficult issues.  Many of the critical issues to be debated and decided over the next few months require an in-depth knowledge of medical practice operations and the internal culture of medical practice groups.  The more knowledgeable the facilitator is of this, the smoother the merger process and due diligence will be.  It is very common for the potential facilitator to actually attend the first group-to-group meeting and assist the physician leaders with communicating the merger process, due diligence and necessary resources to all the physician members.   This also allows the prospective leader of the merger team to be involved in the process from the very beginning.   Having this experience on hand will help to eliminate some of the initial questions and concerns, which might arise during this initial meeting. 

Sometimes the question is raised: “Should the administrators or office managers serve on the merger committee or merger team?”  My experience shows that it is not advisable to place them on either team, although they will play critical roles throughout the process.  Merging groups tend to find better solutions when using an objective outside facilitator to assist in this difficult decision making process.  Obviously, these key management personnel will have significant input into the entire planning process.    They will attend and even help plan certain meetings and make recommendations to the committee and the merger team. It will be vital to keep them informed and included in the entire process.  Their approval of the merger plan needs to be gained at every phase of the process.  However, it is not advisable for them to be permanent members of either the committee or the merger team.  There will be times that the merger team and merger committee will need to address issues which will be hard for the respective administrators to be objective about.  

Each merging medical practice should then receive from the merger team a merger planning information request.  This type of information is needed for planning, creating, and implementing a successful merger.  The process of gathering this information needs to begin as soon as possible after formation of the merger committee.  

After the merger team and its responsibilities are established, the committee should set the communication protocol.  This protocol needs to outline which documentation will be retained and who will be responsible for taking meeting minutes.  Most importantly, the committee decides what information will be distributed to the physician members and when this distribution will occur.  My recommendation is that the actual minutes from the merger committee meetings be finalized, typed and distributed the very next day to all physician members.  There may be times when the merger committee needs to go into executive session for very controversial discussions; however, this should be the exception rather than the rule.  Also, the minutes of the meeting should only outline the eventual resolutions and agreements rather than documenting all discussions on the issues.  It is extremely important that the committee have good communication to all the physician members and that this communication is prioritized for timely receipt by everyone involved in the merger.  This will significantly enhance the entire process and increase the chances that the merger will be successful. 

Next, the committee needs to set its meeting schedule.  In order to keep most mergers on track; it is almost necessary to meet once a week.  Initially, it may be feasible to meet every other week for the first few weeks, but soon after that the committee will need to commit to a weekly meeting.  Weekly meetings are extremely important to keep the process on task.  Remember, the merger process is typically very long and a very difficult grind that requires extensive discussions in order to resolve the many issues that will arise.  My experience reveals that many parties harbor the misconception that their merger can be accomplished with just a few meetings and very short timeline.  Remember the merger process will take, in most cases, six months and sometimes even a year.  

If decisions are going to be made timely and the process moved forward, it will require regular meetings.  The merger committee also needs to set the dates and intervals for overall group meetings where all physician members will convene to review the merger process and confirm decisions made by the merger committee.  These meetings are extremely important to keep everyone apprised of the progress and decisions as they develop.  Commonly, all-physician meetings should occur at four to six week intervals.  Initially, they may be staggered a little further apart but when the merger due diligence is nearing completion and compromises are being made, all-physician meetings will need to occur more frequently.  Employees and staff should be kept apprised of the discussions.  This is best handled by individual clinic meetings to keep them apprised of the progress.  It is not necessary to get all staff together for these updates.  There will be plenty of rumors and uncertainty throughout all of the respective staff and this must be dealt with proactive communication and inclusion. 

Finally, the merger committee will need to meet with legal counsel and the merger facilitator to discuss how and why they want to merge and to discuss and review all of the legal issues to ensure there are no significant issues, which would prohibit the merger from moving forward with the due diligence process. Medical practice mergers are now back in vogue………..if done right, a merger is an excellent strategic move for many physicians now looking at their future.