Epi Watch November 2018.pdf
By: Alan Gassman
The adage that a good question is more important than the knowledge that provides the answer is certainly true when physicians are not aware of situations that can occur and how to be in front of the curve to avoid them. Knowledge gaps and misconceptions can prevent physicians from maximizing their liability protections, reducing taxes, and setting up good investments.
A common misconception is that a medical practice can only be owned by doctors, and cannot be held jointly with a spouse or a child to prevent a lawsuit against the doctor from causing a loss of ownership of the practice company. While professional corporations, which are commonly known as P.A.s and P.L.C.s must be owned only by doctors, these can be converted to regular L.L.C.s. As an L.L.C, the practice company can be owned as tenants by the entireties with a spouse to prevent loss of the practice company and its assets if the doctor is sued. Surgery centers and other medical business investments can also be placed into tenancy by the entireties to provide creditor protection for the doctor.
A common knowledge gap involves 401(k) and pension planning. Typically, a successful medical practice will have a 401(k) plan that permits contributions of up to $______ per highly paid doctor and staff contributions that might typically be approximately $_______ per employee. That is often seen as “the best you can do;” however, it is not the only option. In a typical situation where the doctors are age _____, it is often possible to have over $200,000 per doctor placed in a pension plan with the staff members receiving approximately $_____ each, which is more that paid for by the tax savings and is subject to partial loss by the employee under a five year vesting schedule. These are called defined benefit and cash value plans, and are fairly easy to design with the assistance of a qualified and experienced actuary.
Another major misconception is that a big house is a very good investment, and can be expected to go up in value at approximately 4% per year. While the median house in Pinellas County in the past _____ years went up in value by ___% per year on average according to ____________, your house is a year older every year. Assuming a 60-year life of the structure, your house loses approximately 1.5% in value each year, so you might expect a 2.5% rate of return.
Furthermore, the larger the house the more you pay in utilities, maintenance, repairs, and real estate taxes, which no longer save the type of tax monies that they did under the pre-2018 tax code.
The last major misconception is that having a billing consultant come to a medical practice to periodically review random chars, and the billing and collection procedures associated therewith, is not a worthwhile investment. Our experience in the past 30 plus years is that these visits are almost always worth ten times the cost because the consultant can spot opportunities to ________ income, risks the doctor did not realize were being taken, and ways that billing and other employees can work more efficiently to collect a higher percentage of the money owed at a faster rate than what had been normal in the practice.
It is important to note that any consultant coming to the practice should sign an agreement to confirm that they are working for the practice’s lawyers so that what the billing consultant finds may be kept confidential under the attorney-client privilege.
It’s often difficult to know what questions to ask when you don’t know what you don’t know, and even harder when popular misconceptions get in the way. Clearing up these misconceptions will help doctors secure their practices and make more strategic financial decisions.
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