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What does it mean to be “at risk”? Print E-mail
Written by M. Alexandra Johnson, FACHE   
Friday, 13 April 2012 16:48

The concept of being "at risk" has to do with the level of financial risk the entity has in funding the care its patients receive. As profit-oriented enterprises, insurance companies generally assess the insured's risk and base the premium on the anticipated cost of care with the ultimate goal of minimizing that risk. MedicareAdvantage plans are insurance companies, in a sense, that are paid a capitation by the Centers for Medicare and Medicaid Services (CMS) for each enrolled member. In exchange for that capitation payment, the Plan is financially liable for all the care given to the patient (e.g., all medications, surgical procedures, office visits, etc.) by any provider.

Depending on the plan's business model, it may contract with physicians operating as Independent Practice Associations (IPAs) or with groups that own or manage multiple physician offices under a Management Services Organization (MSO). In many cases, the plan's risk is passed onto the IPA or MSO. Click here to read more.

About the author:  M. Alexandra Johnson, FACHE (click to view author's bio)

Last Updated on Friday, 13 April 2012 16:54
Avoid Financial Gridlock When Partners Disagree Print E-mail
Written by David B. Mandell, JD, MBA & Jason M. O’Dell, MS, CWM   
Friday, 30 March 2012 00:00

Financial Planning Gridlock

In our practice, we have addressed potential strategies that doctors can use to reduce income taxes, increase benefits, or build retirement savings.  We have also had the opportunity to consult with hundreds of medical groups on how to implement these strategies for their practices.  However, the outcomes of such consultations can occasionally be less than fruitful because of office politics related to the age-related perspectives of practice partners.

Generally, the younger members of medical practices are very motivated to reduce their income taxes, while the older doctors may have other priorities.  The result of such situations can be practice planning gridlock.  The long-term costs of these gridlocks can be significant, causing younger physicians to have to work more years to reach the same retirement goals as their older partners.  Within this new world of medical practice, more creative methods of practice planning and asset growth are necessary, as are alternatives for managing planning gridlock.

Hybrid Benefit Plans

Hybrid benefit plans, in addition to traditional qualified plans (e.g., 401(k), profit-sharing plan, defined benefit plan), are good options because each physician can choose the amount of money to contribute in the plan formula.  This amount can vary from $150 to $100,000 per year, and because participation levels can be individualized, hybrid plans can be successfully implemented in larger medical groups.  Other benefits to this type of plan include:

·         The plan can be utilized with a qualified plan such as pension, profit-sharing plan/401(k) or SEP IRA;

·         Contributions can qualify for current tax deductions.

·         The plan acts as an ideal “tax hedge” technique against future income and capital gains tax increases.

·         Balances can grow in a top asset protected environment.

·         Employee participation requires a minimal funding outlay.

·         There are no minimum age requirements for withdrawing income (no early withdrawal penalties).

Flexible Corporate Structures

Another way to address gridlock is to alter the practice’s legal structure so that it accommodates planning flexibility on the part of individual physicians.  In the typical medical group structure, there is one legal entity – a corporation, LLC, or professional association (PA).  Physicians are either owners of the entity (informally referring to themselves as partners) or non-owner employees. In all such cases, the physicians have no ability to separate themselves from the central legal entity.  If the central entity does not adopt a planning strategy, no individual doctor has any flexibility to adopt one on his or her own.

An alternative structure is a central entity that is neither owned by, nor the employer of, the doctors directly.  Rather, it is structured through individual professional corporations (PCs) or PAs.  In this way, the central entity pays the physicians’ PCs as 1099 independent contractors after it receives payments.

From a tax standpoint, there is almost no downside to the central entity or the doctors who are not motivated to engage in any additional planning.  However, the physicians who want to implement planning strategies may do so through their individual PCs, leaving the central entity unchanged.  This structure can avert conflict with partners, as well as enable individual physicians to save $10,000-$50,000 more for retirement each year.

Outside Consultants

Many practices that rely on internal resources to tackle financial gridlocks will end up identifying no solution to their dilemma.  In such situations, outside consultants can help physicians realize their financial planning goals.  Outside consultants with expertise in the fields of taxation, accounting, benefits planning, or corporate law can present additional information to facilitate more productive discussions that can help practice members reach more informed group decisions. 


If your practice is grappling with financial gridlock and difficulties with advanced planning options, it may be that the differential needs of the various partners are at odds with each other.  This article has presented some basic methods for dealing with such gridlock.  Nothing can take the place of a professional with experience in the fine points of financial planning for physicians.  The authors welcome your questions, and can be contacted at (877) 656-4362 or at

David Mandell is an attorney, lecturer, and author of five books for physicians.  Jason O’Dell is a financial consultant, lecturer and author of two books for physicians. They are both principals of the financial consulting firm OJM Group.

Please click HERE to read important disclosures.

Last Updated on Monday, 30 April 2012 06:11
A/R From Third-Party Payors - A GAAP Refresher Print E-mail
Written by Jeffrey B. Kramer, CPA   
Monday, 12 March 2012 15:25

Generally Accepted Accounting Principles (or GAAP) govern how healthcare entities prepare their financial statements. GAAP is not a single accounting rule, but rather the aggregate of many rules on how to account for various transactions.

Most healthcare entities participate in payment programs that pay less than full charges for services rendered. Accordingly, there is often a delay in time between the date of medical service and the payment date. Making matters more complicated, many payments are subject to billing reviews, retroactive adjustments or other queries which may occur over a considerable period of time. As such, the lengthy period of time between rendering services and reaching final settlement, compounded by the complexities and ambiguities of reimbursement regulations, makes it difficult to estimate the ultimate amount of revenue earned from these programs.

GAAP accounting standards require service revenue and the related patient accounts receivable, including amounts due from third-party payors, to be reported net of contractual and other adjustments. Since amounts ultimately collectible will not be known until some future date, which may be months or years after services are provided, healthcare entities need to make estimates in order to record revenue and related patient receivables in the financial statements. The basis for such estimates may range from relatively straightforward calculations to highly complex judgments based upon assumptions about future events and decisions.

Accounting standards recognize that estimates are inherently uncertain and that outcomes may not ultimately occur as anticipated. Accordingly, such estimates are reevaluated each time financial statements are prepared. Any differences between original and current estimates are generally reported in the income statement in the period that the revisions are made rather than as an adjustment to the prior period.

Article by Jeffrey B. Kramer, CPA partner in charge of GSK Healthcare Accounting Advisors. Mr. Kramer can be reached at or 954.989.7462.
The Dysfunctional Medical Practice Print E-mail
Written by Wilma N. Torres, CPC   
Monday, 06 February 2012 07:28

Several years ago, we were engaged to transform a dysfunctional medical practice. No matter where we turned, there were issues, the largest of which was that the last patient appointment was set at 4:30 p.m. but the staff rarely left the office before 7:30 each night. Lunch was a juggling exercise because the morning patients were walking out as the afternoon patients were walking in. Understandably, patient frustration ran high and employee morale was almost nil. This series will explore four issues that contributed to the chaos and how they were resolved.                            

Click HERE to read Part I.  Click HERE to read Part II. 

Click HERE to read Part III.   Click HERE to read Part IV.

Click HERE to read part V. 

Learn more about the author, Wilma N. Torres, CPC.
Last Updated on Monday, 05 March 2012 10:59
Risk Contracting, v.2.0 Print E-mail
Written by Lawrence Schimmel, M.D., FACS   
Thursday, 26 January 2012 00:00

In the late 80s and through the 90s risk contracting was seen throughout our Florida market. Primary Care physicians or healthcare entrepreneurs working with a physician assumed partial or full risk for providing care to a subset of a health plan’s enrollees. The “risk taker” would then capitate specialty care and other services to minimize their risk. Success or failure depended on the ability of the primary care giver to manage the patient and control outpatient and hospital resources. Success if viewed through the bottom line depended on performing the right services at the right time in the right setting. Unfortunately, some risk takers viewed underutilization as a sure way to enhance the bottom line and quality of care issues would then arise. HEDIS reporting and NCQA accreditation requirements were measured to insure “quality care”. In some instances instead of full risk, “shared risk” arrangements developed between plan and risk taker and we can also remember the financial incentives for primary care physicians that were set in place to assure HEDIS compliance and patient satisfaction.

Does this all sound like something you have been hearing a lot about lately??

Let’s be clear, an ACO is little more than a risk contract with a lot of the bells and whistles now available to us with technology. There is nothing magical and mystical about this entity. The government has recently eliminated the need to take risk for those who choose to create and ACO and allows you as an ACO up to 50% of the savings. Should you choose to take risk you would be entitled to 60% of the savings. Who would want to take risk for an additional 10%?

So what we have is an entity with 5000 Medicare lives that will contract with providers, hospitals, and pharmacy and ancillary services to provide care to a specific set of patients. Should your cost of care over a period of time be less than that a similar group of non-ACO patients you will receive 50% of the savings. Your reporting requirements are tied into quality indicators that the government has identified which also tie into the meaningful use criteria as required in the HITECH Act for EHRs. Risk contracting v2.0 is the development of the ACO. At this time many patients are still cared for in our community under risk contracts from plan to provider. Those patients are part of some type of Medicare Advantage Plan. 

Why are ACOs being talked about so much? Large parts of our Medicare population are free agents, not part of any Medicare Advantage plan. Those are the patients that are targeted for ACOs. To the extent a primary care physician joins an ACO the patient will not really know any difference. The physician will refer to specialists and hospitalize as needed and all ancillary services will still be provided. The patient for all practical purposes will not notice any difference. Internally, all of the physicians, hospitals, ancillary services within a specific ACO will be linked electronically for reporting and financial purposes. Since the primary care doctor is the one who manages the care of his or her Medicare patients, the key component of any ACO is putting them together to meet the minimum criteria (5000 unaffiliated Medicare patients). This is very similar to the old-fashioned risk contracting of the 80s and 90s packaged differently. Since the final rules from CMS a few months ago regarding ACOs, risk is not even a requirement anymore. The battle about who should control the patient is now beginning. All of the stakeholders that are involved are jockeying for control of the patient and management of the ACO. Whether it is the managed care organization, the hospital, the physician, or the healthcare entrepreneur that prevails is yet to be determined. v. 3.0 is not far behind. Stay tuned.

Dr. Schimmel is a Principal at Marcum Healthcare.  You may contact the author at or 305.995.9801.

Last Updated on Monday, 13 February 2012 10:09
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