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PRACTICE
MANAGEMENT TIPS
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| Telephone
management, a few key tips to better manage your practice |
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Never have billing
directed through the general telephone receptionist.
Make sure that patient statements have the billing
department's direct phone number clearly printed.
Billing calls can bypass the receptionist who is
typically very busy taking patient calls. |
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Use voice-mail in the
billing department so patients can leave messages
when the staff is busy. This also allows the staff
to prepare before returning a patient call, which
is more efficient. |
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Before the implementation
of automated attendants, make sure that you fully
understand your system's abilities to take proper
advantage of the technology. |
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Request annually that
the local telephone carrier perform a free "busy
study" of your incoming calls. This will establish
objective information regarding when you are receiving
calls or missing calls due to busy lines. |
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| Employee
Evaluations |
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| Annual employee evaluations should be objective in nature,
in written form, and include measurable goals for the
employee. Omitting the documented, objective, and accountable
goals will enforce erratic attempts by employees to do
what they think appears to be expected of them. Typically,
these attempts are not consistent with the objectives
of a practicing group, nor will they increase overall
efficiency and effectiveness. Take control of the practice's
greatest asset, and guide the staff through these changing
times by creating individual practice goals for employees
to achieve. |
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| Overdue
Accounts |
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| Practicing groups need to fully understand the
effects of time on the collection of their open
accounts receivable. Simply said, "the longer it
takes you to act on your delinquent accounts, the
lower your chances of collection." The following
chart provided by the US Department of Commerce
depicts how the age of receivables determines its
value: |
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Collection Day |
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Amount Collected
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$1 Today |
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$1.00
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At 30 Days |
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$0.97
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At 60 Days |
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$0.90
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At 90 Days |
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$0.80
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At 120 Days |
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$0.73
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| In our experience, the real loss caused by poor
revenue cycle management clearly exceeds the false
savings of lowering expenses in the billing and
collection departments. |
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HEALTHCARE TRENDS
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| The
2002 Report to the Nation - Occupational Fraud and Abuse
published by the Association of Certified Fraud Examiners: |
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Certified fraud examiners estimate
that 6% of revenues will be lost in 2002 as a result
of occupational fraud and abuse |
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Over half of the frauds cause losses
of at least $100,000 per year |
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The average scheme in their study
lasted 18 months before it was detected |
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The most common method
for detecting occupational fraud is by a tip from
an employee, patient, or anonymous source |
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Organizations with fraud hotlines
cut their fraud losses by approximately 50% per
scheme |
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Measures most helpful in preventing
fraud are (in order of importance): |
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Strong internal controls |
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Background checks on new employees |
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Regular fraud audits |
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Established fraud policies |
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| Medicare
Claim Reconciliation |
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| In a recent survey, days in receivable were measured
to see if there was any effect from utilizing Medicare
electronic reconciliation. Medicare electronic reconciliation
is the actual downloading of Medicare payments into a
practice's computer and crediting the appropriate account
electronically. This electronic crediting process saves
a significant amount of time and its performance has an
effect on the days receivable. In this survey, it was
empirically shown that practices which utilize the Medicare
electronic reconciliation program, lower their days receivable
by 10 days. |
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| Activity-Based
Costing |
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Activity-based cost accounting is a basis of cost
accounting designed to introduce the concept of
an information and cost accounting system that:
1.) identifies various activities performed in an
organization
2.) collects cost on the basis of the underlined
nature and extent of those activities; and
3.) assigns costs to diagnostic testing and services
based on those activities.
Many practices allocate production overhead costs
using only one or few traditional measures of activity.
In reality, overhead costs are more commonly caused
by a variety of activities or cost drivers that
may be related to materials, physician services,
or support services. The use of similar allocation
basis could result in cost evaluations that do not
reflect true practice cost and clearly with third
party managed care contracts, could cause the practice
to lose money for every service rendered.
Each practice needs to review their cost(s) based
on activity-based costing analysis to ensure that
the managed care contracts are currently servicing.
In addition, the Medicare RBRVS serves as a guide
to assist in the analysis of activity based costing.
In the future, practices must perform proper cost
accounting prior to negotiation of any managed care
or capitated contract. |
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TAX ISSUES
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| Job
Creation and Worker Assistance Act of 2002 |
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| On Saturday March 9, 2002, the President signed the
Job Creation and Worker Assistance Act of 2002 (P.L. 107-147).
The new law represents a revised version of what was originally
proposed by the White House and Republicans shortly after
September 11th. The new law creates many new provisions
affecting both businesses and individuals, and some have
been instituted on a retroactive basis and may affect
the filing of 2001 corporate and personal income tax returns.
The following are some of the highlights of the new act:
Business Provisions
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Bonus Depreciation - Additional first
year depreciation deductions equal to 30% of adjusted
basis on qualified property are available for property
acquired after September 10, 2001 and before September
11, 2004. The property eligible for the use of "bonus
depreciation" includes: |
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Property with a recovery period
of 20 years or less |
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Water utility property |
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Non-IRC Section 197 computer
software |
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Qualified leasehold improvements |
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Net Operating Losses - The new law
extends the current carry back of net operating
losses from two years to five years. The losses
must arise in tax years ending in 2001 or 2002.
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New York City Liberty Zone
Taxpayers in the special "Liberty Zone" in
southern Manhattan located on or south of Canal Street,
East Broadway, or Grand Street have been granted special
expensing and other provisions to assist in rebuilding
after September 11th. The following is a brief description
of some key provisions:
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The Code Section 179 election is increased
for qualified New York Liberty Zone property to
equal the lesser of $35,000 of the cost of the property
which is qualified New York Liberty Zone property. |
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The replacement period for non-recognition
of gain for property involuntarily converted as
a result of the terrorist attacks on September 11th,
is extended from two to five years. |
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Work Opportunity Tax Credit (WOTC)
is a new targeted group that establishes a tax credit
for businesses that are Liberty Zone taxpayers.
Generally, to be eligible for the credit, the taxpayer
must employ individuals substantially performing
all their services in the liberty zone and individuals
substantially performing all of their services in
New York City for a business relocated from the
Liberty Zone. |
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| Individual Provisions |
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Archer Medical Savings Accounts -
The use of the Archer Medical Savings Account (MSAs)
initial cut-off date has extended MSAs through December
31, 2003. |
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Foster Care - Payments to a qualified
foster care provider by state or local governments
or a tax-exempt agency generally has been excluded
from income. The new law expands the definition
of payments and who is deemed a foster care individual. |
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| 2002
Tax Limit Update |
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| Social Security - The contribution
benefit base has been increased to $84,900.00 for 2002.
Social Security (OASDI) taxes are imposed on wages and
self-employment income at 6.2% up to the annual benefit
base, or a maximum of $5,263.80. There is no limit on
the amount of earnings subject to the Medicare (HI) tax.
The Medicare (HI) rate is 1.45%, and the combined tax
rate for Social Security (OASDI) and Medicare (HI) is
7.65%.
Standard Mileage Rate - The standard mileage
rate for business use of an automobile has been increased
from 34.5 cents to 36.5 cents per mile for 2002. The
rate for use of an automobile for medical or moving
expense purposes has been increased from 12 cents to
13 cents per mile for 2002. The rate for use of an automobile
for charitable purposes remains at 14 cents per mile.
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| Retirement Plan Limits
- The following items reflect the limits for plan
years beginning in 2002: |
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Maximum elective deferral under a
401(k) or 403(b) plan is $11,000 |
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Annual compensation limit for general
benefit purposes is $200,000 |
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Maximum contribution deferral limit
under SIMPLE retirement accounts is $7,000 |
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Maximum annual benefit under defined
benefit plan is $160,000 |
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Maximum annual addition under defined
contribution plan (profit sharing, 401(k), money
purchase pension plans) is $40,000 |
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| Corporate
Compensation Planning |
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| The typical compensation planning for healthcare
professionals that practice within a personal service
corporation has included a monthly salary with a
minimum of annual bonus calculations and additional
compensation. The payment of bonuses at year-end
has for years been a normal event for professionals
that practice as a regular corporation. The planning
theory used has been to distribute remaining profits
at the corporation's fiscal year-end to the shareholder/healthcare
provider to avoid paying the flat Federal Corporate
tax rate on net income of a personal service corporation
of 35%.
On April 2, 2001, the United States Tax Court
issued Tax Court Memorandum 2001-81 in the case
of PEDIATRIC SURGICAL ASSOCIATES, P.C. vs. COMMISSIONER
OF INTERNAL REVENUE. This case involves the disallowance
of compensation as unreasonable to the two surgeon
shareholders. The government attacked the portion
of payment of bonuses to the shareholders that
was attributable to salaried non-shareholder physicians.
The Tax Court determined that a portion of their
bonuses represented distributions of taxable profits
as dividends and were not "purely for services
rendered."
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important Tax Court and Memorandum Decision
that will affect all personal service corporations
planning in the future. Personal service corporations
should have the following issues reviewed
in light of this decision: |
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Language of current employment
contract |
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Current calculation of compensation
and bonuses |
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The current dividend payments
made by the corporation to shareholders |
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Relationship of net income derived
from non-shareholder/professional to compensation
of shareholders |
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In addition to a review of existing issues of
the personal service corporation, consideration
should be given to a change in the entity type
that the professionals practice within. The election
by a regular corporation to switch to Subchapter-S
status offers many advantages that should be considered
at this time. Also, the popularity and use of
limited liability companies (LLC) is also an alternative.
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| The
Aspen Consulting Group, Ltd.Management and Financial Updates are furnished
as a service to provide general information from time to time based
on information believed by us to be reliable. It is not intended to
constitute our definitive advice regarding specific matters or actions.
Please contact us if you wish to pursue further matters contained
in the Management and Financial Updates. |
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