February 2014

T h e O f f i c i a l P u b l i c a t i o n o f t h e Lo s A n g e l e s Co u n t y M e d i c a l A s s o c i a t i o n

REPORTING ON THE ECONOMICS OF HEALTHCARE DELIVERY

A PUBLICATION OF PNN www.PhysiciansNewsNetwork.com

FEBRUARY 2014

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A N o r c A l G r o u p c o m pA N y

FEB R UA RY 2014 | TA B LE OF CONT ENT S

Volume 145 Issue 2

COVER STORY

16

REFORM AND YOUR TAXES

With February being prime time for filing taxes, we have turned to the experts to unveil critical tax changes affecting physicians as of 2013 and beyond. Among the key issues discussed in this article will be the Medicare Hospital Insurance Tax and Medicare Tax on Investment Income, as well as income tax, which will be critical for sole proprietors and employed physicians.

16 DEPARTMENTS 6 Front Office | Practice Management Tips, hints, advice and resources

8 Balance | Lifestyle & Wellness

News, studies, tips and opportunities to help physicians maintain a balanced lifestyle

8

14 PNN | NEWS IN REVIEW

The latest headlines impacting the economics of healthcare delivery in Southern California

22 transitions | career management

22

A look at the questions and challenges associated with various stages of your medical career

Physician Engagement

Feeling engaged is a prime driver of physicians’ satisfaction and dissatisfaction with their jobs. When physicians feel a lack of engagement —or are outright disengaged— it manifests itself in various ways, from feelings of hopelessness, anger or cynicism to, ultimately, leaving or wanting to leave their jobs.

24 United We Stand | AT WORK FOR YOU

LACMA and CMA membership at work for you

From Your Association 4

President’s Letter | marshall morgan, MD

26 CEO’s Letter | Rocky Delgadillo 27 LACMA News | Association Happenings

22

Physician Magazine (ISSN 1533-9254) is published monthly by LACMA Services Inc. (a subsidiary of the Los Angeles County Medical Association) at 707 Wilshire Boulevard, Suite 3800, Los Angeles, CA 90017. Periodicals Postage Paid at Los Angeles, California, and at additional mailing offices. Volume 143, No. 04 Copyright ©2012 by LACMA Services Inc. All rights reserved. Reproduction in whole or in part without written permission is prohibited. POSTMASTER: Send address changes to Physician Magazine, 707 Wilshire Boulevard, Suite 3800, Los Angeles, CA 9001 7. Advertising rates and information sent upon request.

F EB RUA RY 2014 | w w w. p h y s i c i a n s n e w s n e t w o r k .c o m 1

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strive toward a common goal– that you might spend more time treating your patients and less time worrying about the challenges of managing a practice.

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LACMA’s Board of Directors consists of a group of 30 dedicated physicians who are working hard to uphold your rights and the rights of your patients. They always welcome hearing your comments and concerns. You can contact them by emailing or calling Lisa Le, Executive Assistant, at lisa@lacmanet.org or 213-226-0304.

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P R ES ID ENT ’S LET T ER | MA R S HA LL MOR GA N, MD

Co n so li dati o n : There is an ongoing and acceler-

ating consolidation of healthcare in the United States, affecting health plans, hospitals, and physician practices, driven by powerful economic forces and policy changes.

Consolidation (making one big thing out of many small ones) is most apparent in health insurance: in 90% of the states the top one or two companies have a market share greater than 50%.

This fact alone would suffice to drive the consolidation of hospitals. Only by forming large organizations could hospitals negotiate successfully with the insurers. In a local market where there were 15 independent hospitals, a large insurance company could, and would, exclude the one or two highest priced hospitals, or force them to accept much lower reimbursement.

When that same local market evolved into one with only three large hospital systems, excluding one system with multiple hospitals would make the plan much less attractive to individuals and employers. This allowed hospitals to “fight back” and command higher reimbursement.

There were other forces pushing in the same direction. Hospitals are dealing with a diminished demand for hospital services. During the period 1981-2011, hospital days declined by 33%, and 15% of hospitals closed.

Many of the smaller hospitals that survived did so only by being acquired by, or integrated into, a larger hospital system. Finally, the need for large capital investments in the IT systems needed to deal with the new reporting requirements and reimbursement based on “quality” measures (e.g., penalties for “unnecessary” readmissions) meant that only institutions with economies of scale and access to capital (e.g., large academic medical centers) could survive: 60% of hospitals are now part of multi-hospital systems.

While hospitals were engaging in this “horizontal consolidation” (multiple smaller hospitals coalescing into large hospital systems), they were also engaging in “vertical consolidation” (growth through incorporation of related institutions and businesses) by acquiring nursing homes, home health services and physician practices. In 2004, only 24% of physician practices in the US were owned by hospitals; in 2011, that percentage had increased to 49%.

In this environment physician practices often become part of very large organizations. These organiza-

4 PHYSICIAN MA G A Z INE | F EB RUA RY 2014

tions are complex and require full-time professional managers. Many of these managers are trained only in management (usually MBA training from business schools or equivalent degrees from schools of public health); others are physicians who, generally, have management training and no longer practice medicine.

These managers have assumed responsibility for oversight of the entire organization, including application of clinical algorithms, practice guidelines, standardization of procedures and cost control-measures.

The consolidation and “industrialization” of healthcare, with top-down management, an emphasis on uniformity of practice, adherence to formal guidelines and responsibility for measurements of “population health” (as opposed to concentration on the care of individual patients) are inimical to the traditional values of physician autonomy and professionalism. Physician practices will be “managed” and doctors will be charged with maintaining norms for panels of patients rather than emphasizing their traditional focus on outcomes for individual patients.

The large hospital systems aggressively pursue expansion because “size matters” in their struggle for competitive success in their geographic region and/or business “niche.” In that process, existing small physician practices are being disrupted, and many physicians are being harmed by direct competition from these medical behemoths.

These trends seem irreversible. While it is possible that a few physicians will be able to maintain practices in which close doctor-patient relationships and considerable “time per patient” are preserved (“concierge” practices are the model for this), it is almost certain that in the not very distant future the great majority of physicians, particularly those in large population centers like Los Angeles County, will be employed by (or tightly affiliated with) large health systems. It remains to be seen whether physicians and patients will be satisfied with this new approach to medical care.

On the other hand, the disturbing fact that many people in this land of plenty have no insurance coverage and therefore no access to good medical care is finally, albeit incompletely, being addressed.

We find ourselves in a time of disruptive change in the practice of medicine and the “delivery” of medical care.

All of us must, as best we can, navigate these changes.

LACMA and CMA will diligently and continuously work on behalf of all physicians, and in particular our members, to mitigate the harm and maximize the benefits of these changes.

(Note: most of the facts referenced in this letter are drawn from the November 13, 2013 issue of JAMA. I recommend it to those interested in learning more about this topic.)

Marshall Morgan, MD, is a professor and chief of emergency medicine at the Ronald Reagan UCLA Medical Center and director of emergency medicine center at the David Geffen School of Medicine at UCLA. He is the 142nd president of the Los Angeles County Medical Association.

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P R ACT I CE M A NAG EMENT | FR ONT OFFICE

Act Now to Protect Yourself Under the

Physician Payment Sunshine Act By ta k ing f our easy steps now, you can make sure you're prepared when it's time to review your

2013 financial data before it's published online later this year. Under the Physician Payments Sunshine Act, drug and medical device manufacturers started tracking their financial interactions with licensed physicians – including consulting fees, travel reimbursements, research grants and other gifts – beginning Aug. 1, 2013. Any payments, ownership interests and other “transfers of value” will be reported to the Centers for Medicare & Medicaid Services (CMS) for publication in an online database to be launched in the fall of 2014.

6 PHYSICIAN MA G A Z INE | F EB RUA RY 2014

1. Make sure your disclosures are up to date. Financial and conflict-of-interest disclosures required by employers, advisory bodies and entities funding research should be updated regularly so it is consistent with the data that eventually will be publicly reported under the Sunshine Act. 2. Confirm that your National Provider Identifier (NPI) information is current. The information tied to your NPI, including your specialty, must be accurate to help ensure appropriate attribution of payments and other transfers of value that will be listed in CMS's online database.

3. Request ongoing notification from your industry contacts about the data they report to CMS. Ask your representatives at the manufacturers and group purchasing organizations with which you interact to give you an opportunity to review and correct information they intend to submit before they transmit it to CMS. The 2013 data is due March 31.

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"Open Payments Mobile for Physicians" is available through the Apple Store and Google Play速 Store. A number of security features protect the privacy of the data you capture, which will be stored on one device and cannot be backed up to a cloud or other devices. Also urge your industry contacts to use the app so you will be able to capture the information you need to ensure accurate reporting.

Visit the AMA Sunshine Act physician toolkit to learn more about the law's timeline, the kinds of financial interactions that must be reported and the process to challenge false, inaccurate or misleading reports.

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front offi ce | practi ce m anage m ent

Here are four easy steps you can take now to support the accuracy of this data:

balance | li festyle & wellness

IS YOUR PORTFOLIO HEALTHY? By: Don Pelgrim

For m a ny pro fe ss i o na l s time is at a premium, and many aspects of your personal life un-

related to your core practice may not receive the full time and attention they require, or they are delegated to others to manage. Like the health of a patient, your personal investment needs and objectives may change based on a variety of factors – some of which are controllable and others that are subject to external factors beyond your control. Further, similar to the patient that drifts further away from a healthy lifestyle over time, inattention or neglect in reacting to those factors affecting your investments may compound the problems in an investment portfolio.

8 PHYSICIAN MA G A Z INE | F EB RUA RY 2014

1. Diagnosis (Portfolio Assessment) Like a medical diagnosis, a portfolio assessment involves the process of attempting to determine the problems or issues in your portfolio and a review of the potential causes of those problems and issues.

However, while a medical diagnosis may only focus on problems, a portfolio assessment should also include a review of the successes in the portfolio to ensure they are not an aberration or subject to changing circumstances, but are repeatable and sustainable through the current investments or investment approach. In 2013, there were significant increases in the stock market and other financial sectors. The question that may be asked now is whether it is realistic to consider the velocity and trajectory of those gains sustainable.

Identification of the issues and their causes in a lackluster portfolio will assist in your decisions about which treatments (investments) are in alignment with the prognosis (your expected outcomes based on your investment philosophy, risk tolerance and goals).

Depending on the extent of the issues or the complexity of the financial, tax and legal structure of your investments, this process may involve various professionals including your accountant/tax advisor, attorney, banker, financial advisors and others. Further, the assessment may involve revisiting the structure of your investments, how they intended to work, factors impacting results, actual results and corrective actions or changes.

2. Primum Non Nocere - First Do No Harm (Investment Philosophy) Because every medical decision has the potential for harm, a fundamental principle guiding physicians is that, whatever the intervention, the patient’s wellbeing is the primary consideration. In the practice of medicine, this principle may lead to restraint and inaction. From a less altruistic perspective, physicians may be held accountable for all the harms they cause but only some of the harms they fail to prevent.

When applied to investments, the damage caused by inaction can be as severe as the damage caused by action - and you may bear the full brunt of action or inaction through your portfolio results.

There are a number of factors that impact the outcomes of most investments. Many of those factors are dynamic, and the degree of their impact on the results of an investment is influenced by controllable and non-controllable events, such as the decision to liquidate early and absorb a penalty or economic changes on the other side of the globe. Further, necessary changes in investment philosophy or approach may be required as a result of events that occur over the life cycle of the investor, including birth, death, divorce, age, retirement, succession planning and other factors. Therefore, periodically assessing and reviewing your investment philosophy, goals and objectives should Identification of the issues become a part of your and their causes in a lackluster portfolio review.

Setting aside investportfolio will assist in your dement styles such as value cisions about which treatments investing, fundamentals (investments) are in alignment investing, technical investing, contrarian inwith the prognosis (your exvesting, and other styles, pected outcomes based on some of which may become part of an inteyour investment philosophy, grated strategy directly or risk tolerance and goals). through managed investments, this article will touch only on a couple of key elements associated with formulating an investment philosophy specifically, a risk assessment and determining your risk tolerance level. These elements are at the core of most investor concerns and generally become the touchstones that drive investment objectives, goals and investment selection.

Except for certain insured or guaranteed investments, which likely offer lower relative returns, most investments involve some degree of risk. Further, investment risk can take different forms, including the loss of all or a portion of your principal investment, interest rate risk (the impact of rate changes on investments), unstable or unpredictable returns, business risk (the risk associated with the specific issuer or counterparty), credit risk (or default risk), taxability risk (e.g., the loss of tax exempt status), call risk (which is related to reinvestment risk and opportunity cost in a stable or declining interest rate environment), inflationary risk (the failure of the value or income of the investment to stay ahead of the rate of inflation), F EB RUA RY 2014 | w w w. p h y s i c i a n s n e w s n e t w o r k .c o m 9

l i festyle & wellness | balance

Portfolio Check-Up Physicians often talk with their patients about changes they can make to create better balance and, as a result, better health. Many of these changes are the elements of a healthy lifestyle the patients learned about in grade school but either forgot about, failed to implement or drifted away from. Tragically, although the physician as a counselor reminds their patients about these fundamental principles, many times the wake-up call for a patient comes after a catastrophic event.

In order to maintain a healthy portfolio, the following are the top five touchstones that should be considered in the next “check-up� of your investments:

balance | li festyle & wellness

liquidity risk (the inability to buy or sell when desirable), market risk (based on volatility and other factors), political and legal risk (the loss in value due to changes in the law affecting the investment or business prospects), currency and exchange risk (due to the change in price of one currency against another), and other risks that may be inherent to the specific type of investment or investment structure.

An assessment of investment risk is essentially a determination of the probability of a risk occurring and severity of the impact on the particular investment if the risk actually occurs (e.g., loss of principal and/or return). That risk is then weighed against the expected return on the investment. The goal is to obtain a strong return relative to risk or a strong “risk-adjusted return.” For example, if two investments had an 8% return, the less risky investment would have a better risk-adjusted return.

Risk tolerance differs by investor, changes over the course of an investor’s life cycle, and may be at different levels within investments in a diversified investment portfolio.

It involves the degree of risk an investor has the ability or willingness to accept with respect to large swings in value or the potential loss of their principal in exchange for an anticipated return. Questions you may consider to determine your level of tolerance for risk, whether in your portfolio as a whole or with respect to a particular investment, include the investment time horizon, your earning capacity, other assets you own, the percentage of your portfolio you will allocate to a particular investment, existing diversification within your investment portfolio, and other risk mitigation options available to you such as hedging and insurance. Ultimately, it may boil down to questions as simple as whether you can stomach a loss on the investment or will lose sleep at night thinking about the investment.

The investment risk assessment and investor risk tolerance level are critical components to investing, 1 0 PHYSICIAN MA G A Z INE | F EB RUA RY 2014

and the goal is for you to have a realistic understanding of the risks and your tolerance level. Therefore, the interaction of the investment risk assessment, your return requirements, and your level of comfort with those factors are considered at this stage. Further, this is not a static decision or a onetime event. You should periodically reassess your risk tolerance level and the investment risks in your portfolio to determine whether any changes are necessary.

3. Prognosis (Objectives and Expected Outcomes) Once the issues and their potential causes have been identified (diagnosis), and the investment philosophy (including return expectations, risk assessment and risk tolerance as a foundation) has been reaffirmed, the various attributes of the specific investments or the structure of the portfolio and plan of investment (treatment plan) may be evaluated for alignment with the investment objectives and expected outcomes. This next step may include consideration of: • Active or Passive Management: There are at least two levels to this consideration. The first is your level of involvement, and the second is the level of involvement of your money manager. Active management, either by you or your money manager, involves the selection and management of the specific holdings in your portfolio. For example, you may desire real estate related investments, but are you prepared for the calls at midnight about clogged toilets? Conversely, there are real estate investments where you may self-select the individual investments, but you do not have the responsibilities or hassles of ownership. Examples of passive management may include brand name mutual funds where you may select the fund but do not influence the underlying investments. Ultimately, you may have active and passive investments in your portfolio.

balance | li festyle & wellness

• Investment Horizon: How long your money is tied up in an investment should be considered in connection with, among other things, the timing of distributions and related cash flow, short-term liquidity needs, phantom income (i.e., no distributions to pay taxes on realized gains), impacts of inflation and increasing interest rates, and the return expectation. For example, shorter term fixed income investments with comparable risk and return expectations are generally more favorable than longer term fixed income investments in a rising interest rate environment.

• Cash Flow; Growth: If there is no need for immediate cash flow, consideration may be given to whether the anticipated growth and future distributions exceed the value of a present Reassessment of your investstream of income from an alternative investments or your portfolio should ment.

If there is the take place at periodic intervals need or desire for curand during those times when rent cash flow, the consistency, sustainability severe or urgent conditions and frequency of distrimay impact your portfolio and butions should be considered. For example, the underlying investments. an investment should be reviewed to determine whether there are factors that may impact cash flow and are there payment alternatives through the investment if the cash flow is interrupted.

• Principal Protection: Returning to the concept of risk adjusted returns, consideration should be given to whether the investment provides strong returns relative to risk and are there mitigating factors or other safeguards to protect your investment if the investment does not perform as originally contemplated.

• Taxation: The tax impact on investments is an important consideration that is sometimes overlooked and includes factors such as whether (i) the returns are taxed as current income or capital gains; (ii) the returns are tax exempt and on what level (federal, state, local); (iii) tax efficient strategies be employed to obtain tax exempt status, avoid (versus evade) certain taxes, defer taxes or otherwise minimize the tax bite; (iv) the investment qualifies for inclusion in your pension plan or IRA (including, self-directed 1 2 PHYSICIAN MA G A Z INE | F EB RUA RY 2014

IRAs); (v) the nature of the investment or the investment structure creates phantom income upon which tax must be paid and will there be distributions to pay the tax; and (vi) other tax considerations.

As mentioned above, the investment philosophy and style will often dictate other questions and considerations at this stage of the process. For example, fundamental investing will necessarily include questions and analysis involving the health and financial results of the specific business underlying the investment; its strategic plan, attributes and growth opportunities in the markets it serve; potential economic, legal and political impacts; and other factors.

4. Treatment/Care Plan Implementation (Investment Plan Execution) Once the issues and their potential causes have been identified, and the investment philosophy (including return expectations, investment horizon and risk tolerance) has been reaffirmed, a treatment plan (investment plan) may be put in place. At this stage investment goals and expectations have been established and communicated and they are now put into effect.

Execution of the investment plan may involve various activities to put the plan in place, even if you will be keeping the majority of your underlying investments intact. These activities may include exploring new service providers, determining whether there are more cost effective ways to execute your plan, additional research or education on new or alternative investment opportunities, or implementing succession planning or tax efficient strategies. As opposed to “going it alone,” this stage may also include coordinating a team to provide financial services such as ensuring your tax advisor, attorney, financial advisor, investment manager and other providers are working together with you to the extent necessary to have an integrated investment plan. Continuing education, information, involvement and monitoring should also become part of the investment plan execution. Lastly, even with passive investments, monitoring will be an important part of plan execution. This is to ensure that the plan and individual investments remain on track and adjustments may be made as circumstances change and actual results materialize.

5. Treatment Efficacy (Review and Adjustment) In the practice of medicine, treatment efficacy is the systematic and scientific evaluation of whether a treatment works. Like a review of treatment efficacy, the review of individual investments and your overall portfolio may involve reassessment of the

ing changes to any part of your strategy or particular investments.

It’s About Balance As you enter into 2014, it may be wise to take a little time to consider whether your portfolio is healthy, if it needs to lose a few pounds, or if it needs immediate intervention. Further, conducting periodic evaluations of your investments will assist with the early detection of potential issues. And, although it may be like asking you to eat more broccoli when everything is going well (i.e., the market is rising), having a few stable investments in your portfolio may be good for you.

Donald H. Pelgrim, Jr., & Wilshire Finance Partners specialize in providing stable income and principal protection through short term, real estate-based fixed income investments. Nothing contained in this article may be relied upon as legal, accounting or tax advice. Readers should rely on the advice of their own legal counsel, accountants and other advisors to address their specific circumstances. Donald H. Pelgrim, Jr., is an attorney licensed to practice in the State of California and holds his California Real Estate Brokers License, license number 00944722. Wilshire Finance Partners, Inc. is licensed by the California Bureau of Real Estate, license number 01523207, and the California Department of Business Oversight, Finance Lenders License number 603K729. Š Copyright 2014. To provide feedback or for more information about investments offered by Wilshire Finance Partners, please call toll free (866) 575-5070.

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F EB RUA RY 2014 | w w w. p h y s i c i a n s n e w s n e t w o r k .c o m 1 3

l i festyle & wellness | balance

investments after the commencement of investment and at various points during the investment horizon to evaluate the success of the investment and the impact on your investment portfolio. Together with information about the amount of the initial investment, the amounts of any gains, losses, distributions, additional investments and reinvestments, and the factors affecting the investment, more informed decisions can be made about whether the actual results are in alignment with your original goals and expectations for the investment and whether any changes or adjustments need to be made with respect to the investment.

Reassessment of your investments or your portfolio should take place at periodic intervals and during those times when severe or urgent conditions may impact your portfolio and the underlying investments. While restraint is a quality that may need to be exercised in certain circumstances with a balanced portfolio (hopefully, with some downside protection), reassessment and review will help you determine the necessity and appropriateness of mak-

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Torrance Doctor Helps Steer New Network of Private Physicians A group of doctors called the American College of Private Physicians (ACPP) recently applied Photo via USC for 501(c)3 tax exempt status and is creating a network of independent doctors to share best practices and grow concierge medicine.

Dr. Thomas LaGrelius, a Torrance-based primary care physician, chair of the ACPP’s steering committee, told PNN that the business plan and bylaws of the new organization are unique and were developed from lessons learned in the past building numerous other physician organizations, some of which were more successful than others.

Dr. Marcy Zwelling-Aamot, a Los Alamitosbased internist and clinical care specialist, who is a member of the board of directors at the ACPP, said the purpose of the group is to solidify and accredit doctors’ practices.

Alecto Acquires Local Medical Center Lex Reddy, CEO of Alecto Health Services, which recently acquired ownership of the 204-bed acute-care hospital Olympia Medical Center in the Mid-City/Mid-Wilshire area of LA, said the company will invest between $10 million and $15 million in infrastructure upgrades.

Reddy told PNN last week that the investment, planned over the next 12 to18 months, will include opening a new catheter lab and upgrading the surgical and emergency departments, including buying new equipment.

Alecto and Olympia Medical Center announced on Jan. 2 that the merger became effective on Dec. 31, 2013. Financial details were not disclosed, Reddy said.

Reddy said he plans to reach out to independent physician practices in LA County, including Beverly Hills, Culver City and Westwood, to join the hospital.

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Insurance Giants Exploring Idea of Medical Tourism In a new trend, health insurance giants like Blue Shield and Anthem Blue Cross are exploring the idea of offering residents in Los Angeles County and elsewhere medical tourism as part of their healthcare coverage.

Some argue it could be the answer to Obamacare. Others say that medical tourism is risky for patients because when things go wrong, they may end up paying more for correcting medical problems back home.

The idea of Americans traveling to countries like Canada, Mexico or Costa Rica for medical care, including knee and hip surgeries and cosmetic procedures, is not new, according to published reports. A 2009 Grail Research LLC report found that Americans spent an estimated $35 billion on procedures abroad, a majority in Asia and Latin America.

New Website Ranks LA County Health Providers A new, free website that ranks Los Angeles County-based physician groups, hospitals and medical groups, as well as other health providers in California, aims to help consumers with their healthcare choices.

The California HealthCare Foundation recently made the physician data available through a partnership with Consumer Reports Health and the nonprofit California Healthcare Performance Information System.

The website, calqualitycare.org, rates medical groups based on patients’ survey responses to questions about access, care and customer service.

Patients can compare providers on such criteria as how easy it is to make appointments, helpfulness of the office staff and how effectively their doctor communicates.

Physician Burnout on the Rise Dr. Karen Miotto, chair of UCLA Health Systems’ medical staff health committee, said the recently held annual board meeting of the California Public Protection and Physician Health Inc. addressed key issues, including how to help physicians in LA County and elsewhere deal with the increasing stress of practicing in the changing health environment.

With the alarming rise of physicians experiencing burnout, more hospital and medical groups are implementing programs specifically designed to help physicians address their own wellness.

Several studies have shown that burned-out and disruptive physicians not only undermine their own health and professionalism but also can put a serious financial toll on healthcare organizations that fail to address the issue.

During the meeting, “we talked about the need in various areas of physicians’ health and monitoring and what it will look like in the future,” Dr. Miotto said. “Addressing issues without the diversion program was a big subject of conversation and how CPPPH can increase its outreach.”

reporting on the technology of healthcare delivery

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Physician Entrepreneur Builds Commercially Viable Biotech Company

On Dec. 12, 2013. the Greater Los Angeles Chapter of the Society of Physician Entrepreneurs (SoPE) hosted guest speaker Dr. William Pardridge, MD, founder and chief scientific officer of ArmaGen, a UCLA spinout developing platform technology solutions for transporting therapeutics across the blood-brain barrier (BBB).

Dr. Pardridge began by detailing the basic science as well as the significance of the blood-brain barrier in understanding how to treat neurological diseases that affect millions, such as stroke and Alzheimer’s, and the challenges of currently existing drug delivery methods. In the 1980s, Dr. Pardridge and his research team at UCLA were the first to show that there were receptor systems along the human BBB that acted as transport systems.

Since then, they have developed what they call “molecular Trojan horses” that can effectively deliver various drugs and gene therapies to the brain.

ArmaGen Technologies Inc. was founded in 2004 to use this technology to develop therapeutic products for treatment of conditions including Alzheimer’s disease, Parkinson’s disease, stroke, and brain cancer.

Bio-Pen Could Allow Doctors to Draw Human Cells

A handheld ‘bio pen’ developed in the labs of the University of Wollongong in Australia will allow surgeons to design customised implants on-site and at the time of surgery.

In a process similar to 3D printing, the ‘bio-pen’ uses material that is deposited in layers. Each layer is exposed to ultra-violet light from a source attached to the pen, hardening the gel so further layers can be added, eventually building a three-dimensional framework. An ultraviolet light is then used to solidify the ink which provides protection for the cells while they are built up layer by layer. Once cells begin to develop they turn into nerves, muscle and bone.

Once the cells are ‘drawn’ onto the surgery site they will multiply, become differentiated into nerve cells, muscle cells or bone cells and will eventually turn from individual cells into a thriving community of cells in the form of a functioning a tissue, such as nerves, or a muscle.

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Surgeon Donates $50M to USC Dr. Gary Michelson, 64, an orthopedic spinal surgeon turned philanthropist, has donated $50 million to the University of Southern California to Photo via USC fund a bioscience center, the school reported recently.

The Los Angeles-based doctor reportedly has no connection to USC. His donation will go toward building a 190,000-square-foot facility with state-of-the-art laboratories that will include a microscopy machine that can take precise measurements, according to published reports.

“Dr. Michelson’s generous gift is truly visionary, as it will bridge USC’s strengths in a broad range of disciplines, including the sciences, engineering, medicine, mathematics and computer science,” said USC President C.L. Max Nikias in a written statement. “The new USC Michelson Center will be a vibrant hub for innovation and will help create a major biomedical research corridor in Southern California.”

With February being prime time for filing taxes, we have turned to the

experts to unveil critical tax changes affecting physicians as of 2013 and beyond. Among the key issues discussed in this article will be the Medicare Hospital Insurance Tax and Medicare Tax on Investment In-

come, as well as income tax, which will be critical for sole proprietors and employed physicians. We will also shed light on the Sunshine Act

and outline its critical implications for doctors who have ties to drug companies, and talk about key issues when considering buying health insurance coverage for your employees.

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• The individual’s net investment income Under the Patient Protection and the ACA, physi- • Any excess of an individual’s modified adjusted cians earning more than $200,000 a year ($250,000 gross income over specified threshold amounts for joint filers) must pay higher Medicare hospital (also $200,000 for individuals and $250,000 for insurance (HI) taxes beginning in 2013. joint filers) The new tax is 2.35%, which marks a 0.9% rise • The 3.8% Medicare tax also applies similarly of applicable wages above those thresholds. This to some estates and trusts. Employers have no means that a doctor who earns an annual salary of withholding or payment obligation for the 3.8% $300,000 will pay HI taxes of 1.45% on $200,000, Medicare tax on unearned income. plus 2.35% on $100,000.

“It used to be that Medicare tax was only withIf doctors are held on wages,” employed, the Lieber said. “The employer will Medicare tax on withhold the 0.9% unearned investMedicare HI payment income is roll tax, regardless brand new. The “It used to be that Medicare tax of whether a phytaxes will be 3.8% was only withheld on wages. The sician files indion investment inMedicare tax on unearned investvidually or jointly, come they earn ment income is brand new. The taxes said Ed Lieber, (with the benchwill be 3.8% on investment income managing sharemark of $200,000 holder of ELLS, a they earn (with the benchmark for filing single CPA and business and $250,000 for of $200,000 for filing single and advisors company filing married). $250,000 for filing married). located in Santa Lieber said it’s Ana. critical that physi“There isn’t a cians have all their separate box that paperwork in orindicates that on der. the W2 form,” he “If doctors are noted. “It will be part of the Medicare tax.” involved in a partnership and that is income, it Doctors who are sole proprietors will pay the needs to be properly classified,” he noted. “If they additional 0.9% on their year-end tax return, he have investments in partnerships, they need to said. bring their Form K-1, for instance.”

Medicare Tax on Investment Income or Net Investment Income Tax

Also starting in 2013, high-income taxpayers will be subject to a new Medicare tax on investment income such as capital gains, dividends, interests and rental income.

The Medicare tax on investment income will be 3.8% on the lesser of:

He said doctors also should be aware that the new Medicare tax also applies to income from trusts.

“Doctors who have money in a trust need to be careful, because the Medicare tax on investments starts when the trust income exceeds $12,150 starting this year,” he said. “If income is sitting in a trust, doctors may want to take a closer look at getting it out of the trust so they don’t pay extra tax on it.”

One of the ways to do that might be to distrib-

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refor m & your taxes | feature

Medicare Hospital Insurance Tax

feature | reform & your taxes

he said. “If a docute income year-bytor had investment year or shelter it. A income coming in, tax expert can help, perhaps they could he said. shelter it by gifting Similarly, if a phyit to their children, sician earns more “If a doctor had investment income which also brings than $200,000 a coming in, perhaps they could shelwith it certain other year and earns diviter it by gifting it to their children, issues, but it may dends from stock which also brings with it certain help them obtain a holdings or interother issues, but it may help them lower tax rate,” he est from a savings obtain a lower tax rate.” added. account or income Another considfrom rental propereration for top earnties, the 3.8% tax ers: If a physician is also applies, Lieber in the top tax bracket noted. for federal and state The new HI tax income ($ 1 million) for high-wage earnand earns an addiers will raise roughly $87 billion over 10 years, and the Medicare tax on tional dollar in investments, that additional dollar will net investment income is expected to raise an ad- be taxed at 56.7% as of 2013. ditional $123 billion over 10 years, according to the Congressional Research Service Report for Congress. Both taxes aim to help pay for health insur- What Physicians Need to ance subsidies.

Know About the Sunshine Act Doctors should also be aware that as of Aug. 1, 2013, pharmaceutical companies, life science firms and other groups started collecting information on Higher Income Tax Under the 2013 federal income tax tables, which the financial relationship with them and are required include annual inflation adjustments, standard de- to report this information to the Centers for Mediductions and other tax changes from the American care & Medicaid Services (CMS) this March.

The transparency aims to give patients a better Taxpayer Relief Act, the AMT exemption for 2013 will understanding of the relationships their physicians be $51,900 ($80,800 married/joint).

For the tax year 2013, the new top rate is 39.6% may have with drug and device companies.

While collaborations between companies and for individuals earning more than $400,000, or $450,000 for married taxpayers filing jointly. The physicians have been longstanding and aren’t inherother marginal tax rates are 10%, 15%, 25%, 28%, ently suspect, physicians need to be aware that certain types of partnerships could violate the law.

33% and 35%, the same as in recent years.

That may be the case if providers are being paid In California, the state tax has been raised to a maximum of 12.3% and an additional 1% mental as part of an inducement or as a reward for referring health tax when a person’s income exceeds $1 mil- patients or for recommending the manufacturers’ products. lion, Lieber said.

Here are some of the issues that doctors need to “We take a look at all sources of other income,”

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• The published report will include amount, date, nature and form of the payment and the physician’s name, business, address and specialty, National Provider Identification, state professional license number and the name of the drug or device to which the pay relates.

• The government’s main concern in these types of relationships is that they could lead to overuse or overcharges of payment. To disincentivize the behavior, the government put the Anti-Kickback Statute and False Claims Act in place. Safe harbor for personal services can protect properly structured physician consulting agreements from scrutiny, experts say.

However, excessive pay amounts for agreements, for instance, or in cases where there isn’t a legitimate need for services contracted or if physicians perform services for which they are not being paid, may raise red flags.

• The public data will provide a new pool for investigators to mine data for further analytics. Tax authorities may also look at the reports and compare the information with the physician’s income.

• Violations

of

the Anti-Kickback Statute are punishable by up to five years in prison, criminal fines up to $25,000 per violation, administrative civil money penalties up to $50,000 per violation and exclusion from participating in federal healthcare programs.

• Under the Patient Protection and Affordable Care Act (PPACA) of 2010, a person must have specific knowledge or intent to violate the AntiKickback Statute. Any claim submitted to the government that includes items or services resulting from a violation of the law now constitutes a false or fraudulent claim for the purpose of the FCA. • The Federal Claims Act is often used by the government and by private citizens to allege violations of the Anti-Kickback Statute. Congress and whistleblowers with enough resources have also been known to identify targets for further investigation.

Health Insurance Coverage for Employees

Penalties for employers who do not provide healthcare coverage and have workers who receive government-funded subsidized premiums started this year.

Tax experts agree that most medical practices will unlikely be affected by these new laws, because While collaborations between they apply to firms companies and physicians have been that have at least longstanding and aren’t inher50 employees. ently suspect, physicians need to be Still, for some larger practices aware that certain types of partand small businerships could violate the law. nesses that are considering offering health insur-

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refor m & your taxes | feature

be aware of in terms of the new nationwide reporting system.

• Under the new law, companies must annually report to CMS any direct or indirect pay or other transfers of value they make to physicians and teaching hospitals and ownership and investment interests held by physicians. CMS will make the reports publicly available.

feature | reform & your taxes

ance to employees, the following items will be could lead businesses to self-insure, or pay their workers’ medical costs directly instead of joining a important. “There are still a lot of details to be worked out, traditional managed-care plan.

The do-it-yourself plans have typically been and a lot of these things are very fluid right now and will be changing,� said Michael Alter, presi- reserved for bigger companies, because it gives dent and CEO of SurePayrolls, Inc., in Glenview, them more control over benefits and can lower costs.

Ill., which provides Only about payroll services to 15% of firms with small businesses, fewer than 200 including mediworkers were selfcal practices, in insured in 2012, a recent article compared with that appeared in Violations of the Anti-Kickback Stat81% of larger American Medical ute are punishable by up to five years firms, according News. in prison, criminal fines up to $25,000 to a Kaiser FamAccording to per violation, administrative civil ily Foundation surAmerican Medimoney penalties up to $50,000 per viovey. cal News, some lation and exclusion from participatFor medipractices could be ing in federal healthcare programs. cal practices and eligible for a tax other small busicredit if they paid nesses, being selfat least half of the insured would let cost of insurance them avoid the for their staff. new requirement under the new tax that calls for traditional small group plans to inSmall Practices May Opt to Self-Include richer plans, such as mental-health and masure to Avoid New Health Law On the other hand, a new provision that will hit ternity care.

Self-insured firms can also avoid changes to small businesses and their employees particularly pricing rules that could increase costs for groups hard is a health insurance tax.

The health insurance tax is officially imposed of healthy workers, according to published reports.

This comes with risks, though. on health insurance companies but is expected If an employee has a serious illness or traumatic to have the greatest effect on their customers, because the insurers will pass most of the burden on incident, the small business may be on the hook through higher premiums, according to an article for the medical bills. To spread the risk, these plans published on the Physicians for a National Health have mostly been offered by large companies with 100 or more workers.

Program website.

Consequently, some experts worry that the An analysis by the nonpartisan Joint Committee on Taxation found that the tax will raise insur- health law is changing the risk-benefit calculation ance premiums on average by $350-$400 per af- for small businesses.

Self-insurance tends to benefit mostly healthy fected family in 2016.

The higher premiums caused by the new tax young workers who have lower costs. Some peo-

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Three Key Coverage Issues for Sponsoring Health Plans When it comes to sponsoring health insurance

plans for your employees, here are three key considerations doctors should be aware of:

• No Lifetime and Annual Limits on Essential Health Benefits: Starting this year, plans cannot impose lifetime or annual limits on certain “essential health benefits.” This requirement will affect many employer-paid medical expense reimbursement plans (MERPs) and health reimbursement arrangements (HRA), which typically reimburse employee out-of-pocket medical costs up to a specified limit. There are key exceptions.

• Eligibility Provisions: Starting this year, plans cannot impose an eligibility waiting period of more than 90 days. For administrative reasons, many employers plan to implement a waiting period in which eligible employees become eligible on the first day of the month following 60 days of employment.

• Wellness Programs: Physicians who consider offering their staff a wellness program should determine whether it complies with the ACA’s new wellness program regulations and, if not, what changes may be needed.

While experts seem to disagree on whether the

new changes will make it easier or not for practic-

es to offer health insurance, it is certain that many small businesses and individuals will turn to the exchanges to buy coverage.

The Bottom Line

While the new legislation provides temporary clarity on some issues, including income tax, for the foreseeable future, many uncertainties remain. A sound financial plan developed with an expert should allow flexibility to adapt to changing regulations and can help doctors plan for the future.

“This legislation will provide practitioners the

ability to compete with the local hospitals and large practice groups for quality employees,” said

Carl Kleimann, president of Odyssey OneSource, which provides human resources services to prac-

tices ranging from six to 400 employees, in Ameri-

can Medical News. “These reforms should have the effect of leveling the playing field, because access to coverage is going to improve.”

refor m & your taxes | feature

ple worry that the self-insured plans could undermine the exchanges, which are supposed to help spread the risk among healthy and sicker people.

If healthy businesses opt out of the exchanges, the argument goes, that leaves more less-healthy counterparts on the exchanges. This, in turn, could push up premiums in the marketplace, which has some regulators worried.

Officials in several states are seeking to stem the strategy by limiting so-called stoploss insurance, which covers the unexpected, large healthcare bills for self-insured companies.

Several insurers, meanwhile, say they are responsive to customers, and started offering self-funded options to businesses with fewer than 25 employees.

Cigna Corp. reportedly started offering plans to firms with as few as 25 employees in 26 states and in the District of Columbia. As of last year, United HealthGroup Inc. and Humana also reportedly started offering similar plans to small employers, including those with as few as 10 members.

Experts recommend that physician employers that sponsor self-insured plans should work with an advisor to determine the potential impact on them of the various ACA requirements and modify their plans to comply.

transi t i ons | career managem ent

Physician Engagement: A Key Driver of Physician Satisfaction and Organizational Effectiveness Robert Stark, MD and Daniel Whitlock, MD

Fe e ling e ng ag e d i s a prime driver of physicians’ satisfaction and dissatisfaction with their

jobs. When physicians feel a lack of engagement—or are outright disengaged—it manifests itself in various ways, from feelings of hopelessness, anger or cynicism to ultimately, leaving or wanting to leave their jobs.

That’s a matter of particular concern given that turnover and prolonged vacancies are key cost drivers—estimated to run as high as $100,000 per month when all costs and lost revenue are considered.

In 2013, Physician Wellness Services conducted a nationwide, multi-specialty Physician Engagement Survey with Cejka Search to gain a better understanding of what physician engagement really means to physicians.

The 1,666 physician respondents confirmed (with a 99% confidence level and +/- 3% margin of error against the national active physician population) that engagement is extremely important to physicians’ job satisfaction. Based on a 10-point Likert scale ranging from 1 (unimportant) to 10 (very important), the average score was 8.0, with a quarter scoring 10, and two-thirds (66.2%) scoring it in the high range. Yet, the survey showed that their actual feelings of engagement were lower, with average scores of 7.7 for engagement with their work, and just 6.4 for engagement with their organizations.

What Does Engagement Really Mean to Physicians?

Engagement as a term is used a lot—but what does it really mean to physicians? Lacking specificity around

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this—and solid metrics—it’s nearly impossible for healthcare organizations to achieve an increase in engagement with their physician population. This formed the primary goal of the survey—to understand what engages physicians, and then based on this knowledge, assist healthcare organizations in making increased physician engagement actionable.

Asked to evaluate 15 elements of engagement, physicians generally felt that all of the elements of engagement were very important to feeling engaged, based upon average scores ranging from 7.9 to 9.2 on a 10-point Likert scale. These were well above the 3.0 to 7.0 point mid-range and all in the upper quartile.

Moreover, a 10 was the top score by far for all of these elements.

The top five elements of engagement in absolute terms were: • Respect for my competency and skills (9.2 average score) • Feeling that my opinions and ideas are valued (9.1—tie) • Good relationships with my physician colleagues (9.1—tie) • Good work/life balance (9.1—tie) • A voice in how my time is structured and used (9.0)

There are sizable gaps between what is important to physicians to feel engaged and what they perceive they are experiencing in their current practice—but even more so with the ideal of a 10 score, which, given their importance scores for all elements, is a better reflection of their true expectations.

A companion survey of administrators showed they essentially understand the degree to which specific elements are important to physicians’ feelings of engagement, but tend to overstate how well their organizations are providing what physicians want.

Engagement Drives Career Decisions The cost of overestimating physician satisfaction and not doing enough to engage physicians may ultimately be reflected in higher physician turnover, lower morale and, ultimately, sub-optimal performance operationally and clinically as physicians feel less buy-in around key organizational initiatives.

A significant survey takeaway was that administrators often underestimate how large a role engagement plays in physicians’ decisions to accept practice opportunities and/or leave a current job. When asked how important a role engagement plays in physicians’ decisions to accept a practice opportunity: • The average score for physicians was 7.3.

• The average score for administrators was 6.9.

The gap in scores was even greater when asked about the role engagement played in physicians’ decisions to leave a practice: • The average score for physicians was 6.3.

• The average score for administrators was 5.4.

The degree to which administrators underestimate the role that engagement plays for a physician making career decisions is troubling given the predicted shortage of physicians as boomer physicians retire.

The most successful healthcare organizations strive to create passion in physicians for their practice setting and health system. This physician engagement survey provides the framework for understanding physicians’ needs in order to develop the same passion for their organizations as they have for their patients. Engagement is a foundational element of passion and the key to igniting a powerful synergy that distinguishes the great organizations from the merely good ones.

The 15 Elements of Physician Engagement

1.

2.

3.

4.

5.

6.

7.

8.

Respect for my competency and skills Feeling that my opinions and ideas are valued Good relationships with my physician colleagues Good work/life balance A voice in how my time is structured and used Fair compensation for my work Good relationships with non-physician clinical staff A broader sense of meaning in my work over and above my day to day duties 9. A voice in clinical operations and processes 10. Opportunities to expand my clinical skills and learn new skills 11. Opportunities for professional development and career advancement 12. Good relationships with administrators 13. Alignment with my organization’s mission and goals 14. Working for an organization that is a leader in innovation and patient care 15. Participation in setting broader organizational goals and strategies Note: In rank order of absolute scores to question: What is important to feeling engaged?

For more on physician engagement visit http://www.physicianwellnessservices. com/news/engagementsurvey.php About the authors: Daniel J.Whitlock, MD, MBA, joined Physician Wellness Services as a consulting physician to continue pursuing his interests in understanding and preventing physician stress and burnout. Dr. Whitlock received his MD degree from the University of Minnesota. He completed his internship in pediatrics/internal medicine at Cleveland Metropolitan General Hospital and completed his residency at Case Western Reserve University in Cleveland. He completed a fellowship in pediatric nephrology at the University of California in San Francisco. In 1993, Dr. Whitlock received a Master’s in Business Administration from the University of Minnesota.

Robert Stark, MD, a consulting physician for Physician Wellness Services, is medical director of the Cardiac Prevention Program at Greenwich Hospital. A boardcertified internist and cardiologist, he practices in Greenwich, CT and is also a clinical assistant professor of medicine at New York Medical College.

Dr. Stark received his MD degree with honors from Harvard Medical School in 1974. He completed his internship and residency in internal medicine at the University of Pennsylvania Hospital in Philadelphia, and he completed his cardiology fellowship training at the National Heart Institute, part of the National Institutes of Health, in Bethesda, MD. While at NIH, he carried out research on lipids (cholesterol) and the advanced detection and treatment of coronary artery disease.

transi ti ons | career m anage m ent

The least important elements were participation in setting broader organizational goals and strategies (7.9 average score) and working for a leader in innovation and patient care (8.1), followed by alignment with the organization’s mission and goals (8.2). However, given how high these scores were, it underlines the fact that these elements are still important to physicians.

Physician respondents gave universally lower marks for how well they felt these elements were true of their current practices, with average scores ranging from 5.8 to 8.0 with a majority in the 6 range.

The gaps between what was important to feeling engaged and what was true of their current practices ranged from .9 to 2.6 points. The largest gaps were: • Feeling that my opinions and ideas are valued (2.6 point gap) • A voice in clinical operations and processes (2.4— tie) • A voice in how my time is structured and used (2.4—tie) • Fair compensation for my work (2.4—tie) • Good work/life balance (2.4—tie)

un i te d we stand | at wor k for you

Proposed Budget Eliminates Retroactive Medi-Cal Cuts CMA Staff

In early January, Governor Jerry Brown announced that the State of California would not be mov-

ing forward with retroactive collection of a 10% cut to the Medi-Cal program, a win for physicians and patients in California. The announcement came as part of the governor’s 2014-2015 fiscal year budget proposal.

“The governor’s budget demonstrates a clear understanding of the importance that California’s Medicaid (Medi-Cal) program has for the state’s poorest and most vulnerable patients,” says Richard Thorp, MD, president of the California Medical Association (CMA).

“After voicing a commitment to expand Medi-Cal eligibility and ensure that the rollout of the Affordable Care Act in California be a success, this is a huge step in the right direction.”

Unfortunately, the budget does not stop the 10% cuts moving forward. Although elimination of the retroactive cut is a huge step in the right direction, an additional 10% cut will only cement California in the position of having the lowest Medicaid rates in the nation. While this budget will provide some relief to physicians who may have otherwise been forced to stop taking new Medi-Cal patients altogether, it does not go far enough.

CMA is part of an unprecedented coalition of physicians, dentists, healthcare workers and hospitals that will continue working to stop the cuts. The coalition, called “We Care for California,” includes the largest statewide organizations representing physicians, dentists, hospitals and healthcare workers, as well as health plans, first responders, caregivers and other health providers. CMA and the We Care for California coalition will continue to push for full restoration of the cuts moving forward.

“As the rest of the nation looks to California for an example of health reform success, we simply cannot 2 4 PHYSICIAN MA G A Z INE | F EB RUA RY 2014

move forward with a 10% prospective cut to the MediCal program while simultaneously adding new patients to the program,” says Dr. Thorp. Under the Affordable Care Act, more than 3 million patients are expected to enter Medi-Cal over the course of the next two years.

“CMA and our stakeholder partners will look toward reforms that will result in real access to care so that health reform is more than an empty promise of an insurance card,” says Dr. Thorp.

In March of 2011, the California Legislature passed and Governor Jerry Brown signed AB 97, which included a 10% reimbursement rate cut for physicians, dentists, pharmacists and other Medi-Cal providers.

The cuts were enjoined for two years while the matter was being argued in a CMA-filed lawsuit.

Despite earlier favorable rulings, a three judge panel of the 9th Circuit Court of Appeals cleared the way for implementation of these rate reductions. CMA requested a rehearing from the full 9th Circuit Court of Appeals, which was denied. In September 2013, CMA filed a petition with the United States Supreme Court, asking them to review the appeals court ruling. The Court has not yet ruled on this petition.

Even before the cuts, California’s Medi-Cal provider payment rates were the lowest in the nation. Low reimbursement rates have forced many of California’s providers to stop seeing Medi-Cal patients. As a result, 56% of Medi-Cal patients report difficulty finding a doctor. If these cuts are not stopped, Medi-Cal will become nothing more than a broken promise of access to care.

On January 1, 2014, Covered California began providing health coverage to more 500,000 patients statewide. With that figure expected to grow by the end of the 2014 open enrollment period, it is critical that physicians and their staff have a clear understanding of their exchange plan participation status so they can communicate this information to patients before scheduling. It’s equally as important that practices understand the reimbursement rates and other terms associated with the plans with which they are contracted.

Even if you did not intentionally contract with any exchange plans, the California Medical Association (CMA) urges physicians to check their participation status. It is very possible that physicians may have been unknowingly opted into an exchange plan network due to the way that major insurance plans have structured their provider agreements.

If you’ve attempted to look up your exchange plan participation status on the Covered California website, you know that it’s not a straightforward process.

Because it is critical that physicians know what plans they are contracted with, CMA has created a quick and easy tool to look up your exchange plan participation status in just a few clicks.

The tool, available to members only, requires simply your first and last name and middle initial and it will tell you which plans list you as a contracting physician (as of September 2013, the most recent data released by Covered California). To access the tool, visit http://www.cmanet.org/exchange-lookup.

Please note: You will be required to log in with a member account. If you have not already activated your web account, visit http://www.cmanet.org/activate. If you need assistance activating your account, contact CMA’s member service center at (800) 7864262 or memberservice@cmanet.org.

For more information on Covered California, visit CMA’s exchange resource center at www.cmanet.org/ exchange. Physician members and their staff also have free access to CMA’s practice management experts at (888) 401-5911 or economicservices@cmanet.org.

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at work for you | un i te d we stand

CMA Develops Simple Tool to Identify Physician Participation Status in Exchange Plans

associ at i on ha ppen i ngs | lacm a news

ceo’s letter

Not entir ely une xpec ted, the implementation of the Affordable Care Act and Covered California is causing a lot of confusion.

We realize that our physicians need to be cognizant of current and new developments, because they are the trusted advisors to their patients.

A lot of the confusion seems to be centered around two separate programs—Covered California and California’s Duals Demonstration project, or Cal MediConnect.

Covered California, the state-run exchange for newly insured, had enrolled nearly 500,000 people in its private health plans through the end of December 2013, according to federal data released in January.

The Covered California exchange is designed for newly insured. Enrollment started on Oct. 1, 2013, but under the federal healthcare law continues through March 31.

Cal MediConnect is designed for dual eligible patients, Medicare and Medi-Cal beneficiaries, and as it stands right now, will be implemented no sooner than April 2014 in eight counties, including Los Angeles.

LACMA has long said that the proposed project would threaten the medical care of 200,000 mostly elderly low-income and disabled patients in LA County who, with or without their knowledge or consent, may be reassigned from their current doctor to healthcare plans managed by L. A. Care or HealthNet. Patients need to be informed that they can indeed opt out of the Cal MediConnect program. DCHS has indicated the opt-out forms will be available April 1, 2014.

On another threat to patient care, this month LACMA and medical executives of the Southern California Medical Association will meet to discuss their efforts to thwart a major threat to all practicing physicians in LA County and elsewhere in California: The fight against efforts by various groups to overturn California’s Medical Injury Compensation Reform Act (MICRA).

Many younger physicians especially may not be aware that efforts to overturn this key statute would cause malpractice rates to skyrocket and create the same conditions that threatened to throw California’s healthcare system into crisis during the early 1970s.

MICRA has stabilized liability costs. Efforts by several groups to overturn MICRA come at a time when the healthcare system and reimbursements for Medicare, Medi-Cal are being cut. If MICRA were changed, it would exacerbate the situation.

We really need physicians in LA County to be prepared for what will be a very, very expensive and nasty fight. The initiative’s provision would increase the cap on speculative, non-economic damages from the current $250,000 to more than $1.25 million, with automatic increases every year.

The other provisions in the initiative relate to physician drug testing and prescription drugs, which are entirely misleading and a disguise of their true intent, namely to increase the cost of malpractice insurance and chase great physicians out of their profession.

During this historic implementation of health reform, it is more important than ever that physicians become members of LACMA so we can speak with one united voice. We are now working with large physician groups and intend to bring even more physician groups into our organization.

We are stronger as one.

Now is the time for physicians to unite and help sort out the confusion.

If you’ve never been a LACMA member, consider that the cost of your first-year membership is merely $555, which is less than your daily Starbucks Latte.

Rocky Delgadillo Chief Executive Officer

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Budget Instructs CMS to Reform RAC Audits That Have Been Troubling Physicians Within the federal appropriations bill recently passed by Congress, soon to be signed by President Obama, is little known language that instructs the Centers for Medicare & Medicaid Services (CMS) to improve the Medicare Recovery Audit Contractor (RAC) program.

The 1,582-page federal spending plan for the 2014-2015 fiscal year contains a paragraph that states the CMS RACs have financial incentives causing them to be too aggressive in their retrospective audits of physicians. “Information received from the Office of Medicare Hearings and Appeals (OMHA) indicates that about 50% of the estimated 43,000 appeals were fully or partially overturned (yearly). The fiscal year 2015 budget request should include a plan with a time line, goals, and measurable objectives to improve the RAC process,” the budget plan states.

Language in the budget also says that CMS is expected to work with Congress and stakeholders to identify challenges and additional reforms to the RAC program. “CMS should establish a systematic feedback process with the OMHA, CMS programs and the RACs to prevent the appearance that RACs are selecting determinations to increase their fees. The CMS is urged to stay focused on improvements to all operations that prevent improper payments in lieu of chasing dollars after the fact.”

In 2012 members of the California Medical Association’s (CMA) House of Delegates spoke out strongly against aggressive downcoding efforts by RACs and adopted policy that officially put the association on record as opposing the practice.

Resolution 222-12 stemmed from an ongoing problem with an out-of-state auditing firm, Connolly Healthcare, selectively downcoding claims on behalf of Medicare, forcing physicians to undertake costly and time-consuming appeals.

The audits and subsequent downcodes, which several speakers equated to financial “bounty hunting” on behalf of the CMS, were almost always reversed upon physician appeal, which suggested that they were of little merit to begin with, speakers said.

“I can’t tell you how outraged we doctors should be that this is going on,” James Hinsdale, MD, a past CMA president, said during the resolution’s floor debate.

Successful passage of the resolution brought CMA in line with the American Medical Association’s (AMA) position on the matter. Both CMA and AMA have been lobbying long and hard to bring about change to this punitive process.

Contact: Elizabeth McNeil, (800) 786-4262 or emcneil@cmanet.org.

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Save the date:

Legislative Leadership Conference Mark your 2014 calendars now for the 40th annual California Medical Association (CMA) Legislative Leadership Conference. The conference will take place at the Sheraton Grand Hotel in Sacramento, just three blocks from the State Capitol and across the street from CMA headquarters.

This is a unique event for California physicians and is free of charge to all CMA members. Plan to join more than 400 physicians, medical students and CMA Alliance members who will be coming to Sacramento to lobby their legislative leaders as champions for medicine and their patients.

Prior to the conference members will receive webinar training on legislation and policy affecting the practice of medicine.

Set April 22 aside to become an advocate for your patients and colleagues!

To register online, please visit www.cmanet.org.

TEL: (888) 762‐0220 NMLS: 339255 CA. DRE: 01864758 As heard on KFI

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LACMA NEWS | A S S OCIAT I ON H A PP ENI NG S

WE TREAT DOCTORS RIGHT!

LACMA NEWS | A S S OCIAT I ON H A PP ENI NG S

L o s An g e l e s C o u n t y M e d i c a l As s o c i a t i o n

Renew your dues today!

By renewing your dues, you will continue to receive:

Legislative Advocacy—Continuous fight to protect the medical profession from current challenges such as MICRA, Dual Eligibles, and the Health Benefits Exchange Access to documentation to help you be ready for changes in the healthcare landscape Free Reimbursement Assistance—Get your share of the over $7 million recovered since 2010 unpaid claims.

Free Jury Duty Assistance—Your time is valuable! Maximize your flexibility and reduce your changes of reporting when scheduling jury duty service.

Up to 30-40% savings through LACMA’s Group Purchasing Organization and Waste Management Company Free and low cost access to events including CME events, Mixers, Training Workshops, and Webinars for you and your staff

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Mail your invoice and payment to: 707 Wilshire Blvd, Suite 3800; Los Angeles, CA 90017 For a copy of your renewal invoice please email Margaret Vieira, margaret@lacmanet.org

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by t he nu m bers | R EFOR M & YOUR TA XES

By The Numbers Medicare Tax

3.8% High-income taxpayers will be subject to a new Medicare tax on investment income such as capital gains, dividends, interests and rental income.

For the tax year 2013, the new top rate is 39.6% for individuals earning more than $400,000, or $450,000 for married taxpayers filing jointly. The other marginal tax rates are 10%, 15%, 25%, 28%, 33% and 35%, the same as in recent years.

2.35% Physicians earning more than $200,000 a year ($250,000 for joint filers) must pay higher Medicare hospital insurance (HI) taxes. The new tax is 2.35%, which marks a 0.9% rise of applicable wages above those thresholds.

The new HI tax for high-wage earners will raise roughly $87 billion over 10 years, and the Medicare tax on net investment income is expected to raise an additional $123 billion over 10 years, according to the Congressional Research Service Report for Congress. Both taxes aim to help pay for health insurance subsidies.

3 2 PHYSICIAN MA G A Z INE | F EB RUA RY 2014

Medicare Hospital Insurance Tax

56.7% Investment Income

If a physician is in the top tax bracket ($1 million) and earns an additional dollar in investments, that additional dollar will be taxed at 56.7% as of 2013.

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