Offering additional specialized medical services can benefit both your practice and your patients. The practice adds a revenue source to help offset overhead costs. Patients gain convenience and continuity of services.

For example, you might offer access to a fertility specialist within an OB/GYN practice or to a cardiologist within a primary care practice. Whichever medical services you add, the resulting professional interaction facilitates caring for patients’ needs and the integration of patient records can improve the continuity of their care.

On the income side, adding a specialist can allow your practice to charge for services that previously were referred out. But note that subspecialty services must be carefully structured in order to avoid legal problems due to fee splitting, kickback or Stark law violations. A principal requirement is to pay or receive no more than a “fair market value” for the services.

Employee

One practical arrangement is simply to hire a specialist full-time—assuming you can find a suitable and willing physician—and bill for his or her services. However, to justify a full-time specialist, you will need a patient base that is large enough to generate sufficient volume.

If you anticipate lower volume, part-time employment may be more suitable. You can choose to pay a set salary, a per diem rate or a percentage of amounts collected, or you could pay on another basis.

A part-time arrangement may work out well if the specialist ordinarily practices outside of your primary market. Otherwise, you risk having your patients followed up at the specialist’s primary office.

Independent Contractor

Making an independent contractor arrangement is another possibility. You would share space with a specialist whom you pay on a 1099 basis without tax withholding rather than on a W-2 salary basis.

In this situation, your practice would bill and collect from the independent contractor’s patients, as you would if the contractor were a full- or part-time employee. Alternatively, patients could pay the physician’s professional corporation that has a contractor arrangement with your practice. Before engaging an independent contractor, however, talk to us about the tax rules that must be met.

Support Services

You also might arrange for the specialist to bill and collect while you provide staff time for scheduling, obtaining insurance information, filing, etc., plus space and supporting facilities for the specialist’s office visits. For your services, you would receive a percentage (“fair market value”) of the amounts collected. Note that with this support services arrangement, you avoid malpractice exposure for the specialist’s activities, which may help compensate for generally receiving less revenue than the other specialist arrangements would generate.

Adding subspecialty services is both a business and a medical decision. On the business side, careful planning to avoid regulatory pitfalls and maximize potential revenue is essential. Please call a member of Somerset’s Health Care Team at 1-800-469-7206 or 317-472-2200 to learn more.

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The most recent pension law changes enacted last summer can be a welcome development for a medical practice with a 401(k) or defined benefit pension plan.

Limits on Contributions Extended

The current, generous contribution limits for 401(k) plans that were scheduled to expire in 2011 became permanent. So did the limit for contributions to defined benefit plans and the ability of owners and partners to borrow from their retirement plans on a basis similar to employee participants. The annual dollar limits that continue to apply are $15,500 for 401(k) plan contributions, $5,000 for 401(k) plan catch-up contributions and $180,000 for defined benefit pension benefits—increased from $175,000 in 2006.

Less Costly Safe Harbor

Starting next year*, by requiring automatic enrollment** of new participants in your 401(k) plan, you can qualify for a new non-discrimination testing safe harbor with lower employer contribution amounts than the current 401(k) safe harbor.

401(k) plan non-discrimination rules require two annual tests comparing the average contributions—including salary deferrals and matching—of highly compensated employees and non-highly compensated employees. Failing either the actual deferral percentage (ADP) or actual contribution percentage (ACP) test has unwelcome tax consequences for highly compensated participants. Their excess contributions must be refunded (and, therefore, taxed) or recharacterized as taxable instead of tax-deferred income.

Currently, a 401(k) plan can avoid testing by meeting the law’s safe harbor requirements:

• A 3% nonelective employer contribution for each nonhighly compensated employee, or }

• A specified matching contribution for all eligible employees—100% of the first 3% of earnings deferred plus 50% of deferrals between 3% and 5% (or an “enhanced match”) and

• The immediate vesting of all employer safe harbor contributions.

The “qualified contribution arrangement” automatic safe harbor includes:

• Either an employer contribution for all employees of at least 3% or a matching contribution that is 100% of the first 1% of compensation deferred plus 50% of deferrals between 1% and 6%.

• Vesting of employer contributions after two years of service.

• An automatic employee contribution percentage— ranging from a 3% to 6% minimum to a 10% maximum (Other requirements also apply.).

* Plan years that begin on or after January 1, 2008.
** A specified percentage of pay is automatically withheld unless the employee chooses not to participate.

Increased Defined Benefit Deduction

The tax deduction limit for annual defined benefit plan contributions was raised in order to encourage corporations to fully fund their plans. In 2007, within the tax code’s maximum funding limits, your practice may contribute and deduct up to 150% of your normal amount. After 2007, the limit and deduction will be even higher if your plan is not fully funded. Note that professional advice is essential to determine the amount that your practice may contribute to your defined benefit plan and deduct as a contribution.

When a Safe Harbor Plan Makes the Most Sense

Choosing a safe harbor plan design may be desirable for your practice if:

• The value of the benefits accrued for the partners or owner is more than 60% of the value of the total benefits accrued for all participants, or

• Contributions are already at or near the amounts required by the safe harbor. Moving to a safe harbor design now can help avoid testing problems in the future even if no current problem exists.

Please contact your Somerset advisor to learn more about opportunities for enhancing your retirement plan.

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Treating patients without knowledge of their current health plan coverage status can lead to time-intensive bill collection efforts, bad debts and write-offs. Here’s how you can help your practice reduce plan eligibility difficulties.

When patients become ineligible for health plan coverage, the news may creep from the employer to the plan to you, sometimes over an extended period of time. Other patients simply change their plans or jobs without mentioning it to your staff. To avoid the resulting collection difficulties, look to your health plan contracts and office procedures.

Often, payers are contractually obligated to pay for treatment given between the end of eligibility and receipt of notification. If needed, make adding such language a priority at your next contract renewal.

Consider adjusting your office procedures to systematically verify patients’ eligibility. When making appointments, have the schedulers reconfirm each patient’s coverage—by asking or, if available, by using the plan’s website or automated voice response system.

At check in, have your receptionist always make a new copy of the patient’s current insurance card and ask whether coverage has changed. Some plans offer a terminal for confirming eligibility. If your office has one, make sure its use is integrated into the check-in sequence.

Even though health plan enrollee lists may not be completely up-to-date when you receive them, have your staff promptly check for missing (and new) names. And transfer the data without delay to your billing and scheduling systems.

Confirming eligibility in advance takes some time and effort, but the potential reduction in collection problems can make it worthwhile.

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An efficient billing function is key to your practice’s financial health. And just as important is promptly posting all remittances to your bank account.

Less Cash—More Work

With incoming checks and cash copays, posting and deposits are tasks that busy staff can easily put aside. And if remittances pile up on a desk or in a drawer, you won’t see a warning flag on your bank statement that your balance is lower than it should be.

Delayed posting may do more than reduce your bank balance. If your billing system automatically generates statements showing outstanding balances that have already been paid, some patients may make duplicate payments that will have to be posted and then refunded or credited. Others may call with time-consuming inquiries or complaints.

Avoiding Delays

When ordinary tasks require more than the available time, your staff may put off less pressing duties, such as posting and depositing remittances. So assuring prompt processing starts with employing enough staff for the size of your practice. Also consider making the posting function more than an entry-level position. In most situations, you need someone who is able to:

• Post payments accurately and reliably

• Check the accuracy of payments from insurance carriers and follow up on any variances

• Rebill or appeal denied insurance claims

• Promptly process payments that lack sufficient identification

Preventing Problems

Whenever staffing permits, separate the remittance processing functions. The person posting remittances should not also post charges, receive copays and other time-of-service payments or handle statements. Billing and collection records require your regular attention, especially in regard to write-offs so you can make sure that collectable items are not being conveniently disposed of.

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We are pleased to welcome Kathy Rokita to our Health Care Team.

Jeff Boomershine, Andy DePew, Steve Diagostino, Steve Dobias, George Kellum and Mike McCaslin will be attending the BONES Society Conference in Chicago from May 6 to 9. Please stop by to visit them at Booth 816. Mike McCaslin and Steve Dobias will be speaking on the topics of Strategic Planning and Succession Planning Buy-In and Buy-Out Approaches.

Andy DePew will be presenting “Salary Setting & Payroll 101,” and Jason Plake will be presenting “Accounting 101” at the Indiana MGMA Spring Conference in Bloomington on May 10 and 11. Along with Andy and Jason, Jeff Boomershine, Mandi Clossey, Cathy Weaver and David Wolfe will be exhibiting at the trade show.

Steve Dobias and Cathy Weaver will be attending the American Association of Ambulatory Surgery Centers (AAASC) Annual Meeting & Exhibition in Denver from May 16 to 19.

Becker’s ASC Review identified Somerset as one of 38 companies to watch in 2007. This annual list that Scott Becker, JD, CPA, has been publishing since 2004, identifies companies that have made great strides in the ambulatory surgery center business.

We are currently collecting data for the 2007 Midwest Ambulatory Surgical Center Benchmark & Salary Survey. We invite surgery centers in Illinois, Indiana, Kentucky, Michigan, Ohio and Wisconsin to participate by going to our web site--www.somersetcpas.com.

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Health Care Commentaries is provided by Somerset’s Health Care Team for our clients and other interested persons upon request. Since technical information is presented in generalized fashion, no final conclusion on these topics should be made without further review. For additional information on the issues discussed, please contact a member of our Health Care Team. This document is not intended or written to be used, and cannot be used, for the purpose of avoiding tax penalties that may be imposed on the taxpayer. Our Health Care Team provides health care
consulting, ancillary service consulting, tax, accounting, information systems, wealth management, and management consulting services to physicians and their practices. We are passionate about your success.

Somerset CPAs, P.C.
3925 River Crossing Parkway, Third Floor
Indianapolis, Indiana 46240
317.472.2200 • 800.469.7206 • FAX 317.208.1200
www.somersetcpas.com