Incentivizing medicine — From page 3
More consolidating One year ago, less than 1 percent of WestMed’s patients were covered by some form of shared savings model. By July, Schwartz projected between 40 and 50 percent of the practice’s patients will fall intothat category, a transition he said he had expected to take “decades.” Similarly, at White Plains Hospital, every new managed care contract is a pay-forperformance contract, Schandler said. “We are, as hospitals, going to be much more accountable for our costs, for our quality (and) for our results,” he said. “So based on our quality, based on patient satisfaction, based on our efficiency, there are incentives built into contracts.” The Affordable Care Act has prompted other changes as CROWE well, namely the consolidation of smaller practices into larger medical groups or hospitals as efficiency becomes paramount. “It makes it much more difficult for us to adapt in the same way as the group that has 200-plus doctors or a hospital because we’re under the same pressure to increase our efficiency, to increase computerization,” Crowe said. However, Crowe said the trend might MURPHY have been inevitable. Asked whether the era of small practices is drawing to a close,
he said, “I think the answer is yes, but again, I’m not sure it’s because of Obamacare.”
Rebates coming Health insurance companies are SCHANDLER expected to rebate more than $140 million to New York state individuals and businesses by August for failing to meet medical loss ratio (MLR) requirements outlined in the Affordable Care Act, according to a new report. Under the MLR provision, insurers are required to spend 80 percent of all premium income from individual and small business plans and SCHWARTZ 85 percent of all premium income from large group plans on health care claims and quality improvement activities. Insurance rebates to individuals and businesses are projected to hit $1.3 billion nationwide, not including California, according to a report by the Kaiser Family Foundation, a nonprofit health care analysis group. In New York state, 70,000 people enrolled in three separate coverage plans will receive $10.5 WEBER million in rebates, the report states. Additionally, in the small group market, 38,000 people enrolled in two separate plans will receive $4.8 million in rebates, while in the large group market nearly 900,000 people across seven plans will receive $127.2 million in rebates.
Strong first quarter for Greater Hudson Bank BY KATHY KAHN kathykahn@westfairinc.com
Greater Hudson Bank, based in Middletown, reported first-quarter earnings up 62 percent to $709,000, or 7 cents a share, from $438,000, or 4 cents, a year ago. The bank’s return on equity rose to 7.6.percent from 5.3 percent in last year’s quarter. The bank said the rise in profit was due to an increase in net interest income of $536,000, 23 percent, and almost $200,000 in gains on securities transactions. But that was offset by a 44 percent rise in the provision for loan losses and a 14 percent rise in non-interest expense. “While we saw an increase in our nonperforming loans this past quarter, the increase was primarily related to one loan relationship, which is
being monitored closely,” CEO Eric Wiggins said. Loans were up 26 percent to $169 million. “We are seeing good loan demand with a strong pipeline coming into 2012, which has been a main contributor to these results. Net loans outstanding have increased nearly 8 percent since year end,” he said. The rise in expenses was due to higher salary and marketing expenses as well as expenses related to other outside services. As of March 31, the bank’s leverage ratio was 11.7 percent, sufficient to make it a wellcapitalized institution under federal regulatory requirements. Greater Hudson’s annual stockholder’s meeting will be held May 22 at 10 a.m. at the Salvation Army Conference Center in West Nyack.
Citrin Cooperman Corner If Your New Business Fails, Can You Collect Money? BY ALAN A. SCHACHTER, CPA.ABV, CVA, CFE, CFF CITRIN COOPERMAN Between high unemployment rates and a dissatisfied workforce, there’s been a rash of new business start-ups over the last several years. Some will succeed. Others will fail. And like more established businesses, a portion of new businesses will inevitably wind up in court, suing for economic damages based on allegations of breach of contract, malpractice, intellectual property infringement or business interruption. Given the current economic environment, it is a critical time to look at the obstacles and opportunities facing business owners and investors who may consider a lawsuit if their start-ups go under. As with all businesses, lost profits for new enterprises must be proved. In the past, the “new business rule” restricted a start-up’s ability to sue for damages even if damages had occurred and there was no question that the business was entitled to a cash award. The courts ruled that lost profits could never be calculated with reasonable certainty without an established history of the business’ profits. The good news is that Connecticut, New York and a majority of other states have since rejected the new business rule. Nevertheless, it is still a challenge for new businesses to win a monetary award for damages because the courts often require a high threshold of evidence by the owner to support a lost profits claim. Connecticut and New York require that the enterprise firmly establish that it would have been able to generate future profits, which is a tougher standard than that which is applied to an established business. In addition, start-up businesses have limited options when it comes to ways to prove their case. Economic damages experts often use one
of three methods to estimate lost profits: (1) management’s projections, (2) the “before/after” method, or (3) the “yardstick” method. Since start-up companies usually do not have profitable before periods to assist in estimating future profits, and management’s projections are often over stated and unreliable, the yardstick method often becomes the only alternative. The yardstick method is used to predict a company’s profits by reference to the performance of comparable businesses. The challenge is finding reliable matches in terms of location, size, industry and competition. The courts also look to similar businesses operated by the owner, the extent of the involvement of the enterprise’s investors, and the general state of the economy, when making their decision. To prepare for these challenges, the business owner should work with an economic damages expert to compile as much company and industry data as possible, keeping in mind the high level of scrutiny that will be used to establish that the company would have earned profits. The next Citrin Cooperman Corner column will appear on this page, Monday, June 4th, 2012 dealing with executive compensation. About the Author: Alan A. Schachter, a partner in Citrin Cooperman’s Valuation and Forensic Services Group, is based in the Norwalk office. He is both a certified fraud examiner and a certified valuation analyst, and accredited as a business appraiser by the AICPA. Alan has presented and written extensively on many areas of forensic accounting, litigation support and business valuation, and served as a special consultant to the New York State Department of Taxation and Finance for enforcement matters. Alan can be reached by phone at (203) 254-3000 or at aschachter@ citrincooperman.com. Citrin Cooperman is a full-service accounting and business consulting firm.
A MESSAGE FROM CITRIN COOPERMAN WCBJ • May 7, 2012
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