Today's Practice Southwest Edition: Q1 2015

THE PHYSICIAN’S FINANCIAL HEALTH SERIES: USING PRIVATE POOLED INCOME FUNDS FOR RETIREMENT FINANCIAL ADVISORY SERIES

SOUTHWEST EDITION

The anatomy of a beast.

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SOUTHWEST EDITION

DESIGN AND LAYOUT PROVIDED BY Division IV: A Creative Resource www.DivisionIV.com

PUBLISHER Charles Tramont ctramont@todayspractice.com

a creative resource

CONTENT CONTRIBUTION AND CONTRIBUTOR ENDORSEMENTS PROVIDED BY

EDITORIAL ASSISTANT Nancy Smoot nsmoot@todayspractice.com

MARKETING EDITOR Nathan Purcell npurcell@todayspractice.com

PRACTICE MANAGEMENT EDITOR Candy Caverley ccaverley@todayspractice.com

LEGAL EDITOR Neil Thomson Esq. nthomson@todayspractice.com

TECHNOLOGY EDITOR Bob Smith bsmith@todayspractice.com

FINANCE EDITOR Chris Hynes, JD, CFP chynes@todayspractice.com

Meridian Medical Practice Solutions www.MeridianMPS.com

EDITORIAL DISCLAIMER Today’s Practice considers its sources reliable and verifies as much data as possible. However, reporting inaccuracies can occur, consequently readers using this information do so at their own risk.

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Today‘s Practice is sold with the understanding that the publisher is not rendering legal or financial advice. Although persons and companies mentioned herein are believed to be reputable, Today’s Practice, affiliated associations, any of its employees, sales executives, editors or contributors accept any responsibility whatsoever for such persons’ and companies’ activities.

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PRACTICE MANAGEMENT 11 GUIDELINES TO BUILDING A PROSPEROUS TEAM

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WHAT WAS SHE SAYING?

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5 QUESTIONS TO ASSESS WHETHER YOUR PRACTICE IS A GOOD FIT FOR AN ACQUISITION

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Identifying and correcting the patient communication gap starts with a few basic steps...

MARKETING GET INFORMED: CALL TRACKING

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How call tracking can help your practice generate more return patients.

SOCIAL MEDIA

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Why it should matter to you and your practice.

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LEGAL FROM APPLICATION TO AUDIT

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BUILD A STRONGER FOUNDATION

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EXEMPT ORGANIZATIONS & THE IRS’S NEW PARADIGM

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FINANCE

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SPECIAL FEATURE: THE PHYSICIAN’S FINANCIAL HEALTH SERIES

25 WHAT MAKES A GREAT TAX ADVISOR? POOLED INCOME FUND 33 PRIVATE Understanding and using Private Pooled Income Funds for retirement.

YOU SELL YOUR PRACTICE...

39 BEFORE What the independent practitioner needs to know in this environment.

45 TICK TOCK AND THE TAX TRAP 51 CASHFLOW INVESTING DONE RIGHT

TECHNOLOGY 57 5 ESSENTIAL CONSIDERATIONS IN CHOOSING A SECURE TEXT MESSAGING SERVICE

71 IS YOUR PRACTICE READY FOR EMV?

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guidelines to building a prosperous team

by Chris Atley

I use the word prosperous, because building a team is of the utmost importance in creating a successful practice.

It can really make or break your success. If your team is unmotivated, it will effect how they interact with your patients, their decision-making, and their efficiency level. If they are motivated and connected to their job, they will make great decisions and will be a joy to be around. This in turn will affect staff productivity levels and the experience your clients will have, which directly relate to repeat business and your bottom line.

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11 Guidelines (continued) I would like to share eleven guidelines with you on how to hire a great team, as well as how to keep them energized and motivated.

1. Be clear on your criteria.

What is important to you in an employee? Look at skill set as well as other criteria, such as people skills and trainability. For example, are they open-minded and keen to learn? A person who doesn’t have a lot of experience, but whom is motivated to be there will be a lot more valuable than a person who has a lot of experience, but lacks enthusiasm for the job. Therefore, the former being very trainable and the latter a red flag.

2. Help them get motivated to their bigger WHY. It’s important that everyone on the team be aware and passionate about the bigger vision of the practice. Share it with them during their interview and make sure you ask why they want to work for you as well. Is it a means to an end or are they actually excited about the position? Pay attention to those gut feelings, especially when someone may “look” great on paper but seems to be “off ” in-person. Your gut instincts are never wrong.

You can probably look back at a time(s) when you didn’t follow your gut and it ended up backfiring.

3. Know that people are going to make mistakes and that this is okay, especially when they first start working with you. There is a bit of a learning curve and expecting perfection is unreasonable at the beginning and along the way. A great rule of thumb is that you allow for mistakes, but they must figure out what went wrong right away so that it doesn’t happen again. If it continues more then three times, then it’s time to let them go.

4. This is number three’s cousin.

You did not hire your employees to become your friends. Of course being kind and respectful are of the utmost importance, but so is being the boss you need to be. You are the CEO (yes you are a CEO), of your prac-

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Chris Atley tice and it’s important to communicate this so that the boundary lines are clear. I see this all too often with business owners – they are trying to fulfill some type of dysfunctional need deep down and don’t end up being the leader they need to be because they’re afraid to hurt someone’s feelings. You are running a business first and foremost and can have friends outside of work.

5. Communicate all of the expectations upfront in terms of what the role includes along with timelines, etc. This will help to ensure everyone is on the same page from the beginning and will prevent friction in the future.

6. Pay them what the position is worth. Don’t try to short change or find the best deal when it comes to paying your employees. Now this doesn’t mean you need to overpay what the position is worth, but be fair.

From an employee’s point of view this shows they are respected and a valued member of the team. This all goes hand-in-hand with doing a great job and enjoying coming into work.

7. Feedback Sandwich.

I learned this in Toastmasters years ago, and it has helped me immensely with building my own team. If you want to provide constructive criticism on an issue, start of with praising something they are doing a well first, followed by what needs improving, and ending with more positive praise. People are much more open to accepting feedback if they feel valued and appreciated first.

8. Help them be the best version of themselves People operate at their best when they feel confident and valued. As above, give them praise. It doesn’t only have to be in the context of feedback. Remember to point out what they are doing well and how much you appreciate them. Give them an extra special token of your appreciation like a gift card, a plant or even a bonus. Do something simple like using their name when

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11 Guidelines (continued)

Chris Atley

speaking to them. This is small, but makes people feel special and has a big impact. Say thank-you for their work on a daily basis. Treat them as you would like to be treated yourself.

You did not hire your employees to become your friends. Of course being kind and respectful are of the utmost importance, but so is being the boss you need to be.

9. Manage your expectations.

As a recovering Type A myself, this can be tough.

Expectations are high and it’s a close cousin to perfectionism. Your expectations may not always be reasonable. Check in on this often. Are you trying to be perfect, and therefore asking your staff to do unreasonable things? Know that perfection either comes from not wanting to disappoint someone, or with wanting someone’s approval. It’s likely a parent, and it doesn’t matter how old you are or whether they are alive or not.

Go with whomever comes to mind first. There is likely more work to be done around this, but having the awareness is the first step in changing it. Notice where this is popping-up with your clients and practice as a whole.

10. Keep your own inner critic in check.

This is similar to number nine, but differs slightly. The harder you are on yourself, the harder you are on your employees (and family too). It leads back to the perfection issue again, but shows up a little differently in this example. If you find you start to “nitpick” at your staff, take a look at your own inner dialogue. Are you operating from a place of positive, loving self-talk? Or are you operating from a critical inner voice where nothing you do is ever good enough? If the latter is happening, you may need to do some deeper work to shift this, but again having the awareness is a big start. You are likely looking at your employees with the same critical eye, where nothing they do ever measures up.

January 2015

11. Above all else, Be Who You Need to Be. Remember you’re only as good as your worst employee, and only as good as your best employee. You set the tone for the entire practice. The more secure and confident you are, the more this will affect everyone you come into contact with. From your employees, to your patients, to even your friends and family. Do what you need to do in order to stay positive first. If you’re worrying about money, get some help on re-writing your money story. If you don’t have enough time off, make the time. You will be in a better place to serve and lead.

Enjoy the team you build and watch your practice thrive and soar! Oh, and have a little fun too!

about the author:

Chris Atley CEO and Founder Chris Atley, LLC

Chris Atley has been named “Coach of the Year 2014 , and is the proven industry expert at connecting frustrated entrepreneurs with their inner strength and freedom. She helps them crush barriers so they can transform struggle into success. As a result they start to flourish personally, excel professionally, and gain new vitality and spirit.

Chris has been called upon to share her unique transformation skills with television, radio, and print audiences across the country. Her skill, wisdom, and charisma draw rave reviews at lectures, conferences, workshops, and universities in the United States and Canada.

At the heart of Chris’ success, is her “Decisions by Design” approach.

It’s regarded by many as “the next great leap in personal and professional development.” Through her proven system, Chris empowers her clients to topple their personal barriers so they are free to engage their life with clarity and confidence, and excel as an entrepreneur and a human being.

Not only is Chris at the cutting edge of entrepreneurial excellence, she also holds a Bachelors Degree in Psychology, is certified in the Belief Breakthrough Method, and is a Certified Coach and Neuro-Linguistic Programming (NLP) Practitioner. She is an expert in Spiritual Law, and lives and breathes this into her business and personal life.

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What was she saying?

How often has this happened to you? Be honest. ..

by cynthia ackrill, md

You are right in the middle of a conversation…and suddenly you realize you have followed your own thoughts down some pathway so far that you have no earthly idea what the other person just said. Maybe you are still forming a rebuttal to a statement 4 sentences ago, or maybe you are thinking 5 steps ahead about your idea. Or perhaps you are processing some emotion that bubbled up from your subconscious when she mentioned a sticky quality review issue, or you realized that you don’t even know about this issue. Or you really just sidetracked wondering if you remembered to take your extra key fob out the pants you dropped off at the cleaners.

Whatever the case… now you have to scramble and choose whether to admit you were not listening, or use one of the well-rehearsed filler statements to buy some time to catch on and look like you knew what was going on all along.

January 2015

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What Was She Saying? (continued) Despite our best intentions—to be present, attentive, focused, open, curious, collaborative listeners—in the reality of our busy, stressful, competitive, failure-phobic world, so often we miss the mark. And the result is extremely costly! Poor listening skills waste time, efficiency, opportunities, brilliance, profits, and the feeling of connection missed by so many. Communication failures risk quality of care and patient satisfaction.

Truth be told, it greatly erodes our own satisfaction.

When we are so busy-brained, we miss chances to shift perspectives, learn from the wisdom of others, get creative, see new solutions, or feel deeply connected.

Is this unique to healthcare? Of course not, but there are some aspects of the healthcare culture that reinforce a less receptive, risk-avoidant mental stance. Reared in a system where the acquisition of knowledge is revered and rewarded, “knowing” can become the goal at the expense of cognitive flexibility, openness, and emotional intelligence. True, the risk of “not knowing” in medicine can be critical to patient outcome, but somehow this competitive culture supports a state described in some disciplines as “already-always-knowing.”

I can remember to this day being on rounds down the hall from my general surgeon ex-husband as he was reprimanded for not speaking with force… whether he knew the right answer or not! Heaven forbid, we show vulnerability or admit we might not know something!

Sure, we are taught to listen to the patient, observe body language, and be attuned to soft clues, but even then, the point is to be “in the know.” In our heads we are spinning through differential diagnosis internal dialogues, trying to fit what the patient says into our puzzle. (And reportedly, we are so busy weaving our own thoughts that we interrupt within 7 seconds!) This is not the style of listening needed for effective influence, engagement, leadership, or the deeply satisfying connection to people and purpose so many crave.

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Cynthia Ackrill, MD Yet it is a style we have trained so well, it becomes our fallback under any type of stress. 360 evaluations of physicians in leadership development programs often reveal a need to learn to listen more openly, with less judgment and more vulnerability. This is what builds the trust and engagement needed to heal healthcare.

Listening with more curiosity than attachment allows the brain to find more possibilities, make new connections, and find collaborative solutions that value and engage others. This is the substance of leadership presence and influence.

But how do you do that? You are sleep-deprived, need quick solutions, and your iPhone is reminding you that you are late to clinic. Everybody wants a part of you, and your head spins with your never-ending to-do list.

You have to actually disrupt your busy internal dialogue to mindfully shift to more “active listening” in the moment. Whenever possible, take a breath before a conversation and decide HOW you want to listen. You can create and practice a habit of disruption. This is mindfulness in action! There is amazing power in choosing how to be present and think, instead of staying in reactive mode.

I have had some coaches train themselves to take a breath as they go through each door and choose their present focus. Others put a tiny dot on their computers, phones, steering wheels, and doorways reminding them to breath and choose. There are lots of techniques. Just play with one and practice with curiosity and self-compassion—it’s a learning process. Breathe.

Does this matter? YES!! As healthcare shifts and physicians want to take a more active role in leadership, the art of listening is critical to building influence. Vulnerability is a key leadership attribute. (See Quiet Leadership or the HBR blog, “What Bosses Gain By Being Vulnerable.”)

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What Was She Saying? (continued) Repeat a “mantra” like “present and curious” or whatever inspires your intention Picture your mind actually opening up to receive Picture your attention or energy settling down in your core (heart or gut) instead of in your spinning head.

(Feel your feet on the ground?)

Check your assumptions, expectations, competition, and judgment at the door ;-)!

Don’t assume you are getting all the other person is trying to communicate or that they are receiving your intended thoughts

Cynthia Ackrill, MD But I believe it matters even more immediately, to each and every one of us. Humans thrive through connection. Constantly navigating the changing seas of healthcare, too many physicians feel disconnected from their values and their whys, from their loved ones, each other, and the greater community. Active listening is a way back. When we listen more actively, we connect more deeply, think more broadly, and feel more engaged in our own lives. Get curious and play with it? about the author:

Cynthia Ackrill, MD Human Performance Consultant President of WellSpark

Rephrase/reflect what you just heard—“I hear you saying that ….”

Ask for clarification of what they said and what they heard

Dr. Ackrill is a Human Performance Consultant, Coach, and Speaker President of WellSpark.

Ask questions that acknowledge what you just heard Whenever you can choose a question over a statement Pause more & Interrupt less Avoid words that raise defenses Accept that communication is often difficult and requires not only delivering information, but making sure it landed, and that you actively received as well.

If you need time for a more intelligent or thoughtful response, ask for it. “Let me think about that for a bit and I’ll get back to you by the end of day.” (Then do!)

Don't assume that you know what the other person is talking about Curiously enjoy the opportunity to connect in some way and advance learning

January 2015

Dr. Ackrill works with professional leaders and teams to expand performance capacities and resilience. With the latest science and research, she provides innovative ways to optimize energy, creativity, focus, and access to brilliance for enhanced, sustainable performance. Her work includes the systematic management of stress, addressing specific lifestyle/health risk challenges, facilitating behavior change, and creating collaborative cultures to support excellence. She coaches individual leaders, their teams, consults on wellness programming, organizational effectiveness, and cultural shifts, and speaks at off-sites and conferences.

Cynthia L. Ackrill, MD brings a unique and thorough background to the subject of health as a business strategy and the power of mission and values based leadership. She combines her knowledge as a primary care physician with her extensive experience in neuro-psycho-physiologic approaches to behavior, performance, and health, and her training in coaching. She is a graduate of Duke University and the University of Maryland School of Medicine, a Fellow of the American Institute of Stress, a charter member of HeartMath, and a former board member of the International Society of Neurofeedback and Research. A certified Wellcoach® and Well People coach, and certified Professional/Executive coach, Dr. Ackrill has also completed training in positive psychology, intrinsic motivation, and peak performance coaching. She enjoys the “diagnosis” of systemic issues and facilitating groups toward mutuality of purpose and is a certified Team Advantage leader.

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questions to assess whether your practice is a good fit for an acquisition

by Margaret McGuckin

Are you thinking about selling your practice or joining a system? As a former Chief Operating Officer for a large, nationwide practice management company, I experienced physicians that loved working in our management system and those who didn’t.

What made the difference? The questions they asked while in the discovery phase of the M&A process helped them determine if there was strong alignment with expectations of the acquiring company.

January 2015

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5 Questions (continued)

Margaret McGuckin

Here are 5 questions that will uncover whether or not you’ll be happy practicing in a new way.

Ask them early!

How will my success be measured?

• Too many doctors are surprised that they don’t really know how their success will be measured…and it goes beyond RVU. • Ask to see all the reports and/or scorecards used to evaluate your success.

• How is productivity or RVU computed? Ask to see all the data and elements that go into the productivity equation. Ask them to talk you through them. A specific data element may mean something different to them than it means to you.

• What else goes into the equation? Cost management?

Research targets? Revenue or payment targets, including payer mix targets?

• Are there a minimum number of patients that you will need to see daily? What tools or people do they have to help you get to that level?

• How will the performance of your team be measured?

What happens to your practice manager? Typically the practice manager you’ve been working with—possibly for many years—will not be a long-term employee with the acquiring company. Very few practice managers are able to make the transition successfully.

• Who does the performance management for the administrative staff? For the clinical staff? If you want to have choice in who is working for you, you need to understand what role and responsibility you’ll have in interviewing, hiring and exiting members of the team.

If you aren’t getting what you need to make a sound decision, look at other alternatives or it’s highly likely that you’ll be asking questions within 24 months about how to exit.

• Can they identify (to your satisfaction) what the attrib-

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5 Questions (continued)

Margaret McGuckin

utes are of a doctor who will be successful in their system? Do you have those attributes?

• Is there a maximum number of minutes allowed for types of appointments? For example, if you schedule 40 minutes for a physical and the new maximum amount of time is 30 minutes, it’ll be difficult to provide the type of patient experience that you’re providing now. How important is that to you?

What support How will they will be provided to me and to my team? communicate with me?

• Who do I talk to? How often? On what topics? Does one person talk with me about financials and another about budgeting?

• What’s the agenda for Orientation?

What support will be provided to me and to my team?

• Get really specific on this! What is their approach to identifying and sharing best practices? Do they have a team who identifies and shares best practices across the group?

• How does this group think about the intersection of cost and revenue, as it relates to labor, types of materials, advertising and marketing, office expenses, travel and training, professional services…even down to bonus payouts for the team.

• Who is my “Go-To” person? Does it vary by function?

For example, will you have to call a different person for a billing question? A coding question? An HR question?

Or is one designated person able to get these issues resolved throughout the system. The answer to this question impacts your and your team’s productivity.

• Do you like and trust the C-level executives? The culture flows out from them. Would you want to have dinner once a month with them? If not, you will dread every performance review, every retreat, every visit and every conference call.

• Ask to meet with your key operating contact now, not later. Ask them to be realistic with you. Ask for a process map. If you don’t genuinely feel like they are there to support you, think twice. This can be indicative of a culture in which you won’t feel valued.

January 2015

• How strong is the Onboarding process? What do physicians who’ve recently been brought into the system say about the process? Most physicians have found that they need more than IT training. They need to understand what is different from independent practice. A mentor is a huge asset. A small, but insightful, example of the parameters of operating in this system could be learning how the holiday party is handled. Are there budget constraints? Who pays? Can the company buy alcohol?

Ask a couple of detailed question to get a sense of how they think about investment and patient growth.

• What if I need a new hand piece or another new piece of equipment?

• Do they understand what a physician needs in order to be productive and balance this against the cost ramifications?

• Be ready to offer how many more procedures per day can be done with the new hand piece or piece of equipment.

• What is expected of me to acquire patients or expand the referral base?

• Ask doctors who have joined this group about how new patients come into the practice. Who does the marketing and sales work? Who bears the expense?

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5 Questions (continued) • Are there targets for this? For example, is the goal to have 10% new patients and 90% existing ones? Compare their target to your practice’s patient retention rate.

How will they communicate with me?

• If a superior patient experience is important to you, take a look at how you measure it today and look for similar things in the new group. Bring your patient satisfaction scores to the table. Are the measures similar? Do they know what the drivers of satisfaction and dissatisfaction are? Do you agree with them?

Margaret McGuckin

How strong is the Onboarding process?

What do physicians who’ve recently been brought into the system say about the process? Most physicians have found that they need more than IT training. They need to understand what is different from independent practice.

• Verbatims are more important than you think. They give you insight into the types of patients they treat. So, ask to read their patient satisfaction survey verbatims.

about the author:

• Ask to spend time in a practice that the group owns that is similar to yours. As you spend time observing, check to see if you are seeing the same types of experiences playing out as you would see in your own practice.

For example, ask the front desk or practice manager what happens when a patient complains. Ask to hear specific language they use in talking to a dissatisfied patient. Is that how you would approach the situation? If not, this is something you need to talk about.

• Do patients seem happy? Ask them what their experience has been. Does it mirror what you would hear in your practice?

When you ask yourself these questions, you’ll more fully understand the trade-offs you’ll be making in being acquired. How highly do you value flexibility and independence? How transparent are they?

If you aren’t getting what you need to make a sound decision, look at other alternatives or it’s highly likely that you’ll be asking questions within 24 months about how to exit.

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Margaret McGuckin Principal m. mcguckin group

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As an operating executive, she needed a toolkit to meet aggressive growth targets, and is now working with companies with similar challenges. She leverages a career of learnings with Rapid Results, a time-tested, unique toolkit and facilitation approach to achieve implementation breakthroughs.

As Chief Operating Officer at ClearChoice Dental Implant Centers, she pioneered and rapidly scaled a new direct-to-consumer delivery and practice management model that became the national leader in dental implants with 31 locations across the country.

TODAY ’ S P R A C T I C E: C H A N G I N G T H E B U S I NES S OF M EDI C I NE

Ja nua r y 2015

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what makes a great

tax advisor? before you sell your practice...

Tom Wheelwright, CPA Founder and CEO ProVision CPA’s

Chris Jarvis, MBA, CFP®

President Jade Risk Co-founder Dakatori Financial Fellowship

James M. Lauzon, CLU President/CEO AFRM, LLC

private pooled income fund

Christopher Hynes, JD, CFP® Attorney and Certified Financial Planner Advisor to the Advisors Worcester, Massachusetts

Gerald R. Nowotny, JD, CFP® Attorney Osborne & Osborne, P.A.

tick tock...

Christopher Hynes, JD, CFP®

cashflow

Ivan Oberon

and the tax trap.

investing done right

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TODAY ’ S P R A C T I C E: C H A N G I N G T H E B U S I NES S OF M EDI C I NE

Attorney and Certified Financial Planner Advisor to the Advisors Worcester, Massachusetts

Co-founder Coast 2 Coast Investment Solutions Bloomberg Radio

Ja nua r y 2015

SPECIAL FEATURE: THE PHYSICIAN’S FINANCIAL HEALTH SERIES

January 2015

TODAY’S PRA C T I C E: C HA NGI NG T HE BUS I NES S OF M EDI C INE

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FI NA NCE

“The most important trait for your tax advisor is that he or she cares more about you than he or she does about himself or herself.”

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TODAY ’ S P R A C T I C E : C H A N G I N G T H E B U S I NES S OF M EDI C I NE

Ja nua r y 2015

special feature: the physician’s financial health series

what makes a great

Tax Advisor? tom wheelwright, cpa, founder and ceo of provision cpa’s

“Day in and day out, your tax accountant can make or lose you more money than any single person in your life, with the possible exception of your kids.”

– Harvey Mackay

January 2015

TODAY’S PRA C T I C E: C HA NGI NG T HE BUS I NES S OF M EDI C INE

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What Makes a Great Tax Advisor? (continued) My sweetheart, Louanne, and I recently purchased a new home. It’s a beautiful Spanish style home with a terrific courtyard in the front and another in the back. It has marble and wood floors and old-fashioned Italian tile on the roof. And it’s on almost a full acre of land in a great neighborhood. Nothing bad about this house. The process of buying, financing and improving the house, though, was one of the biggest challenges we have had to endure in all the time we have been together.

The challenges were not with the sellers, the buyers of our old house, or even the mortgage company. The challenges were all with our advisors; from our real estate agent to our mortgage broker to our painting contractor. These are all people to whom we paid a lot of money and who we expected would take care of our needs in selling the old house and purchasing and renovating the new one. Only one of our advisors was stellar; our interior decorator.

The first hint of trouble came when we made the offer to the seller of the new house. When we walked through the house the first time it was clear that there was a lot of deferred maintenance. So in our offer, we suggested that the seller should compensate us for this and asked for a credit against our closing costs of $9,000. The seller came back and offered $5,000. Our real estate agent said we should take it. At the time I thought, “Well, ok, I guess, the difference of $4,000 is not really enough to keep us from buying the house.” So we agreed to the lower credit.

The next hint of trouble came from the mortgage broker. We almost lost the house because I had done a short sale on a piece of property 46 months before that was still showing on my credit report. The lender would not close the deal until the short sale was 48 months old. Fortunately, the seller agreed to postpone the closing. The mortgage broker had known about the short sale for several months and had never mentioned

27

Tom Wheelwright, CPA

that it needed to be 48 months old before we could purchase a new property.

Then there was the sale of the old house. This was a house in a cute little subdivision in an older neighborhood.

The houses outside of the subdivision were worn and had not been taken care of. But the location was great and the houses on our street were all in terrific condition. When we went to price the house, we consulted with our agent (the same agent as the one we used to purchase the new house) and he suggested a price that, based on comparable sales in the neighborhood (not our street), seemed fair. The house sold rapidly. We of course wondered why it sold so quickly.

It turns out that we had underpriced the house for the subdivision by 10 - 20%. So the buyers were getting a great deal. What we didn’t understand when we set the price was that houses on our street were valued 10-20% higher than the rest of the neighborhood. When we look back on this, it makes total sense. All someone has to do is drive around the block a few times and it’s obvious that the houses on our street form a little pocket of heaven.

While we were still under contract, and before we closed on the sale, we even had a neighbor who was selling their house complain that we had sold too low and it was affecting the appraisal of their house. In the end they sold their house, which was only slightly bigger than ours, for more than $50,000 above the price we got.

TODAY’S PRACTICE: CHANGING THE BUSINESS OF MEDICINE

January 2015

What Makes a Great Tax Advisor? (continued) It was more of the same with the painters, the handyman and the landscapers. They did not perform as we expected. Only one of our home advisors performed to our expectations; our interior decorator. Our interior decorator is a charming man who goes by JR (like JR Ewing). JR is smart, reliable and knows his business. We had thought these attributes also applied to our real estate agent, mortgage broker and contractors.

So what was the difference between the decorator and all of these other advisors?

And what in the world does this have to do with finding the right tax advisor? My sweetheart and I have been asking ourselves these questions for the past several months (she is also a tax advisor and runs her own accounting firm. Yes, we are technically competitors and yes, we talk about taxes with each other all the time. Very exciting!).

The answer is simple. First, JR understands that his role is that of a trusted advisor. He knows that what he recommends will have an impact on our life every day from the time we rise in the morning for breakfast to the time we have dinner and retire for the evening. We will see the results of his work every time we enter the house.

Tom Wheelwright, CPA

were never on the same page. Our real estate agent clearly believed that his only role was to negotiate the deal. He did not see his role as one of giving advice and counseling us on price or terms. Our mortgage broker didn’t ask good questions and came back to us many times asking for more information, information that he could and should have asked for up front, given his many years in the mortgage industry. (We even got an email from him on the day we were supposed to close asking for 15 more pieces of financial information, delaying the closing another week.)

Our painters never asked us whether we preferred to have them paint one room at a time (as we expected) or all of the rooms a little at a time. Instead, we had painters throughout the house for more than three weeks.

Imagine the disruption having contractors traipsing through the house for weeks on end. Thank goodness we decided to wait until later to paint the master bedroom!

“When you interview an advisor, whether it be an attorney, financial planner or tax advisor, do they ask you good questions?

Second, JR begins each assignment by setting the expectations. What are we trying to accomplish? How much money do we want to spend? What level of quality do we want in our fixtures, paint and flooring? He spent hours with us up front determining what we wanted to accomplish in this new house. JR proceeded to then exceed our expectations.

Think about this in terms of your patients. You spend considerable time diagnosing their ailments through long lists of questions on forms and in person and much testing. You would never even think about doing a procedure that wasn’t completely explained to and understood by the patient, complete with side effects and long-term care. Nor would you expect them to have to ask you questions in order to get a complete diagnosis.

The other advisors never set expectations, so we were left with what we thought they should be doing and we

Yet that is how most advisors act. When you interview an advisor, whether it be an attorney, financial planner

January 2015

TODAY’S PRACTICE: CHANGING THE BUSINESS OF MEDICINE

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What Makes a Great Tax Advisor? (continued) or tax advisor, do they ask you good questions? Do they diagnose your financial ailments and spend time asking about your family history the way you would if they were your patient? Are they passionate about improving your financial well being like you would be about improving their physical well being?

I’m pretty passionate about reducing taxes. And passion is the most important element in reducing your taxes. Both you and your tax advisor should be so passionate about reducing taxes that it is on your mind every time you spend money (potential deduction) and every time you make money (potential for changing the rate of tax on your income).

But being passionate about reducing your taxes is only one of the traits to look for in a good tax advisor.

Another is how the advisor looks at the tax law. Is the advisor afraid of the law or does he look at it as an opportunity? Most tax accountants are scared to death of the law. They won’t even read it. Instead, they read an abbreviated version of the law, such as a simple tax guide. These accountants shy away from anything they don’t understand, and they don’t understand much.

The most important trait for your tax advisor is that he or she cares more about you than he or she does about himself or herself. How can you know this? It’s simply a matter of whether he or she spends most of the time in your interview answering your questions and talking about himself or herself and his or her services, or whether he or she is more focused on what you need.

Are they asking about your pain? Where does it hurt (taxes)? How much pain (taxes) are you willing to put up with? Will they just postpone (defer) the pain to a later date (like pension, profit sharing and 401(k) plans), or will they work with you to permanently reduce your tax pain?

If your tax advisor is not asking you questions about your situation, how can he or she possibly know what the tax consequences will be to you? He or she certainly

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January 2015

Tom Wheelwright, CPA

What Makes a Great Tax Advisor? (continued)

Tom Wheelwright, CPA about the author:

“If your tax advisor is not asking you questions about your situation, how can he or she possibly know what the tax consequences will be to you? won’t be able to show you how to change your situation so that you received better tax results.

The reality is that, like your patients, you have all of the answers. Your advisor, whether it is your real estate agent, your mortgage broker, your painter or your tax advisor, should have all of the questions. It’s their job to diagnose the problem and then come up with the solutions. Don’t ever worry about what questions you should ask your tax advisor. If you have to ask the questions, then you simply have the wrong advisor.

Also remember that only you can reduce your taxes.

You have to learn enough about how the tax law applies to you so that you can use it to your benefit every minute of every day. Be sure to find a tax advisor who is willing and able to teach you the rules you need to know in order to reduce your taxes. Above all, be sure to set your expectations for how you work with your tax advisor up front. Don’t make the mistake we did with our home advisors. Tell them what you want out of your relationship with them and make sure they are telling you what to expect. If your expectations meet their expectations, it’s a fit and you should hire them immediately. That’s the only way you will get a permanent solution to your tax pain.

January 2015

Tom Wheelwright, CPA Founder and CEO ProVision CPA’s

Tom Wheelwright, CPA, is the creative force behind ProVision, the world’s premier strategic CPA firm. As the founder and CEO, Tom has been responsible for innovating new tax, business and wealth consulting and strategy services for premium clientele for over 30 years.

Tom is a leading expert and published author on partnerships and corporation tax strategies, a well-known platform speaker and a wealth education innovator. Tom is author of the bestseller, Tax-Free Wealth. In Tax-Free Wealth, Tom shows entrepreneurs and investors how to build massive amounts of wealth through practical and strategic ways to permanently reduce taxes.

Tom has written several articles for publication in major professional journals and online resources and has spoken to thousands throughout the U.S., Canada, Europe and Australia. Tom has also used his superior relationship and team building skills to advise the Asian markets. He has spoken extensively in China, Japan and Russia contributing his strategies on reducing taxes and building wealth.

Donald Trump selected Tom to contribute to his Wealth Builders Program, calling Tom “the best of the best.” Robert Kiyosaki, bestselling author of Rich Dad Poor Dad, calls Tom “a team player that anyone who wants to be rich needs to add to his team.” In Robert Kiyosaki’s book, The Real Book of Real Estate, Tom, himself, authored Chapters 1 and 21. Tom also contributed to Robert Kiyosaki’s Rich Dad Success Stories, Who Took My Money, Unfair Advantage and his newest book, Why A Students Work for C Students.

For more than 30 years, Tom has devised innovative tax, business and wealth strategies for sophisticated investors and business owners in the health care, real estate and high tech fields. His passion is teaching these innovative strategies to the thousands who come to hear him speak. He has participated as a key note speaker and panelist in multiple roundtables, and led ground-breaking tax discussions challenging the status quo in terms of tax strategies.

TODAY’S PRACTICE: CHANGING THE BUSINESS OF MEDICINE

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The right team.

The right direction.

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MATRIX offers solutions across consultative planning, delivery management, business analytics, development and quality assurance.

Government mandates such as but not limited to IDC-10 and HIPAA are all within our capabilities.

Through our Agile Practice, MATRIX delivers continuous and sustainable time to market solutions to our customers. This allows our customers in the health care industry, whether a payer or provider, the ability to have a competitive advantage without sacrificing quality.

Our blended offshore model, which meets all mandated security and compliance regulations in the health care space, provides customers with a safe and secure cost effective solution.

Our Managed Services Programs and strategic service offerings tailored specific to the Health Care Industry include IT Strategy Agile Delivery Practices and Coaching Application Development Testing and Automation Solutions Integration and Claims Processing MATRIX holds specialty knowledge specific to Claims Processing within the Health Care industry, such as: iSeries PowerMHS Facets Pega

www.MatrixRes.com Go Direct: Doug King

Mobile: 480.510.0700

dking@matrixres.com

F I NA NCE

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TODAY ’ S P R A C T I C E : C H A N G I N G T H E B U S I NES S OF M EDI C I NE

Ja nua r y 2015

special feature: the physician’s financial health series

Demystifying the

Private Pooled Income Fund Understanding and using private pooled income funds for retirement Chris Hynes, JD, cfp® & Gerald R. Nowotny, JD

In our roles as tax, legal and financial advisors, we have encountered many clients who can be fairly classified as ‘reluctant’ charitable donors. To clarify, we frequently remind them that, when it comes to their ‘gross’ income and their consequent income tax obligation, there are only three choices: (1) Pay yourself; (2) Pay the Government (i.e., taxes) or (3) Donate the money to charity.

With their options presented in those ostensibly confining terms, most taxpayers quickly develop an appreciation for charity.

January 2015

For the informed taxpayer, advanced charitable tax planning strategies provide a number of different pathways to “have your cake and eat it too!” Specifically, for many physicians with whom we’ve worked, the main goal is not the retention of investment principal per se, but rather the continued ability to retain and control 1. investment management, 2. “income” and 3. final disposition of their assets. This article focuses on how a Pooled Income Fund (PIF), a type of charitable trust, can help physicians accomplish all three of those objectives.

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Private Pooled... (continued)

Chris Hynes, JD, CFP® & Gerald R. Nowotny, JD

What is a PIF?

Tax and Regulatory Mandates

A PIF is a Trust that is established and maintained by a public charity. The PIF receives contributions from individual donors that are commingled for investment purposes within the fund. Each donor is assigned "units of participation" in the fund that are based on the relationship of their contribution to the overall value of the fund at the time of contribution.

The Trust document of the PIF must specify that property transferred to the Fund by each donor be commingled with, and invested or reinvested with, other property transferred to the fund by other donors. Charitable organizations are permitted to operate multiple PIFs, provided that each such Fund is maintained by the organization and is not a device to permit a group of donors to create a Fund which may be subject to their manipulation. Such manipulation is, however, highly unlikely because the regulations require the governing instrument of a PIF to (1) prohibit a donor or income beneficiary of a PIF from serving as a trustee of the Fund, and (2) include a prohibition against self-dealing.

Each year, the fund's entire net investment income is distributed to fund participants according to their units of participation. Income distributions are made to each participant for their lifetime, after which the portion of the fund assets attributable to the participant is severed from the fund and used by the charity for its charitable purposes. A PIF could, therefore, also be described as a ‘charitable remainder mutual fund.’

Contributions to PIFs qualify for charitable income, gift, and estate tax deduction purposes. The donor's deduction is based on the ‘discounted present value’ of the remainder interest. Donors can also avoid recognition of capital gain on the transfer of appreciated property (such as individual stock or closely held business interests) to the fund.

After carefully examining the commingling requirements of funds or contributions from multiple donors, we can find nothing in the Internal Revenue Code (IRC) or treasury regulations that would preclude establishing a PIF with a single donor. Historically then, one can infer that the absence of the Private PIF (PPIF) is attributable more to administrative burdens than tax issues. Clearly, the administration of many PPIFs with assets beneath a certain threshold of assets under management could become somewhat unwieldy for the charity. Otherwise, why would a charity care if it receives a remainder interest in a gift worth one million dollars from a single donor instead of the same amount from one thousand donors?

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To clarify, we frequently remind them that, when it comes to their ‘gross’ income and their consequent income tax obligation, there are only three choices: (1) Pay yourself; (2) Pay the Government (i.e., taxes) or (3) Donate the money to charity. With their options presented in those ostensibly confining terms, most taxpayers quickly develop an appreciation for charity.

Interestingly, there is nothing legally preventing a wealth management firm or Registered Investment Advisor (RIA) from establishing multiple commingled Funds or pools of assets within a public charity for clients of the RIA or alternatively, by a registered representative of a broker-dealer. Again, the issue is not a tax issue but rather a potential administrative burden for the fund administrator operating the Fund on behalf of a public charity. Analogously, however, the administrative pricing should not be dramatically different for the Fund

TODAY ’ S P R A C T I C E: C H A N G I N G T H E B U S I NES S OF M EDI C I NE

Ja nua r y 2015

Private Pooled... (continued)

Chris Hynes, JD, CFPÂŽ & Gerald R. Nowotny, JD

administrator operating and administering separately managed accounts for individual clients of the RIA. According to the relevant tax law, the Fund must not include property transferred under arrangements other than PIFs. However, a Fund is permitted to invest jointly with other properties that are held by, or for the use of, the charity maintaining the Fund. For example, community foundations and other public charities often receive contributions that are maintained for the benefit of other charitable organizations selected by the donor, i.e. Donor Advised Funds (DAFs). Importantly, a donor may designate the donor’s DAF administered by the public charity as the recipient of the remainder interest.

There are several major tax benefits to employing the PIF as a planning tool.

Perhaps most significant, the taxpayer does not recognize gain or loss on the transfer of property to the PIF.

Each lifetime beneficiary of a PIF receives a pro rata share of the total rate of return earned by the fund for such taxable year.

When a donor transfers property to a PIF, one or more units of participation are assigned to the beneficiary or beneficiaries of the retained income interest. The number of units of participation assigned is obtained by dividing the fair market value of the property by the fair market value of a unit in the fund at the time of the transfer. Like a Charitable Remainder Trust (CRT), the PIF may make distributions on a monthly, quarterly or annual basis to meet the income requirements of the taxpayer.

January 2015

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Private Pooled... (continued)

Chris Hynes, JD, CFP® & Gerald R. Nowotny, JD

Tax Benefits of PIFs There are several major tax benefits to employing the PIF as a planning tool. Perhaps most significant, the taxpayer does not recognize gain or loss on the transfer of property to the PIF. In practice, this feature makes the PIF ideal for use by affluent taxpayers who desire to dispose of highly-appreciated, low-yielding property free of capital gains tax exposure in favor of assets that will produce higher amounts of cash flow. So, double tax leverage can be accomplished by avoiding recognition of capital gain and creating an immediate charitable income tax deduction.

Additionally, from a tax-deductibility standpoint, the prolonged low interest rate environment makes this an ideal time for the taxpayer to consider a PIF. To illustrate, if a PIF has existed for less than three taxable years, the charity is able to determine the interest rate used in calculating the charitable deduction by using the following two-step formula: 1. First, calculate the average annual Applicable Federal Midterm Rate (as described in IRC Sec 7520) for each of the three taxable years preceding the year of the transfer; 2. Second, reduce that rate by one percent (1%) to produce the applicable rate used for deduction purposes. In recent terms, the rate for the 2014 tax year was 1.4 percent (2.4% minus 1%).

For comparison purposes, this interest rate provides a significantly larger deduction than an identical contribution to a CRT. The following chart compares the percentage of tax deduction based upon any size charitable contribution. The CRT assumes a minimum CRT payout of five percent (5%) for the taxpayer’s lifetime (which would provide the maximum tax deduction possible).

Taxability of Income from PIF to Beneficiary Although PIFs are ‘taxable’ trusts, they seldom pay any income tax for two reasons. First, PIFs receive an unlimited deduction for all amounts of income distributed to fund participants. And, because pooled income funds are required to distribute all income earned each year, there remains no income to be taxed. Second, PIFs are permitted a special deduction for long-term capital gains that are set aside permanently for charity.

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Ja nua r y 2015

Private Pooled... (continued)

Chris Hynes, JD, CFP® & Gerald R. Nowotny, JD

The Trust document for most PIFs typically defines ‘income’ as that term is defined in IRC Sec 643(b).

Under this section, the term income, when not preceded by the words ‘taxable,’ ‘distributable,’ ‘undistributed net,’ or ‘gross,’ means the amount of income of the trust for the taxable year determined under the terms of the governing instrument and local (state) law. The Uniform Income and Principal Act adopted by most states defines ‘income’ to include interest, dividends, rents, and royalties. Unless otherwise defined, income does not ordinarily include capital gains. Provided that such definition is compatible with state law, however, PIFs can expand the definition of ‘income’ to include capital gains. On their personal tax returns, PIF beneficiaries must include in their gross income all amounts properly paid, credited, or required to be distributed income during the taxable year or years of the Fund.

Because PIFs distribute all income earned during the taxable year, the tax character (i.e., capital gain or ordinary income) of amounts distributed to each income beneficiary is directly proportional to the tax character of investment income earned within the PIF. Finally, the taxpayer also receives a charitable deduction for gift tax purposes and the remainder interest is not included in the taxpayer’s taxable estate.

Summary Historically, taxpayers and their advisors have been hard-pressed to find charitable solutions that provide maximum tax deductions; retention of lifetime income and capital gains avoidance upon the sale of an asset.

Although esoteric, we have found the PPIF to be a far superior option to better-known and ‘time-tested’ structures such as CRTs when it comes to accomplishing the above-referenced objectives. Predictably, we have begun to educate other financial and tax planners on how the PPIF can transform even their most ‘reluctant’ physician clients into committed charitable donors.

January 2015

about the author:

Gerald R. Nowotny, JD, CFP® Attorney Osborne & Osborne, P.A.

Mr. Nowotny was raised in the Panama Canal Zone where his family lived for twenty five years. He attended Culver Military Academy in Culver, Indiana and graduated in 1978. He attended the United States Military Academy at West Point, New York and graduated in 1982. He served on active duty for five years as a Transportation Corps officer and left active duty as a captain in 1987. At West Point, he had a double concentration in foreign languages B Spanish and Portuguese and achieved the highest level of non-native proficiency in both languages.

Mr. Nowotny attended the University of Miami Law School where he completed the JD and LL.M programs while working full time in the financial services industry. He has completed the Certified Financial Planner (CFP), Chartered Life Underwriter (CLU), and Chartered Financial Consultant (ChFC) professional designations.

Christopher Hynes, JD, CFP® Attorney and Certified Financial Planner Advisor to the Advisors Worcester, Massachusetts As one of approximately 1,800 attorneys who are also Certified Financial Planners ™, Chris Hynes’ education, training and experience furnish him with a unique perspective on complex financial structures, issues and products. Since his admission to the Massachusetts Bar almost 20 years ago, Chris has provided estate planning, insurance planning, financial and tax counsel to hundreds of individuals, businesses and non-profit entities. While serving as Senior Partner and Director of Advanced Planning for an independent, 10-advisor Massachusetts-based wealth management team, Chris quickly earned a reputation among his peers as a financial innovator in the insurance and fixed product arena.

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special feature: the physician’s financial health series

Before you sell your practice...

What the independent practitioner needs to know in today’s environment. chris jarvis, mba, cfp® & jim lauzon, clu

|

part one of two

Are you sure you’re ready for the brave new world of healthcare? In this fast-changing environment with hospitals and private equity aggressively courting physicians, what you don’t know could cost you millions.

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Ja nua r y 2015

“A commitment to education and training and a modest investment of less than $10,000 in coding education for staff over two years could result in decreased risks and increased annual revenues of $10,000 to $40,000 per MD depending on the practice type and specialty.”

Karen Zupko

President Karen Zupko & Associates

January 2015

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Before You Sell... (continued)

Chris Jarvis, MBA, CFP® & Jim Lauzon, CLU

This two-part article will provide you valuable information to help you make more informed decisions as you face important choices in your career. Part I will focus on what you can do to get the most out of private practice. The more profitable you are in private practice, the more options you will have in the future. Part II will focus on getting the most out of a sale or employment opportunity, if that is the path you ultimately decide to take.

Why would anyone buy your practice?

The PPACA calls for Affordable Care Organizations (ACOs) in each Medicare region to be responsible for cost-effective, high quality healthcare for its residents.

To be able to adequately serve the patient population, ACOs need to aggressively recruit physicians. This “integration” is taking place nationwide as healthcare systems are vying to secure the local ACO designation… and collect all the Medicare revenue.

At the same time, private equity is investing billions of dollars in the acquisition of platform specialty practices with the hopes of selling them to the hospital systems that will desperately need them to provide a full range of services to its patients. “Platform practices” are the ones that have the ability to be expanded with additional providers and extenders. They often have ancillary services, such as an ambulatory surgery center, lab, pharmacy, or other income-producing entity that can benefit from referrals from physicians in a geographic area.

Why Would You Want to Sell Your Practice?

Because of local or specialty-specific factors, some groups (like cardiologists) are practically forced to ”integrate” with a hospital. For most specialists, the situation is not so dire. Once upon a time, when reimbursements were generous and compliance was less complicated, practice owners could “get by” with mediocre management and systems. Now, stricter guidelines for reimbursements and increased compliance costs make it much harder for smaller practices to thrive.

As a result of these challenges, many physicians see hospital integration as a haven from the “hassles” of running a practice. In conversations with Karen Zupko, founder of Karen Zupko & Associates (a leading consulting firm for many surgical specialists), we came up with the following reasons for doctors’ increased interest in a hospital-based practice (see below).

Top reasons for doctors’ increased interest in a hospital-based practice:

According to CMS, healthcare spending is expected to grow by 6.2% per year from 2015 to 2022. By 2022, it is expected that healthcare will make up 19.9% of the United States Gross Domestic Product (GDP). With the largest segment of our population (Baby Boomers) entering retirement and the statistical evidence that the vast majority of healthcare dollars are spent in the last 20 years of our lives, it is easy to see why so many investors see opportunities in healthcare.

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REASON

REASON

REASON

REASON

REASON

Reduced reimbursements from insurers/Medicare Increased complexity of billing & coding; Increased tension of being audited Difficulty in recruiting young physicians to private practice Lack of awareness of financial benefits available to private practices.

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Before You Sell... (continued)

Chris Jarvis, MBA, CFP® & Jim Lauzon, CLU

Being an employee at a hospital can be a great fit for many doctors. But, until you understand how good things could be for you, you won’t be able to fairly assess the opportunity cost of giving up private practice for hospital employment.

In our experience with thousands of medical practices over the last twenty years, the problem isn’t necessarily that the healthcare system is broken. The problem is THE DOCTOR’S APPROACH to navigating the healthcare system is broken.

If managed properly, your practice can reasonably expect to:

ally join a hospital practice, you should still read this article and implement the strategies offered so you can be in a stronger negotiating position.

“Misconceptions can lead to bad decisions.”

Leaving practice and becoming employed certainly may have its benefits. However, we believe that physicians overestimate the true benefits they will receive from joining a hospital and underestimate (if not completely ignore) the financial benefits available to those in private practice. If specialists fully understood how to easily and efficiently increase revenue, reduce costs, and increase net after tax income, we believe the trend toward employment would slow significantly. Let’s consider a few of these dangerous misconceptions.

Step #1: Stop Leaving So Much Money on the Table.

Improve net revenue

According to Karen Zupko, poor practice management has an enormous impact on revenue and expenses. Not only have reimbursements (for properly coded procedures) been declining, but more importantly, failure to keep up with coding changes has led to mistakes that result in a staggering amount of lost annual revenue.

Estimates from coding professionals range from an average of $20,000 per surgical specialist to more than $40,000 in some cases.

Reduce overhead

Improve compliance with minimal effort Lower taxes by $50,000 to $500,000 annually

Doctors lose over $25 billion per year in denied or reduced reimbursements.

- MDTech.com

Increase retirement savings for the physician owners

If you could collect more, spend less, and keep more of the increased profit from your practice by working smarter, not harder, you would need a much more attractive offer before you would agree to give up on private practice and become an employee of a hospital. Even if you have already made up your mind that you will eventu-

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Most practices have yet to realistically address the growing accounts receivable owed by patients with insurance coverage. These uncollected revenues have resulted from skyrocketing deductibles, ever-increasing coinsurance and copays, and an expanding list of uncovered services in patients’ health insurance plans. Rapid technology changes lead to antiquated systems that are ill-equipped to handle the challenge of tracking down and collecting this revenue!

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Before You Sell... (continued)

Chris Jarvis, MBA, CFP® & Jim Lauzon, CLU

For a small investment, experts are available to not only train your staff, but also to serve as a resource as problems arise. According to Karen Zupko, a published expert with over 35 years of experience, “A commitment to education and training and a modest investment of less than $10,000 in coding education for staff over two years could result in decreased risks and increased annual revenues of $10,000 to $40,000 per MD depending on the practice type and specialty. Physicians are always focused on costs” observes Ms. Zupko, “but rarely are they aware of how much they are losing. Ignorance is expensive.”

Step #2 – Plan to Be Your Own Sugar Daddy Though we have seen dermatology, pain management and ophthalmology practices purchased for $20 to $50 million, we want to save the secrets to getting such a large buyout for Part II of this article. In this piece, we want to focus on what you can do with your own money to achieve the best possible retirement you can – without having to give up your independence and autonomy to work for someone else.

The single greatest injustice is that physicians get absolutely no training on how to run a successful medical practice. Successful business owners use sophisticated corporate structures, private insurance arrangements, and non-traditional retirement planning options to maximize the value they get out of their businesses. If more doctors knew how to increase tax-efficient retirement contributions by $50,000 to $500,000 per year, there would be much less interest in hospital-based practice integration.

If you are earning $300,000 to $3,000,000 (or more), retirement plans offer you very little benefit, while subjecting you to unnecessary Department of Labor oversight, potential fiduciary risks, and significant contributions for employees that are not based on merit.

Successful physicians need to consider the following ideas so they can be more like the savvy business owners in their communities:

Highly-Successful Physicians Should Consider:

Traditional Retirement Plans are Inadequate, when:

You earn more than $300,000 per year

You have more than 10 full-time employees You have employees who earn over $75,000 per year

Implementing non-traditional retirement plans so they can make up to $500,000 annual contributions Creating a captive insurance company to protect the practice, reduce current tax, and improve overall cash flow Leveraging low-cost financing to fund creative retirement, retention and recruitment efforts Protecting future income with up to $100k/month “own occupation” disability income insurance from Lloyd’s of London

You have employees over the age of 50

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Before You Sell... (continued)

Chris Jarvis, MBA, CFP® & Jim Lauzon, CLU about the author:

Conclusion: Small Changes = Big Results Unfortunately, physicians spend so much time on clinical issues and so little time on business strategy. For specialists, the time required to master a sub-specialty is even greater. Ironically, the “business of medicine” seemingly punishes those who take the time to excel at the clinical side of medicine and rewards those who develop the financial expertise necessary to profitably practice medicine.

Before you throw your hands up and give in to becoming an employee, make sure that you understand the costs and benefits of your decision. You owe it to yourself to explore ways to legitimately increase your revenue and benefits while reducing your compliance risks and tax liabilities. You don’t have to become Warren Buffett, but you do need to invest time and money to consult with experts who have an outstanding track record of working with specialists like you. After you explore your options and have a clearer picture of what you can do on your own, you will be better prepared to assess any deal you get from a hospital or a private equity firm. Part II of this article, “Getting the Most Out of Your Deal,” is available from the authors if you can’t wait for the next issue of Today’s Practice.

“Before you throw your hands up and give in to becoming an employee, make sure that you understand the costs and benefits of your decision. You owe it to yourself to explore ways to legitimately increase your revenue and benefits while reducing your compliance risks and tax liabilities.”

Chris Jarvis, MBA, CFP® President Jade Risk Co-founder Dakatori Financial Fellowship Southlake, Texas Chris Jarvis is an author of fourteen books, President of Jade Risk (www.JadeRisk.com), and co-founder of the Daktori Financial Fellowship. He lives in Southlake, Texas. Jim Lauzon is a financial consultant with over 25 years of experience helping physicians, hospitals, and privately-held businesses. He lives in Boston, Massachusetts and runs AFRM (www.afrminc.com). He can be reached at (860)604-6109.

James M. Lauzon, CLU President/CEO AFRM, LLC

Jim has been a leading professional in the financial services industry for over 25 years. Jim began his financial service career with New York Life in Boston and Connecticut building teams of representatives and managing offices while supervising at a principal level. At New York Life he was an Associate Managing Partner, Managing Partner and Advisor/Principal.

After New York Life Jim became the Succession and Estate Planning expert for Smith Brothers Financial, LLC, in Connecticut. With the support and cooperation at Smith Brothers Jim created AFRM, LLC. He decided to duplicate this model he designed at Smith Brothers and has been working with large Commercial Property and Casualty Agencies. Jim works primarily with the property and casualty business owners to make sure the Commercial clients Succession Plan and Estate Plan are done the right way while simultaneously increasing the P&C's bottom line in revenue, exponentially.

Jim earned his Chartered Life Underwriter (CLU) professional designation from The American College. Jim is a member of Business Enterprise Institute, Inc., (BEI). BEI provides comprehensive practice development tools, education and ongoing support to business owner advisors who specializes in comprehensive Exit Planning.

Jim is a graduate of Bridgewater University where he played football and earned his Bachelor of Science.

Jim is a licensed principal holding his series 7, 65 and 24.

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“But better to be hurt by the truth than comforted with a lie.”

-Khaled Hosseini

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special feature: the physician’s financial health series

Tick Tock... and the tax trap.

Chris Hynes, JD, cfp®

|

Advisor to the Advisors

Almost 20 years ago, as a newly-minted prosecuting attorney in the district attorney’s office, I attended an educational workshop on effective witness cross-examination. The presenter was a 50-something year old, very accomplished litigation attorney from a major Boston law firm. In addition to the covering the fundamentals (such as: never ask a question to which you don’t know the answer), he stressed that one of the quickest and most effective ways to impeach the credibility of a witness was to lead him into a state of cognitive dissonance—or as he facetiously referred to it—“Tick-Tock”—during cross-examination.

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Tick-Tock and the Tax Trap (continued) Two elements were prerequisites to creating “Tick-Tock.” First, you needed a witness who clung assiduously to a false narrative. It was even better when the witness actually believed his story—typically because, in the interest of self-preservation, he had conditioned himself into an outwardly credible altered reality (see later, for e.g., People v. Orenthal James Simpson…although The Juice wisely never took the stand).

Second, you needed at least one demonstrable fact that directly contradicted that witnesses’ account. If you had both, the final challenge was to have the witness comprehend and then internalize the contradictory fact while on the stand to the point where he actually realized he now held two mutually opposing viewpoints simultaneously. “Tick-Tock” then ensued. Picture the metaphorical pendulum of the clock swinging in metronomic fashion back and forth between fact and altered reality while the witness remains frozen; unable to reconcile two inapposite “truths”.

Chris Hynes, JD, CFP®

Is this path inexorable or can we count on politicians to alter the variables of the equation to the point where the Entitlement Can is not just kicked further down the road?

Although the concept of creating cognitive dissonance seemed simple and logical from a tactical standpoint, in the context of a criminal trial, my experience was that it was often difficult to achieve Tick-Tock during the “cross.” Back then, the absence of physical evidence in most cases made trials rest primarily on the credibility of witnesses instead of scientific (pre-DNA), videotaped (pre-iPhone) or even mathematical (such as accident reconstruction) evidence. As such, if a juror could simply identify with the witness, that was frequently enough to sway opinion and garner a favorable vote one way or the other in the jury room.

What does any of this have to do with Taxes?

Well, at a Meridian-organized event about 6 months ago in Las Vegas, to begin my CME lecture on finance to a large group of physicians I asked two simple questions: 1.

Do you believe income taxes will go UP for you in the future? (Incidentally, almost every doctor in attendance answered ‘Yes’—either verbally or through a guttural

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Tick-Tock and the Tax Trap (continued) groan normally associated with food poisoning.) If so, then 2. shouldn’t you get out of your tax-delayed retirement accounts such as IRAs, 401(k)s and 403(b)s NOW? And my question 2A was: Beyond any matching employer contribution you might receive, why are you continuing to ‘max out’ your employer-sponsored retirement plan?

I looked out at the audience and saw a lot of physicians in Tick-Tock at that moment.

In reality, no one can be absolutely sure that income taxes will rise in the future. However, unlike when I was prosecuting criminal defendants 20 years ago, in this case, there is overwhelming physical and mathematical evidence to suggest they must increase substantially.

Inarguably, the most dominant variable in that mathematical equation is the debt service we have pledged as a nation to Social Security and Medicare recipients. Interestingly, when Social Security (SS) was first introduced as part of Roosevelt’s New Deal in 1935, the average life expectancy was age 62 and the earliest age at which you could begin receiving SS was age 65. So, even though the check was ostensibly available, most had already checked out before they could pick it up. And, if you were fortunate enough to make it to age 65 and begin receiving SS, your life expectancy was only 2 years—age 67. As such, the ratio of workers contributing to SS versus collecting it was 42:1 and the program was wholly solvent. Today, life expectancy for those who reach age 62 (the earliest age at which you can begin taking SS) is age 85. Consequently, the ratio of those pulling the SS wagon to those sitting in that wagon has decreased dramatically—it is now approximately 3:1. Moreover, in 10 years, due primarily to the Baby Boom Generation, that ratio is estimated to narrow further to 2:1.

In 2008, the above math led David Walker, Comptroller General of the United States for ten years under both Bush and Clinton, to calculate that U.S. income tax rates must DOUBLE in order for us to meet all of our prom-

January 2015

Chris Hynes, JD, CFP®

ised obligations. And, according to Walker, each year that this mathematically-required tax doubling remains delayed, our National Debt will increase $3 trillion until we reach $53 trillion. Why stop there? Well, at that point, the country will be essentially bankrupt.

Is this path inexorable or can we count on politicians to alter the variables of the equation to the point where the Entitlement Can is not just kicked further down the road? I’ll leave that one for you, the putative jury in this case. After examining the physical evidence in its entirety, my humble opinion is that income taxes are currently on sale (recall that they once reached 94% and they were at 70% throughout the 1970’s). If this is true, then what can you do to Escape from the Tax Trap you’ve created?

My best lawyerly answer is: “it depends.”

Although the most creative and effective Escapes are varied in structure—charitable planning (see one example in my article in the last edition of TP), life insurance using a variable loan rate arbitrage, tax credit programs or valuation discounts prior to a Roth conversion, there are two consistently important points to bear in mind.

First, manage your expectations. You’re not going to be able to avoid taxes altogether so be prepared for a little financial pain. Think of it as a present-value discounted settlement to buy out a greedy business partner (Uncle Sam) who didn’t do anything to earn the money in the first place. Second, don’t let the tax tail wag the investment dog. In other words, when a specific financial product or structure is part of the Escape, ask yourself whether you would place your money into the product even if it didn’t possess the tax benefits that make it a critical component of the transition from tax-delayed to tax-free.

By way of an Escape example, one of our clients just purchased a fractional interest in a portfolio of life settlement contracts (i.e. previously sold, in-force life insurance policies) inside his IRA. Subsequently, he commissioned a valuation on the portfolio from a qualified appraiser that reflected a discount for lack of “marketa-

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Tick-Tock and the Tax Trap (continued) bility” and “liquidity.” Finally, he converted his IRA to a Roth IRA using the discounted value as the operative one for tax purposes. This will save him a substantial amount in income taxes that he would have otherwise had to pay upon conversion (and, of course, now all of his future gains in the account will be income tax-free).

To him, however, the tax benefits were ancillary to the substance of an investment that afforded him tremendous upside potential (a 67% simple interest return was actually targeted by the fund manager) and was completely uncorrelated to the stock market or interest rates.

Alas, when executing an Escape from the Tax Trap, there is no silver bullet. As with all major financial decisions, it is wise to rely heavily on your team of trusted advisors to guide you through the most advantageous path for you and your family. Clearly, both your Financial Planner and your Tax Professional should be central figures in customizing an Escape that comports with your financial objectives and ultimately helps you distinguish facts from altered financial reality.

Chris Hynes, JD, CFP®

In 2008, David Walker, Comptroller General of the United States for ten years under both Bush and Clinton, calculated that U.S. income tax rates must DOUBLE in order for us to meet all of our promised obligations.

Christopher Hynes, JD, CFP® Attorney and Certified Financial Planner Advisor to the Advisors Worcester, Massachusetts As one of approximately 1,800 attorneys who are also Certified Financial Planners™, Chris Hynes’ education, training and experience furnish him with a unique perspective on complex financial structures, issues and products. Since his admission to the Massachusetts Bar almost 20 years ago, Chris has provided estate planning, insurance planning, financial and tax counsel to hundreds of individuals, businesses and non-profit entities. While serving as Senior Partner and Director of Advanced Planning for an independent, 10-advisor Massachusetts-based wealth management team, Chris quickly earned a reputation among his peers as a financial innovator in the insurance and fixed product arena.

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special feature: the physician’s financial health series

Cashflow

investing done right Ivan Oberon: coast 2 coast investing solutions/bloomberg radio

There appears to be so many different types of investments these days and I believe that when determining what to invest your hard earned money into, everyone should consider those investments secured by real estate. An array of reasons have led me to this conclusion, more specifically that you can profit greatly in this investment by deferring, and potentially even eliminating, taxable gains through a self directed IRA or 401-K.

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“Investing in Cashflow Real Estate has probably contributed more to building financial security, wealth and comfortable retirement than any other investment vehicle.”

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Cashflow Investing Done Right... (continued) Investing in Cashflow Real Estate has probably contributed more to building financial security, wealth and comfortable retirement than any other investment vehicle. However, there are many challenges and mistakes that can be made, especially if you go at it alone.

Here are 5 things to avoid when buying Cashflow Real Estate: 1. Not factoring in all of the costs

Ivan Oberon

3. Over Renovating The Property Do not over spend on upgrades for rentals. You are not living in the home or flipping the home to a retail owner occupant. Choose upgrades that will help increase rent and/or improve leasing time. When you look to buy a turn-key rental property, you want to know the person you are working with understands this, otherwise you may end up significantly overpaying. Basic rule of thumb on a rental property is that is needs to be safe, clean and functional.

I see many people use the basic formula of Rent - PITI, to calculate positive cash flow. This is a mistake. Especially when you consider many cashflow investment buyers out there are purchasing their properties cash in the better cash flowing markets. Both you, and especially the team you may work, with must also factor in the following: Property Management Fee, Vacancy and Maintenance. The percentages one uses to calculate these expenses can vary based on location and the type of real estate you are considering.

4. Only Buy Something “I Would Want to Live In”

2. Self-Managing or Hiring The Wrong Management

5. Getting the Wrong Insurance

A number of investors decide that they will self manage their properties in order to save a buck, either locally or even remotely. The problem is that most investors are running full time businesses or have full time employment and simply do not have the time or expertise to properly manage their own portfolio of properties. Let the professionals handle this for you and don’t be afraid to make sure they are paid what is fair. A good property manager will make you much more profitable long term and will enable you to scale your investments far beyond what you could ever accomplish on your own.

As a result of my background in insurance and experience with real estate investing, I am particularly passionate about this point. I have seen so many investors make this mistake and in most cases it’s actually not primarily their fault. The main problem is that there is not enough accurate education being propagated from our industry. That is why one of my missions is to travel and educate everyone on the right coverage at the right time, and make those coverages available to my fellow investors.

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This is another big mistake. Think about it. The types of properties many of us would want to live in could not possibly be a good investment. A large number of my clients live in million dollar plus homes and in MOST cases; those are not the types of investments or tenants we are all looking for. If you say you like it, you better be talking about the numbers that make up the deal.

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Cashflow Investing Done Right... (continued) Now that you know some key things to avoid, let’s go over why Cashflow Real Estate is the I.D.E.A.L. investment.

Ivan Oberon

appreciation. How would you like to buy your parents original house for the price they paid for it, now? We all would.

Leverage

Income (Cash Flow) Real estate properties create income, which will improve your cash flow now. When you purchase a property, such as a home or apartment building, you will collect a predetermined amount of money each month. This kind of cash flow can be generated from any kind of real investment that can be leased by a tenant for a specific period of time. Office buildings, apartments, rental houses, and even storage units make great investments that create cash flow. Our preferred investment is in single family residential homes.

Depreciation (Tax Advantages)

One of the beautiful things about investing in real estate is that over time, and in some cases, even right away, it can be leveraged to purchase more real estate.

The larger your portfolio grows the more leverage you have, and the greater your ability to grow it at an increasingly faster pace. Furthermore, if you are purchasing using bank financing, you are then leveraging your tenant’s income to pay that mortgage, not your own. about the author:

Ivan Oberon

Even though that may sound like a bad thing, it is actually a very powerful tool to reduce your overall tax burden on your taxable income.

Co-founder Coast 2 Coast Investment Solutions Bloomberg Radio

Equity Whether you are using financing to purchase your investments, or like many out there you are paying cash.

Every month you receive that cash flow, your overall equity position continues to grow.

Ivan Oberon is the co-founder of Coast 2 Coast Investment Solutions, Investing Coast 2 Coast on Bloomberg Radio and Vice President at National Real Estate Insurance Group. For more information, you can reach him at ivan@nreinsurance.com

Appreciation When purchasing investment properties, it is my position that you must purchase based on cashflow and not based on potential appreciation. Like anything else, real estate is susceptible to fluctuations due to market trends. Housing prices go up and down depending on economic and social factors. Appreciation refers to the value of a property as it increases over time. That being said, since we want to be in the real estate game long term, we can pretty much count on benefiting from

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M A RK E T I NG

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Get informed: how call tracking can help your practice generate more return patients

By Dice Nakamura national healthcare division, reachlocal, inc.

If you’re like most hospitals or practices, you view inbound phone calls from new patients as a measure of your marketing success. However, that probably means you have no way of quantifying how many of those calls were generated as a result of your local online marketing. A strategy being used by more and more technology savvy healthcare providers to evaluate the efficiency and results of marketing spend is through call tracking.

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Call Tracking (continued) This method of measurement ties each marketing campaign source (search advertisements, website, social media, etc.) to a unique phone number. It allows healthcare organizations to match each customer to the source by which they discovered you. For example, a patient that clicks on a search ad is linked to the call that later comes in to book an appointment or ask a question.

By way of this process, healthcare marketers can easily capture leads through click-to-call conversions. Along with the ability to track the advertising source of your leads with call tracking, call recording can provide additional benefits to your business.

Dice Nakamura Here is a step by step process about how the service typically works:

1

A consumer sees your online ad or comes across your website and calls the number provided a special tracking phone number.

2

The call tracking number forwards your calls in real time to the phone number of your choice.

3

The phone calls generated by your campaign are recorded.

4

Through a reporting system, you can see all of the call details such as call duration, date, time, and caller ID.

5

With call recording enabled, you can play back your calls to audit and rate them from your report.

6

All of your recorded audio files are stored so you can see how your call handling is improving over time.

:::: Customer Service Listening to recorded calls can help you understand how your staff is handling phone calls and uncover customer service issues such as an improper greeting or failure to completely answer customer questions. For healthcare organizations, it’s very much a consultative sales process when a simple “contact us” form can’t have the same effect.

:::: Sales Training Call recording can help you determine whether or not your team is asking the right questions to qualify a lead or close a sale. You can use this opportunity to properly train your staff how to effectively complete these critical tasks while the lead is on the phone.

:::: Consumer Insight Recorded calls can also help you gather insight into patient trends, issues, and in-demand services. You can then use this insight to adjust service as well as effectively respond to customer questions or complaints.

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Call Tracking (continued)

Dice Nakamura

One healthcare provider reaping the benefits of using call tracking is a non-profit with services in seven states across the U.S. Using proxy numbers attached to each campaign, the organization is able to identify the people who placed phone calls as a result of their online ads, ensuring each campaign was successful.

After running 18 online marketing campaigns with search and display ads connected to unique phone numbers, this organization generated 13 million impressions, 42,000 visits to their website and 3,000 calls.

“Recorded calls can also help you gather insight into patient trends, issues, and in-demand services. You can then use this insight to adjust service as well as effectively respond to customer questions or complaints.”

So how can you implement call tracking technologies?

Digital marketing providers, like ReachLocal, provide a straight forward feature that enables you to track and record each of the incoming calls from your campaigns where you can audit and rate them.

Call tracking technology allows healthcare organizations to track the online buying journey of each patient.

Source: Google & Compete, Treatment Center Study, 2012

about the author:

Dice Nakamura Business Development ReachLocal, Inc. National Healthcare Division

Dice Nakamura is currently the Business Development Executive for ReachLocal’s National Healthcare Division. He has been assisting corporations with marketing and business development initiatives since 1999 and has an extensive background in ecommerce, interactive services, digital analytics, website development, Google products, healthcare, financial services, music business, search marketing, SaaS and telecommunications. As a Google AdWords & Google Analytics Certified business development professional, he helps F1000s businesses and large healthcare organizations implement key digital marketing solutions for lead generation initiatives. Prior to ReachLocal, Dice was the Vice President of Business Development for Vertical Nerve, which is one of four agencies in North America that is a Google Analytics Certified Partner, Google AdWords Certified, Google

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Analytics Premium Authorized Re-Seller, and a Microsoft Preferred Advertising Agency. He led all business development initiatives at Vertical Nerve and was responsible for selling important Vertical Nerve solutions (Conversion Rate Optimization, Search Marketing, Digital Analytics and Interactive Services) to agencies and F1000 clients. He is currently the 2015 President of The Dallas Business Club (www.dallasbusinessclub.com) and received MBA from Baylor University in May of 2012. Dice has published articles and white papers on Google Shopping and Product Listing Ads through Search Marketing Expo/SMX. SMX is programmed by the search marketing authorities who publish the industry leading news site Search Engine Land who have years of experience educating search marketers.

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:

a creative resource

logo campaign brochure website display outdoor tradeshow signage publication stuff *

optimists make the best

graphic designers. just let us handle it.

www.divisioniv.com * stuff is a non-specific term, not to be confused with “things�. elaboration is provided on a situational basis.

M A R K E T I NG

Social media.

Why it should matter to you.

By Ron Meritt & Keenan Donahue On Advertising

Most physicians look at social media marketing as a luxury and not a necessary part of their business. The healthcare industry consistently sets the pace for innovative science and technology, yet at the same time struggles to keep up in marketing and patient engagement. Social media has proven to be an important and essential communication tool for community engagement and healthcare branding.

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Social Media (continued) Physicians who fail to maintain an online presence risk not only their reputation, but also their business success.

Current and new patients often use the internet and social media to read about physicians and make healthcare decisions based on opinions, feedback and viewpoints of other people... whether or not this information is accurate.

Social media has a very short history, however it has revolutionized the way that patients search, evaluate and choose a doctor. A simple Google search in today’s market will yield incredible results regarding a doctor’s image and reputation.

For example, if a patient were seeking a physician, a Google search would result in web pages like WebMD, Healthgrades and RateMD. While patient engagement and health evaluations are critical to the image and reputation of a physician, healthcare evaluation sites are not the key to a physician’s online presence. A physician must be proactive with their online reputation. Healthcare databases are based on patient assessment, resulting in a physician’s lack of control regarding their image.

Often times a physician’s desired online reputation rarely aligns with patient evaluations.

In order to thrive in the web-based world a physician is required to maintain a branded reputation. To do so it is necessary for a physician to control the information distributed online in web-based search engines. Dr. Kevin Pho, a physician based in Nashua, New Hampshire, has yielded incredible results in online marketing.

Not only does Dr. Pho maintain an active blog, but also utilizes his social media profiles to account for more than half of the search engine results when searching his name. Because of the active participation in social media, Dr. Pho controls his brand, his image and significantly expanded his practice with new patients due to his positive online presence.

While Dr. Pho’s success is impressive, many physicians

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Ron Meritt & Keenan Donahue have struggled to make the jump to social media due to a perceived fear of violating HIPAA regulations. Maintaining HIPAA standards in a social media environment is easy and physicians often use this as an excuse not to engage in online marketing.

It is essential to understand that social media is not a tool for personal engagement, but rather brand reputation management. Physicians should engage in social media through topics of health research, medical trends and general health information. Health professionals should engage their patients and the community by giving useful and relevant information. By maintaining a professional presence through social media, physicians brand themselves as qualified healthcare experts, which increases brand which in turn results in new business.

Another barrier physicians often struggle with is the time it takes to develop an online presence. The juggling act of balancing family, personal and professional time is at the heart of almost every physician.

Reducing stress and preventing burnout is a strenuous challenge. But, you would be surprised how little effort it takes to start and maintain an online presence. It is not necessary for every physician to maintain a blog or an inordinate amount of social media profiles. It is better for a physician to start small and build a quality base of followers. To start an online presence, create a profile on the traditional methods of social media, LinkedIn and Facebook. LinkedIn is a jumping off point for physicians to add other like minded professional individuals and share knowledgeable content. By doing so a physician builds credibility, cultivates and online presence and controls their brand reputation.

Many physicians hire outside marketing firms to do social media work for them. A good social media program can pay for itself in increase patients or higher price points for services. In fact, a good social media program should produce 3 to 5 times income for a physician versus the expenses.

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Social Media (continued)

Ron Meritt & Keenan Donahue about the author:

Ron Meritt President On Advertising Phoenix, Arizona

It is essential to understand that social media is not a tool for personal engagement, but rather brand reputation management.

Ron Meritt’s background and experience includes television broadcast production, on-air talent, advertising sales, business marketing and strategic public relations. Ron spent a total of 24 years on television before retiring from broadcasting, and opened On Advertising in 1994.

His keen insight into the workings of journalism and protecting reputations through strategic crisis communications strategies has combined to protect clients throughout the United States from media attacks. On Advertising customizes marketing programs and brand management for all industries, however with a particular focus on healthcare.

Keenan Donahue Account Strategist On Advertising Phoenix, Arizona

Keenan’s varied background includes a degree in Christian Ministry from Ozark Christian College where he honed his critical thinking and writing skills and applied a liberal perspective to established beliefs and traditions. Keenan has worked for high-profile corporations and small start-ups alike where he engaged in blogging and social media marketing, coordinated marketing campaigns and forged strong client relationships.

A physician that is active on the major social media accounts such as Facebook, LinkedIn, Twitter and Google Plus can control content and develop their own brand. By utilizing social media, it helps you engage in deeper patient relationships.

Keenan has resided in cities around the world ranging from San Francisco to Melbourne, Australia and Phoenix, but considers Seattle his official hometown. When Keenan is not in the office he enjoys all things Seattle: coffee, browsing on Amazon, and rooting for the Seattle Sounders Football Club and of course, the Seahawks.

Through web based marketing, physicians set the pace for managing their brand image. Physicians, healthcare professionals, and clinicians who maintain an online presence will increase business opportunities as well as provide access to quality healthcare information for the entire community.

January 2015

MAY/JUNE

2013

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ESSENTIAL CONSIDERATIONS IN CHOOSING A SECURE TEXT MESSAGING SERVICE by richard wagner, jd compliance evangelist, qliqsoft

It’s well beyond crunch time. Following the Sept 23rd HIPAA Omnibus deadline, as the CIO of healthcare provider facility you’ve come to discover that a number of your physician and nurse providers have been communicating with one another over standard text message, exchanging information in a HIPAA noncompliant manner. The time has come for these events turn into reportable breaches, so you decide to implement a secure text messaging application. What are the most important features you must take into consideration in choosing a vendor?

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“Using a cloud-based, decrypt-store-re-encrypt service leaves your stored PHI at the mercy of your vendor’s security controls.“

January 2015

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T E CHNOL OGY

5 Essential Considerations... (continued)

1. Peer-to-Peer Encryption

Any secure text messaging service is better than nothing, but not all services are created equal. A P2P encryption infrastructure ensures that PHI is only being sent directly from user to user, cutting out the middle man vendor server. Using a cloud-based, decrypt-store-re-encrypt service leaves your stored PHI at the mercy of your vendor’s security controls.

2. Data Archiving

Just because you use a P2P encryption product doesn’t mean that you can’t store your own data. The best secure text messaging services give their users complete control over their data, allowing them to store messages in their own data center or cloud. This sort of data can provide all sorts of benefits to a CIO, from provider benchmarking information to even medical malpractice defense evidence.

RICHARD WAGNER, JD

ly-stored PHI. However, if the secure texting application can provide access logs to the secured application, an analyst can easily show that PHI in question was kept safe. This can be all the difference in a multi-million dollar privacy lawsuit.

5. Intuitive Usability

Finally, a secure text messaging service will only be effective if your users decide to adopt it as a replacement to SMS. Therefore, usability is paramount. A simple interface goes a long way in achieving this, as do intuitive features such as group messaging and file attachment. A usable service not only keeps your providers happy, but it also helps getting your users to buy in and stop texting PHI.

3. Read Confirmation and Time Stamps

These features add two essential benefits: usability and compliance protection. Read receipts ensure that urgent information was communicated to the recipient, allowing the sender to take other actions if necessary. Moreover, in the event of a lost phone or other security incident, the ability to prove that the PHI-containing message was never read by a potential malicious third party is an essential component to a breach analysis.

4. Access Logs

Speaking of breach analyses, the new breach standard outlined in the HIPAA Omnibus Regulations requires the analyst to prove that PHI was not accessed by a third party. Proving a negative can be almost impossible, especially in the context of a lost phone with local-

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about the author:

RICHARD WAGNER, JD Compliance Evangelist qliqSoft With a background in healthcare data security and privacy, Richard provides qliqSOFT and its customers guidance on IT regulatory compliance issues. Prior to his time at qliqSOFT, Richard served as the compliance and security officer for a number of health IT and provider organizations. Richard has also consulted industry groups on regulatory issues, assisting the ILHIE on their efforts to create a statewide health information exchange and guiding the ABA eHealth Security subgroup in interpreting the recent HIPAA/HITECH Omnibus regulations. Richard has a law degree with a concentration in health law studies from the Saint Louis University School of Law.

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January 2015

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is your practice ready for

EMV?

By Alan Brandfon

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In Your Practice Ready...

(continued)

The evolution of EMV technology is something that will impact every business that accepts payment cards. EMV (which stands for the original founders Europay, MasterCard and Visa) is a global card security standard that has been widely adopted outside the United States to combat counterfeit cards and fraud. The United States is in the process of migrating from traditional magnetic stripe technology to chip technology following EMV standards.

EMVCo, which is owned by American Express, JCB, MasterCard and Visa manages and maintains the EMV specifications.

Since April of 2013, acquirers and processors have been required to support acceptance of EMV chip transactions.

In October of 2015, any practice that does not process 75 percent of its transactions through an EMV-enabled terminal must assume the liability for fraud.

How does EMV work?

At a very high level, there are two basic types of EMV certified transactions: “Contact” and “Contactless.” A “Contact” EMV transaction is a chip card that must be inserted into the terminal. A “Contactless” EMV transaction (using a card or Smartphone) can be tapped on the POS terminal or a peripheral device. With card present transactions, either a signature or a PIN is required. Most US processors have opted for “chip and signature” cards; “chip and PIN” is more prevalent in Europe.

The EMV Migration Forum reports that an estimated 17 to 20 million chip-enabled cards had been issued in the US by the end of 2013. The group expects another 100 million or more chip-enabled cards to be issued in 2014.

How Will EMV Impact Your Practice?

Practices that have not adopted contact chip technology

by October of 2015 will be liable for losses linked to card fraud, if EMV chip technology could have prevented the fraud. Hospitals, physicians’ offices and all other health-

January 2015

Alan Brandfon care providers that accept credit or debit cards for payment are strongly urged to upgrade their equipment at some point before the liability shift.

How Can You Get Ready for EMV? Now is the time to begin to adopt EMV protocol, ahead of the October 2015 deadline. EMV compatible terminals are now available and can be implemented in your place of business. Start planning to replace your current terminal, whether hardware or virtual, computer-based systems.

Regions that have transitioned to EMV already have seen drastic reductions in fraud losses. As the amount of fraud continues to rise in the U.S., an investment in payment technology is inevitable to provide a more secure environment for your patients to pay for appointments, medications and other services.

In October of 2015, any practice that does not process 75 percent of its transactions through an EMV-enabled terminal must assume the liability for fraud. about the author:

Alan Brandfon Managing Partner Priority Payment Systems Atlantic

Alan Brandfon is the Managing Partner of Priority Payment Systems Atlantic and holds an M.B.A. in Accounting. Alan obtained his C.P.A. in 1992 and has worked in the financial industry for over 22 years. Mr. Brandfon's major focuses include increasing cash flow, collecting receivables, decreasing bad-debt expense, lowering credit card expenses and offering a myriad of payment solutions to all businesses.

Mr. Brandfon presently sits on the Advisory Board of Governors at the Boca Raton Resort and Club, a Blackstone company.

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January January 2015 2015

FROM APPLICATION

TO AUDIT

EXEMPT ORGANIZATIONS & THE IRS’S NEW PARADIGM Peter J. Martin, Esq.

Bowditch & Dewey, LLP

Many well-intentioned people who wish to pursue good works in the health care world do so by creating tax-exempt organizations. Volunteers can thus coordinate their activities through an entity that can raise funds from individuals seeking a charitable contribution deduction and foundations wishing to support the organization’s charitable mission. Such organizations can take many forms, such as unincorporated associations, corporations or charitable trusts. Recently, the Internal Revenue Service issued a proposal that would simplify the process for obtaining tax-exempt status for such organizations.

January January 2015 2015

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From Application to Audit (continued) Tax-exempt status is a matter of federal law. The IRS “recognizes” the tax exempt status of organizations through an application process, using the Form 1023 for many such organizations. (Certain non-profit organizations, such as churches, are not required to apply for tax-exempt status.) To obtain and maintain tax-exempt status, organizations must meet both an organizational and an operational test. The tax-exemption application, the Form 1023, poses many questions pertaining to these tests, and requires the applicant to provide extensive back-up documentation about its organization and proposed operation. Completing these applications and pulling together the documents to make a compelling case to the IRS that the organization ought to be exempt from taxes is a major and costly undertaking for the applicant.

The current Form 1023, with its optional supplemental schedules, is 26 pages long; the instructions for filling it out take up 38 pages.

Analyzing such applications is also a major undertaking for the IRS. Distinguishing the applicant from profit-making enterprises, sniffing out schemes to use the organization to unfairly benefit its “insiders,” and sorting the organization into one of the Internal Revenue Code’s various exemption categories is a time-consuming process.

One recent estimate is that there is a 65,000 case backlog of IRS exempt organization determinations.

The reasons for this backlog are many. One is that the IRS ruled that existing tax exempt organizations that fail to file their annual information returns with the IRS will have their exempt status automatically revoked, and in order to reinstate that status, a new exemption application must be filed (this ruling has recently been relaxed). Another is that a large number of applications for so-called “social welfare” organizations under section 501(c)(4) of the Internal Revenue Code, many having missions of a political nature, have recently been filed. Controversy has swirled around the IRS’s handling of these social welfare organization applications, in part due to the IRS’s stated

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Peter J. Martin, Esq. objective of carefully evaluating whether these applicants are seeking to evade federal campaign finance and disclosure laws.

The increased volume of tax exemption applications stemming from the reinstatement and political social welfare organization applications, added to the already significant number of “normal” applications, has created a situation in which applicants have to wait for a potentially lengthy and in any case indeterminate amount of time for IRS action on the application. One index of this uncertainty and delay has to do with that portion of exemption applications that require analysis by an IRS agent. The IRS website currently states that such applications submitted in July of 2013 are only now being assigned to an agent.

This potentially lengthy delay in obtaining exempt status can compromise volunteers’ ability to raise funds to support the charitable mission of a proposed new organization. It may also discourage volunteers in the health care field, as in other areas of charitable endeavor, from creating a non-profit organization in the first place.

In response to this untenable situation, the IRS recently proposed use of a new, streamlined application process using a new Form 1023-EZ. (The IRS estimates the Form 1023-EZ will become effective sometime this summer.)

This new application, only two pages long, relies upon the applicant’s “self-attestation” that the proposed non-profit meets both the organizational and operational tests.

Unlike the Form 1023, the applicant need not supply copies of its organizational documents, estimate anticipated expenses and revenues, nor even describe in detail its specific charitable mission. Certain organizations will be unable to use the Form 1023-EZ, such as entities with over $500,000 in assets or anticipated annual gross receipts exceeding $200,000, or hospitals, medical research organizations, schools, colleges and universities.

For many other organizations, use of the Form 1023-EZ will make obtaining tax-exempt status much easier. This

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From Application to Audit (continued) proposal represents a fundamental shift by the IRS from administering the organizational and operational tests for tax-exempt status at the beginning of the entity’s life through an application process, to evaluating the actual operations of the entity through a retrospective compliance and audit process. This will be accomplished presumably through analysis of the annual information return filed by tax-exempt organizations, one of the several versions of the Form 990. It appears that the IRS plans to shift employees and resources toward compliance reviews and away from applications, as the backlog of applications decreases over time.

This sea change in approach by the IRS raises some interesting questions. How long will use of the new form result in reduction in the existing backlog? It is not clear whether the older forms still require evaluation under the old rules, or whether existing applicants will get the benefit of the “self-attestation” presumption. Will the lingering political social welfare organization controversy make it difficult for the IRS to quickly shift resources away from careful examination of those applications? Will the smallest exempt organizations, those with gross annual receipts under $25,000 and which merely file annually the “postcard” Form 990-N, essentially avoid any significant scrutiny by the IRS? The IRS’s proposal lowers the barrier to entry into the tax-exempt organization field represented by the cost, in money and time, of the existing application system. Use of the new Form 1023-EZ may result in the creation of many new nonprofit organizations, pursuing health care as well as other charitable missions. The availability of the new application form, and the consequent increased emphasis on compliance review by the IRS, does not mean that such organizations can ignore their ongoing obligations to operate consistently with federal exempt organization law.

Health care volunteers wishing to create such organizations should not do so without understanding the compliance obligations that attach to tax-exempt status.

January 2015

Peter J. Martin, Esq.

“The IRS’s proposal lowers the barrier to entry into the tax-exempt organization field represented by the cost, in money and time, of the existing application system. Use of the new Form 1023-EZ may result in the creation of many new nonprofit organizations, pursuing health care as well as other charitable missions. about the author:

Peter J. Martin, Esquire Partner, Bowditch & Dewey, LLP,

Peter J. Martin, a partner of Bowditch & Dewey, LLP in Worcester, concentrates his practice representing hospitals, long-term care and other facilities, physicians, and other providers in a wide range of legal matters, including corporate compliance, fraud and abuse, managed care, practice acquisitions, health information privacy and security, transactional and operational issues, and regulatory investigations. Mr. Martin also counsels tax-exempt organizations on governance, compliance, and exemption issues. He also was Operations Counsel for Columbia/HCA Healthcare Corporation, representing hospitals and other Columbia providers in New England, Ohio, North Carolina, and portions of Florida. Mr. Martin is a member of the Massachusetts Bar Association, the New Hampshire Bar Association, the Boston Bar Association, and the American Health Lawyers Association and International Association of Privacy Professionals. Mr. Martin received his A.B. from Princeton University, his M.T.S. from Harvard Divinity School, and his J.D. from Boston University School of Law.

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special feature: practice culture development series

building a stronger

Foundation upgrade your human resource function to better support your strategic mission, while more effectively administering the basics. featuring randall c. schauer fox rothschild llp

One of the challenges facing many medical practices is how to effectively and uniformly administer the human resources (“HR”) function across a number of offices, oftentimes with a diversity of cultures and historic practices. This article is not going to focus on HR issues unique to a medical workplace, but rather the HR issues unique to multi-location operations and the unique HR opportunities and challenges those pose. As the administrative work historically associated with a large part of the HR function are capable of being performed by computers or entry-level individuals, and the legal mandates in the workplace become greater and more complex, many organizations are wrestling with how to both gear up the strategic and compliance capabilities, while pushing other administrative items down to the appropriate level, or even outsourcing. As employment law advisor to many medical practices, I have seen many examples of what does and does not work in this industry.

January 2015

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Building a Stronger... (continued) There are several benefits to effectively implementing what is sometimes referred to as “shared HR services.” It allows a “total solution” and “total approach” to problems by centralizing the HR function, rather than having it administered in whatever number of offices may be involved in your Practice. On the conceptual level, this approach allows the hiring of a high-level HR professional who has the capacity, and also the work and educational capability, to provide strategic advice at the highest levels of the organization in the administration of the HR function, broadly including recruiting, training, compliance, benefits, and productivity. This person can interface with legal counsel and the Board of Directors of the organization in the strategic function, helping the business to successfully execute strategy. Another component of the centralized office are administrative experts who can improve organizational efficiency by making sure that the HR function and other work processes, including benefits administration and tracking legal compliance item such as use of FMLA leave by employees across the organization, are consistent with the needs of the specific organization and its employees.

A third skill set that is required in the multi-office environment are the individuals that interface with the office managers and staff to assure consistent enforcement and administration of HR initiatives and policies among all offices. This position would be responsible for providing or initiating training; being available for daily consultation as workplace issues present themselves to the office managers; and periodic visitation to offices for feedback and understanding. These individuals would be critical to implementing best practices in the HR world, and assuring that staff morale does not diminish through feelings of alienation or distance. With the benefits above, there should be improved career development for all staff development and training, while obtaining efficiencies in the professional provision of HR services.

Critical to the success of a centralized HR function is that the office managers understand the critical need for uniform administration of consistent policies across the

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Randall C. Schauer organization, by referring HR issues to the appropriate HR professional, rather than handling it themselves (and freeing the Office Manager for other tasks). In any organization, it is lack of consistency that most often turns workplace decisions into claims that will need to be addressed either in settlement or in litigation, as there is disparate treatment of individuals by managers who may not have known what others were doing and have treated individuals in different classifications differently, even if there is no difference in the demographics of the individuals involved. Hopefully the organization can obtain better management information by consistently gathering information across an organization, rather than the practice management only hearing about HR issues after they have become a problem.

“Critical to the success of a centralized HR function is that the office managers understand the critical need for uniform administration of consistent policies across the organization” On the other side of the coin, issues that need to be addressed which can undercut a centralized HR function in a multi-office environment is the loss of face-to-face contact; employee involvement with the HR management staff; a lack of ownership of Human Resource problems at the office level; and possible IT problems with an extended network.

Management should also be aware that a smooth transformation to provision of centralized HR services is critical in assuring that the efficiencies and enhanced benefits of a centralized model are not lost. In that regard, management needs to define and achieve business goal as early as possible. The centralized HR group must be extremely diligent initially so as to be taken seriously be other management, particularly office managers. It is important that office managers understand what the

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January 2015

Building a Stronger... (continued) process will look like. Initially also, there should be a high visibility of the central HR staff in the offices to help with buy-in and confidence around the new model.

In summary, management needs to consider strategic issues as to why an enhanced, upgraded central HR function is useful; consider how it will affect the business strategy, understand the relationship between the HR professionals, office managers and line managers, and how it will provide both day-to-day administrative support while providing the strategic input at the corporate level. Management will need to be very attentive to managing the change process from the current system, oftentimes one of a laissez-faire management with office managers being relatively empowered versus centralized management. Operational issues will need to be considered with regard to location and access. Finally, there needs to be understanding of what changes and goals are reasonably expected from the process to avoid failure of implementation.

And while this model may not work for all, it is one that can provide significant improvement in recruitment, compliance, risk avoidance, and efficient provision of benefits and other employee programs. With a commensurate improvement to the bottom line.

January 2015

Randall C. Schauer about the author:

Randy C. Schauer Partner, Fox Rothschild LLP Randy's practice focuses on all aspects of labor relations and employment law. He handles the full spectrum of the employment relationship from pre-hire procedures to post-termination closure, including unemployment compensation and statutory compliance issues such as Title VII, ADA, FLSA, FMLA and OSHA compliance. Randy negotiates, drafts, and enforces contracts protecting client's rights in all aspects of the employment relationship, including employment and separation, confidentiality and non-competition, intellectual property protection, and independent contractor arrangements.

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