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Your Finances: Money Management 101

Q: How does credit counseling affect my score?

I mishandled my credit card debt while in medical school and may need help from a credit counselor to get it straightened out. Would consulting one help or hurt my credit score?

A: That information isn't factored into your FICO score, so consulting a counselor for advice will neither help nor hurt you. But don't confuse counseling with more hands-on assistance, such as a debt management plan or debt negotiation. With a debt management plan, a credit counseling agency works out a payment schedule with you and your creditors and makes the payments for you from cash that you deposit with the agency monthly. As their name implies, debt negotiation firms try to reduce the balance you owe to creditors. But both strategies, particularly debt negotiation, involve risks and can have a negative impact on your credit record. For more details, see "Fiscal Fitness: Choosing A Credit Counselor."

Q: Should my pension plan pay my expenses?

I'm setting up a profit-sharing plan for my practice. Should the related expenses come out of plan assets or should my practice pay them directly?

A: You can handle it either way, but to maximize the practice's potential contribution to the plan, it's best to pay trustee's fees and any other administrative expenses separately. This way, you and your employees will get more benefits and the practice will still be able to deduct the costs of administering the plan.

Q: Do credit card rebates count as income?

I pay for office supplies with a credit card that gives me cash rebates. Will I owe tax on the money I get back? And what about rebates for personal purchases?

A: The rebates you receive for business purchases are taxable. Assuming you made the purchases and received the corresponding rebates in 2007, you must subtract the rebates from the amount you deduct for business expenses on your 2007 return. If you receive rebates in 2008 for purchases you made in 2007, report those as income on your 2008 return. Rebates on personal purchases are considered nontaxable price adjustments, however, so you needn't report them on your tax return.

Tech Tip: Doctors Don't Meet Patient Demand For E-Mail Communication

Poll after poll shows that patients want an online relationship with doctors, but that doctors aren't obliging. The latest one from Harris Interactive is no exception.

The survey, sponsored by the California HealthCare Foundation, reports that more than 80% of California primary-care doctors -- excluding those in the Kaiser Permanente system -- rarely communicate with patients online. Doctors in large groups are more averse to a cyber relationship with patients than their solo colleagues, even though they're more likely to have an IT infrastructure that would make it possible. In contrast, 54% percent of Kaiser primary-care doctors said they communicate with patients by e-mail either often or sometimes.

The survey doesn't explain why Kaiser doctors take a different approach to Internet medicine, but how they're paid could be the reason. In the fee-for-service world, e-mailing a patient normally is uncompensated work that crowds out compensated work. Paid on the basis of capitation and oriented toward comprehensive as opposed to episodic patient care, Kaiser doctors arguably have less cause to see patient e-mail as bad for their paychecks.

And when it comes to healthcare, patients definitely want to hit the send button. A Harris Interactive survey published found that 74% of patients would like the ability to e-mail their doctors. Likewise, most patients want to receive test results and clinical-care reminders by e-mail, schedule appointments online, and electronically transmit home-monitoring data to the doctor's office. However, the percentage of patients doing any of these things is less than 5%, according to the survey.

Tech Tip: The Doctors' Lounge Moves Online

Feeling isolated, out of touch with colleagues? It doesn't have to be that way. A community of doctors who share your professional concerns is waiting to talk with you online.

How might online groups expand your horizons? Sharing information, experiences, and advice fosters camaraderie. And the 24/7 convenience of electronic communication is perfect for busy doctors. Prominent thought leaders often mingle in Internet communities. You might be surprised to see who responds to your posts.

But which online group is best for you?

Depending on your schedule and personality, you may gravitate toward one type of communication channel over the other. Chat rooms supply immediate gratification, but because they're in real time, they hinge on your availability, which for doctors is iffy. A bulletin board, on the other hand, lets you visit whenever it's convenient. And e-mail lists give you the luxury of reading and writing messages when you please. By automatically sending you messages, they spare you the effort of visiting a bulletin-board Web site. However, e-mail lists can trigger a flood in your inbox.

Regardless which you choose, watch out for deception. False identities abound on some physician bulletin boards. A nonphysician -- perhaps a patient of yours -- may pretend to be a physician. To avoid breaches of confidentiality and identity theft, be careful what you reveal. Likewise, EHR vendors may pose as unbiased doctors. If someone online recommends buying a particular product, ask for references and seek independent confirmation of "expert" assertions.

The benefits of online groups, however, outweigh the hassles. It's important, however, to find the right one to meet your needs. You can find bulletin boards and e-mail lists for physicians at the Web sites of medical societies, other professional organizations, and government agencies, like the Centers for Disease Control and Prevention. Physicians also have formed smaller, more specialized online groups through Yahoo and Google.

Several virtual communities for doctors that you might want to investigate include emrupdate.com, iMedExchange, MomMD, PedTalk, and Sermo.

Business Tip: Sinking Reimbursement, Harder Work

If it feels like your life is mostly work, you're not alone. In 2007, a survey of office-based MDs and Dos by "Medical Economics" shows that a third of primary care physicians put in 60 hours or more a week.

Ob/gyns had the longest workweek, in part because they do a lot of hospital work. In contrast, many FPs, internists, and pediatricians -- all of whom spent fewer hours on the job -- now rely on hospitalists.

At the same time, many doctors are logging long hours in the office in an attempt to balance out reimbursement cuts by seeing more patients.

Productivity, like the length of a doctor's workweek, still varies by specialty. According to the survey, pediatricians saw a median of 100 patients per week in 2007 -- about the same as FPs and internists -- but worked fewer hours. And 27% of pediatricians worked fewer than 40 hours a week compared to only 15% of FPs and 14% of internists. Consultants say this is partly because a high percentage of pediatricians are women working part-time while raising families.

Many GPs also worked part-time. Overall, they had the lowest numbers of hours and visits among primary care physicians, partly because they tend to be older and are starting to phase out of practice.

Family physicians, in contrast, mirror the primary care bell curve of productivity. Thus, 17% of FPs worked 50-54 hours a week, virtually the same as PCPs as a whole. Similarly, 27% of FPs and 24% of all PCPs saw 100-124 patients a week.

Internists are a different story. While their median productivity was almost identical to that of FPs, they were more likely to see fewer than 50 patients and far less likely to exceed 99 visits a week. One reason is that internists tend to see older, sicker patients than FPs, and those more complex cases take more time. The upside is that internists generate more level 4 and 5 charges than FPs, so their total compensation is higher.

Business Tip: The Smarter Way To Faster Billing And Collections

In a typical one- or two-doctor practice, the billing and collection department consists of one person. If you're lucky, he's a pro, who aces everything from entering charges to appealing denials, knows health plan protocols inside out, and brings in almost every dollar that's owed.

Problems may emerge, though, when more doctors join the practice, and they hire two additional billers. Although the billing department has gotten bigger and perhaps busier, it may actually be less effective due to poor organization and rampant multitasking. In other words, everybody does everything and nobody is accountable for anything.

The cure for this problem is multifaceted: It calls for creating specialized support roles, performance goals, a teamwork culture, and written policies on everything from denied claims to deadbeat patients. Another must is information technology that lets you collect more money with fewer employees.

How many staffers do you need for billing? The annual cost survey from the Medical Group Management Association provides a rule of thumb for a reasonable head count in the billing department. In 2006, single-specialty family practices employed .67 of a patient-accounting staffer for each full-time-equivalent physician. Pediatric and internal medicine practices reported staffing ratios of .60 and .61, respectively. In the MGMA survey, patient accounting includes employees who code, enter charges, post payments, cashier, and follow up on A/R.

However, MGMA numbers are only guidelines. Practices relying heavily on computer automation can operate with a smaller crew.

Consider the job of checking claims for errors before submitting them to a clearinghouse, or directly to an insurer. You can rely solely on a pair of human eyes, which glaze over by 4 PM, or take advantage of tireless "scrubbing" software that spots a ZIP code with six digits or a CPT code that needs a modifier. Popular practice management programs have scrubbing modules -- but they're only effective if you turn them on and staffers know how to use them. If your software lacks this function, buy an add-on scrubbing program or turn to so-called revenue-cycle management companies that offer scrubbing.

Are you exploiting all the information technology available to collect more money with less effort? Ask your practice management software vendor or a healthcare computer consultant to perform a digital checkup of your operation and price software upgrades.

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Your Finances: Retirement Plans That Can Dramatically Boost Annual Contributions

A "cash balance" plan is a defined benefit ("DB") plan, meaning that it is a retirement plan that provides for a targeted monthly benefit at retirement for you and your employees. Typically, a participant can elect to receive the monthly benefit he or she has accrued under the plan (or a onetime lump sum payout equivalent to the monthly benefit) upon reaching retirement age or terminating employment.

A participant's benefit under a DB plan is determined by many factors including the participant's age and compensation; the plan's benefit formula, prevailing interest rates, and mortality assumptions; and prevailing non-discrimination rules as set forth in the tax laws and by the IRS.

A DB plan is appealing where the owner wants to contribute more than what is permitted into a profit-sharing plan where the maximum employer contribution is limited to 25% of all of the participants' compensation. A DB plan has no such limitation. However, because benefits are promised, the employer is responsible for funding the plan. The minimum required contribution is determined by an actuary each year and must be contributed.

When an employer sponsors both a defined benefit plan and a profit-sharing plan -- which is often the case for cash balance plan sponsors -- the maximum employer contribution is limited to 31% of compensation. Employee 401(k) salary deferrals (up to $15,500 or $20,500 for those 50 and over) are not included in this limit.

The goal of a DB plan is to have enough money to pay benefits when participants reach retirement age. In other words, the plan is targeting to fund a certain pot of money equivalent to the benefits accrued for each participant. Year by year, the contribution to the plan is determined based on the assets in the plan, the expected return in future years, and participant data. If the plan's value drops, the employer's contribution will increase. If the plan's value rises faster than expectations, the contributions will decrease.

A traditional DB plan has a uniform benefit structure for all participants. For example, a traditional DB plan's benefit formula might be 2% of the employee's highest annual pay multiplied by years of participation.

A traditional DB plan would be most beneficial to an older, highly paid owner with a young, lower-paid staff. The main drawback of a traditional DB plan is the cost of the benefits for the staff, especially if there are older or highly paid staff members. In order to get the key employees a substantial benefit, the benefits (and costs) for the staff may be very high. As participants get older, their benefit accruals become more valuable because they are closer to their retirement age. If we assume that a 25-year-old and a 55-year-old earn the same salary and have the same service history (i.e., are identical in every way except age), they would also have the same accrued benefit, which might work out to a $400 monthly benefit in retirement. However, the annual contributions to the plan on behalf of the 55 year old (as well as the lump sum benefit payable when the participant exits) will be about four times higher than the 25-year-old's because the 55-year-old is much closer to retirement.

A cash balance ("CB") plan is a special type of DB plan that defines participant benefits as the accumulation of allocations and interest credits at retirement. The employer funds the plan under the assumption that these theoretical accounts will be paid to participants at retirement.

Each year, the participants receive a … [click here for complete article]

Richard Collier is a nationally recognized lawyer representing doctors in the business aspects of their practices and personal lives (tax matters, practice transitions, retirement plans, etc.). For further information about his seminars or newsletter, call toll-free 1-888-888-4840.