Issuu on Google+

E-discovery continued from page 1 inaccessible in e-discovery. A computer forensics expert can access deleted files from hard drives with relative ease. If the data was also stored on a server, it can be accessed from there. Messages that were sent to others, like emails, are available from their computers. The metadata also can be problematic. (Metadata consists of the tags, dates, change notations, etc., that a computer records about the files it stores.) Even without opening a specific file, much can be learned about it. Another complicating factor in this e-discovery puzzle is that this data becomes relevant as soon as a dispute arises. The knee-jerk reaction of many people, when alerted to a problem, is to start deleting electronic files, thinking them to be private and untraceable. This is unwise because you have a duty to preserve such data if you are aware of the dispute. In fact, particular steps should be taken to be sure the data is preserved, like changing automatic record-deletion settings on computers or scheduled destruction of backup tapes that contain relevant data. Even turning on a computer that has relevant information can change the metadata related to the dispute. In some

cases, that could be considered tampering with evidence. Of course, if any legal issue arises, you should contact your attorney at once for specific counsel on the matter at hand. Failure to preserve data can be a very serious matter. In some cases, a judge may instruct the jury to assume you destroyed data on purpose because it would have been damning in nature. This is referred to as “spoliation” and can do serious damage to an individual’s case. In other instances, failure to preserve data could result in dismissal of a case to the detriment of the party that compromised the data. In short, it is unwise to do anything that would delete evidence, once an issue has been made known. And that brings us back to the initial advice of this article. Businesses and medical practices should have a well-documented and well-implemented record retention policy that includes all of the electronic data produced. This is a complex issue that should be well thought out and rigorously enforced. Failure to address this issue could cost your practice time, money, reputation and more. – Denise Altman, CPA, M.B.A.

Your Healthy Practice The technical information in this newsletter is necessarily brief. No final conclusion on these topics should be drawn without further review and consultation. Please be advised that, based on current IRS rules and standards, the information contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty assessed by the IRS. © 2012 CPAmerica International

100 Second Avenue South, Suite 600, St. Petersburg, Florida 33701 www.gsscpa.com | gss@gsscpa.com

(727) 821-6161 If we may answer any of your questions on the information contained in this publication, please contact us.

E-discovery

may complicate your record retention

The age of technology has brought about many good things. The ability to search, find, save and retrieve information in a flash has made us more efficient in many ways. But, it has also opened us up to risks we may not have anticipated. For years, businesses, including medical practices, have dealt with the necessity of record retention. There are rules and regulations in many fields about how long certain types of information should be kept. It has always been good practice to establish and adhere to an official record retention policy, but that is more critical today than ever because of a concept called e-discovery. E-discovery refers to the search and retrieval of electronic information for use in civil or criminal proceedings. Think about it. Every email, Word document, spreadsheet, text message, Tweet, calendar entry – the list goes on – could be subjected to e-discovery if you or your practice were ever party to a dispute. You don’t necessarily even have to be the main parties named in the dispute. Your records could be subpoenaed if you have any relevant connection to a third party’s dispute. This concept presents several serious issues that bear ­consideration: ➨ Quantity of data available. Because electronic records are so easy and inexpensive to keep, many businesses never purge

their electronic libraries of files. This means that years and years of data could be accessible if requested for a legal purpose. If it is accessible, you’ll most likely be required to make it available. For instance, a litigant might subpoena all electronic documents dealing with a certain patient or transaction file that covered several years. The task of locating and retrieving that data would be cumbersome and expensive. ➨ Type of data available. Technology changes over time, and our ability to retrieve information from old programs is sometimes difficult. However, if we have kept the data, on a backup tape for instance, we may have to make it available to the party requesting it. That means finding a way to retrieve it and make it readable for the other party. This could be time-consuming and expensive. ➨ Informality of data available. Many of the electronic files that may be requested are informal files like emails, text messages, IM’s and so on. Often, the language used in those communications is less precise and sometimes lax. Because the “conversations” are documented as ➜ Bankruptcy: What to electronic files, they are discoverable, know when all else fails and can be damaging in many cases. ➨ Permanence of data available. ➜ What if your practice Electronic f iles are diff icult to is one among many destroy. Even deleting a file doesn’t creditors? completely destroy it and make it

Inside

May/June 2012

See E-discovery on page 4

Inside

A financial and management bulletin to physicians and medical practices from:

100 Second Avenue South, Suite 600, St. Petersburg, Florida 33701 | (727) 821-6161 | www.gsscpa.com


Bankruptcy:

What to know when all else fails

of its assets while seeking to reduce debts or extend the time for repayment. Chapter 11 is not available to individuals. As a debtor in possession, the filing entity works with advisors to develop a plan to pay all or part of the debt owed over a period of time and to restructure the practice for profitability. A reorganization plan must be presented to the court for approval within 120 days from the initial filing. The personal assets of a corporation’s stockholders are not at risk in a Chapter 11 filing. The same is not true for a sole proprietorship or partnership. However, an individual can file for personal bankruptcy to protect personal assets. When a debtor files for reorganization, a creditors’ committee is formed to negotiate the terms of the plan and ensure the best interests of all unsecured creditors. No committee is formed if a practice qualifies as a small business debtor owing Among the nearly 1.38 million bankruptcies filed in the less than $2,343,300. In this case, the practice is subject to United States in 2011 were a number of physicians and group additional U.S. trustee oversight and has 180 days to file a plan. medical practices. It is a trend spurred by the rising cost of technology, Chapter 13 Only individuals, including sole proprietors, are eligible for decreasing reimbursements and uncertainty about the effects Chapter 13 – provided they do not exceed certain periodically of healthcare reform. adjusted debt limits. Currently, unsecured debts must be less Chapter 7 than $360,475 and secured debts less than $1,081,400. Individuals, sole proprietors, partnerships and corporations Dubbed the “wage earner’s plan,” Chapter 13 enables those (including limited liability companies) planning to cease with regular income to develop a plan to pay all or part of operation can file under Chapter 7, a process known as “liqui- their debts over three to five years. dation.” However, this decision is less appealing to partnerships Another difference between Chapters 7 and 13 is that the and corporations because they cannot discharge their debts debtor maintains possession of assets and pays the trustee, under Chapter 7. who distributes the money to creditors. In addition, more Unless it plans to reorganize, a corporation can simply types of debts can be discharged under Chapter 13. ­d issolve and distribute its assets to creditors. And because The debtor has only 14 days to submit a repayment plan to corporations exist separate from their owners, or shareholders, the court and must begin making payments to the trustee creditors cannot seek nonbusiness assets. within 30 days of the original filing. In most instances, the Partnerships and corporations may benefit from a Chapter 7 debtor must pay in full priority claims, such as taxes. filing in a scenario in which the business or practice owes An attorney can advise a debtor about the proper treatcertain taxes, such as federal withholding. The IRS can come ment of secured claims in the plan. The debtor may pay back after the owners as “responsible persons.” A Chapter 7 filing unsecured debt in full or in part if projected disposable ensures that taxes are paid first. income is not enough to cover payment over five years. Individuals filing under Chapter 7 must meet a “means test” to qualify. Their current monthly income cannot exceed the Discharge While most debts will be discharged once a bankruptcy case state median. Failing that, the case is dismissed or converted is closed, certain debts cannot be discharged. These include to Chapter 13. alimony and child support, among others. In liquidation proceedings, a court-appointed trustee takes Filing Chapter 7 or 13 as an individual will affect a physician’s over a debtor’s assets, reduces them to cash and uses the FICO score. Bankruptcy will remain on the individual’s credit ­proceeds to pay creditors. Certain assets are exempt under either report for at least seven years. federal law or the debtor’s home state law. If the debtor doesn’t Physicians should seek counsel on nonbankruptcy options have any nonexempt property to liquidate, the court may to reduce debt, tax consequences of filing and actions to avoid ­discharge the debts, releasing the debtor from personal liability. should they choose to proceed with their filing. Chapter 11 When healthcare providers declare bankruptcy, they also A corporation, sole proprietorship or partnership seeking must address issues related to patient privacy and health to remain in practice may consider Chapter 11, known as records. It’s important for them to consult with an attorney “reorganization.” The practice maintains possession and control knowledgeable in healthcare law. – Irene E. Lombardo

2

May/June 2012 Your Healthy Practice

What if your practice

is one among many creditors?

O

on the amount owed and the possibility of a distribution, it may not be worth the time to try to recover monies owed. You will get a distribution only if, for example, there are assets to liquidate under Chapter 7. To pursue recovery, you must file a proof of claim with the bankruptcy court within 90 days after the first date set for the creditors’ meeting. You must attach all information required. The federal rules for filing a proof of claim were

nce the court has discharged the debt, any effort to ­collect it can subject you to punishment for contempt.

With bankruptcies being filed in large numbers, one or more of your patients may be among them. It’s important to understand the debtor’s legal rights and the steps you should take in these cases. If the debtor has named you as a creditor in court documents, you will receive a notice of commencement of case, a notice of the creditors’ meeting and the closing document. An automatic stay is issued as soon as a debtor files for any chapter of the bankruptcy law. All billing and collection activity – formal and informal – for any outstanding debts incurred prior to that date must stop. No employee or collection agency contracted by you can seek payment. Any attempt to collect money owed – even if unintentional as an automated billing statement – can put you at risk for thousands of dollars in court penalties. Medical bills are classified as unsecured debt. Depending

amended on Dec. 1, 2011, increasing the amount of information to be documented and imposing sanctions for failure to comply. Claims are prioritized by class (e.g., government, secured, unsecured). Each class must be paid in full before the next lower class can be paid. Unfortunately, most experts say medical bills are usually discharged completely in Chapter 7 bankruptcies and may be repaid only partially in a Chapter 13 filing. Once the court has discharged the debt, any effort to collect it can subject you to punishment for contempt. How you report income determines whether you can write off the uncollected debt. Those on a cash basis pay tax only on income received. Therefore, no tax write-off is available. Those on an accrual basis pay income tax on revenues earned and not collected. Therefore, an uncollected debt can be written off. – Irene E. Lombardo

What do patients want – and is it good for them? Two recently released reports have interesting things to say about what contributes to patient satisfaction. But the question remains: Should doctors give patients what they want? If what they want is improved communication with their physicians, the answer is yes. Overall doctor ratings have increased 0.5 percent, and low ratings have decreased more than 2 percent since 2010, based on DrScore’s 2011 Annual Report Card on Patient Satisfaction. And a lot of face-to-face time with the doctor is the strongest contributor to 2011’s higher patient satisfaction. The expected length of a patient visit is at least 10 minutes, according to the study of 36,000 patients. If the visit is longer than 10 minutes, the doctor scores a 9.2 mean rating out of a possible 10. For five-to-10-minute visits, the mean rating is 6.7, and for five minutes or less, the rating is 2.7. Another study, The Cost of Satisfaction: A National Study of Patient Satisfaction, Health Care Utilization, Expenditures, and Mortality, published in February 2012 by Archives of Internal Medicine, found that satisfactory doctor-patient communication depends on whether the doctor: ➧ Listened carefully ➧ Provided easy-to-understand explanations ➧ Treated what the patient said with respect ➧ Spent time with the patient The nationwide survey of 51,946 adults used in the study

also asked patients to rate their health care from all healthcare providers, including physicians, on a scale of 0 to 10 from the worst to the best health care. In general, the patients who expressed higher satisfaction: ➧ Used the emergency room less often; ➧ Used inpatient services more often; ➧ Had higher healthcare and prescription drug expenditures; ➧ And, surprisingly, had increased mortality risk (26 percent greater than the least satisfied patients) as a group. The study saw a correlation between “the extent to which physicians fulfill patient expectations” and the level of patient satisfaction. In addition, patient satisfaction appears to be “strongly linked to prescription drug expenditures.” It’s also important to note that, in regions of greater intensity of care, patients took advantage of more discretionary health services, “with attendant risk of adverse effects, than similarly ill patients in lower-intensity regions.” Both of these findings may help to explain the increased mortality risk among the study’s most satisfied patients – even though they tended to rate their health as excellent. Conclusions drawn from the study are that: ➧ It isn’t always clear why patients are satisfied with their medical care. ➧ Rather than seek patient satisfaction through request fulfillment, physicians should provide patient-centered communication and evidence-based care. ➧ Preferences of patients should be based on straightforward information from their physicians – even when patients don’t like what they hear. ❚

May/June 2012 Your Healthy Practice

3


Bankruptcy:

What to know when all else fails

of its assets while seeking to reduce debts or extend the time for repayment. Chapter 11 is not available to individuals. As a debtor in possession, the filing entity works with advisors to develop a plan to pay all or part of the debt owed over a period of time and to restructure the practice for profitability. A reorganization plan must be presented to the court for approval within 120 days from the initial filing. The personal assets of a corporation’s stockholders are not at risk in a Chapter 11 filing. The same is not true for a sole proprietorship or partnership. However, an individual can file for personal bankruptcy to protect personal assets. When a debtor files for reorganization, a creditors’ committee is formed to negotiate the terms of the plan and ensure the best interests of all unsecured creditors. No committee is formed if a practice qualifies as a small business debtor owing Among the nearly 1.38 million bankruptcies filed in the less than $2,343,300. In this case, the practice is subject to United States in 2011 were a number of physicians and group additional U.S. trustee oversight and has 180 days to file a plan. medical practices. It is a trend spurred by the rising cost of technology, Chapter 13 Only individuals, including sole proprietors, are eligible for decreasing reimbursements and uncertainty about the effects Chapter 13 – provided they do not exceed certain periodically of healthcare reform. adjusted debt limits. Currently, unsecured debts must be less Chapter 7 than $360,475 and secured debts less than $1,081,400. Individuals, sole proprietors, partnerships and corporations Dubbed the “wage earner’s plan,” Chapter 13 enables those (including limited liability companies) planning to cease with regular income to develop a plan to pay all or part of operation can file under Chapter 7, a process known as “liqui- their debts over three to five years. dation.” However, this decision is less appealing to partnerships Another difference between Chapters 7 and 13 is that the and corporations because they cannot discharge their debts debtor maintains possession of assets and pays the trustee, under Chapter 7. who distributes the money to creditors. In addition, more Unless it plans to reorganize, a corporation can simply types of debts can be discharged under Chapter 13. ­d issolve and distribute its assets to creditors. And because The debtor has only 14 days to submit a repayment plan to corporations exist separate from their owners, or shareholders, the court and must begin making payments to the trustee creditors cannot seek nonbusiness assets. within 30 days of the original filing. In most instances, the Partnerships and corporations may benefit from a Chapter 7 debtor must pay in full priority claims, such as taxes. filing in a scenario in which the business or practice owes An attorney can advise a debtor about the proper treatcertain taxes, such as federal withholding. The IRS can come ment of secured claims in the plan. The debtor may pay back after the owners as “responsible persons.” A Chapter 7 filing unsecured debt in full or in part if projected disposable ensures that taxes are paid first. income is not enough to cover payment over five years. Individuals filing under Chapter 7 must meet a “means test” to qualify. Their current monthly income cannot exceed the Discharge While most debts will be discharged once a bankruptcy case state median. Failing that, the case is dismissed or converted is closed, certain debts cannot be discharged. These include to Chapter 13. alimony and child support, among others. In liquidation proceedings, a court-appointed trustee takes Filing Chapter 7 or 13 as an individual will affect a physician’s over a debtor’s assets, reduces them to cash and uses the FICO score. Bankruptcy will remain on the individual’s credit ­proceeds to pay creditors. Certain assets are exempt under either report for at least seven years. federal law or the debtor’s home state law. If the debtor doesn’t Physicians should seek counsel on nonbankruptcy options have any nonexempt property to liquidate, the court may to reduce debt, tax consequences of filing and actions to avoid ­discharge the debts, releasing the debtor from personal liability. should they choose to proceed with their filing. Chapter 11 When healthcare providers declare bankruptcy, they also A corporation, sole proprietorship or partnership seeking must address issues related to patient privacy and health to remain in practice may consider Chapter 11, known as records. It’s important for them to consult with an attorney “reorganization.” The practice maintains possession and control knowledgeable in healthcare law. – Irene E. Lombardo

2

May/June 2012 Your Healthy Practice

What if your practice

is one among many creditors?

O

on the amount owed and the possibility of a distribution, it may not be worth the time to try to recover monies owed. You will get a distribution only if, for example, there are assets to liquidate under Chapter 7. To pursue recovery, you must file a proof of claim with the bankruptcy court within 90 days after the first date set for the creditors’ meeting. You must attach all information required. The federal rules for filing a proof of claim were

nce the court has discharged the debt, any effort to ­collect it can subject you to punishment for contempt.

With bankruptcies being filed in large numbers, one or more of your patients may be among them. It’s important to understand the debtor’s legal rights and the steps you should take in these cases. If the debtor has named you as a creditor in court documents, you will receive a notice of commencement of case, a notice of the creditors’ meeting and the closing document. An automatic stay is issued as soon as a debtor files for any chapter of the bankruptcy law. All billing and collection activity – formal and informal – for any outstanding debts incurred prior to that date must stop. No employee or collection agency contracted by you can seek payment. Any attempt to collect money owed – even if unintentional as an automated billing statement – can put you at risk for thousands of dollars in court penalties. Medical bills are classified as unsecured debt. Depending

amended on Dec. 1, 2011, increasing the amount of information to be documented and imposing sanctions for failure to comply. Claims are prioritized by class (e.g., government, secured, unsecured). Each class must be paid in full before the next lower class can be paid. Unfortunately, most experts say medical bills are usually discharged completely in Chapter 7 bankruptcies and may be repaid only partially in a Chapter 13 filing. Once the court has discharged the debt, any effort to collect it can subject you to punishment for contempt. How you report income determines whether you can write off the uncollected debt. Those on a cash basis pay tax only on income received. Therefore, no tax write-off is available. Those on an accrual basis pay income tax on revenues earned and not collected. Therefore, an uncollected debt can be written off. – Irene E. Lombardo

What do patients want – and is it good for them? Two recently released reports have interesting things to say about what contributes to patient satisfaction. But the question remains: Should doctors give patients what they want? If what they want is improved communication with their physicians, the answer is yes. Overall doctor ratings have increased 0.5 percent, and low ratings have decreased more than 2 percent since 2010, based on DrScore’s 2011 Annual Report Card on Patient Satisfaction. And a lot of face-to-face time with the doctor is the strongest contributor to 2011’s higher patient satisfaction. The expected length of a patient visit is at least 10 minutes, according to the study of 36,000 patients. If the visit is longer than 10 minutes, the doctor scores a 9.2 mean rating out of a possible 10. For five-to-10-minute visits, the mean rating is 6.7, and for five minutes or less, the rating is 2.7. Another study, The Cost of Satisfaction: A National Study of Patient Satisfaction, Health Care Utilization, Expenditures, and Mortality, published in February 2012 by Archives of Internal Medicine, found that satisfactory doctor-patient communication depends on whether the doctor: ➧ Listened carefully ➧ Provided easy-to-understand explanations ➧ Treated what the patient said with respect ➧ Spent time with the patient The nationwide survey of 51,946 adults used in the study

also asked patients to rate their health care from all healthcare providers, including physicians, on a scale of 0 to 10 from the worst to the best health care. In general, the patients who expressed higher satisfaction: ➧ Used the emergency room less often; ➧ Used inpatient services more often; ➧ Had higher healthcare and prescription drug expenditures; ➧ And, surprisingly, had increased mortality risk (26 percent greater than the least satisfied patients) as a group. The study saw a correlation between “the extent to which physicians fulfill patient expectations” and the level of patient satisfaction. In addition, patient satisfaction appears to be “strongly linked to prescription drug expenditures.” It’s also important to note that, in regions of greater intensity of care, patients took advantage of more discretionary health services, “with attendant risk of adverse effects, than similarly ill patients in lower-intensity regions.” Both of these findings may help to explain the increased mortality risk among the study’s most satisfied patients – even though they tended to rate their health as excellent. Conclusions drawn from the study are that: ➧ It isn’t always clear why patients are satisfied with their medical care. ➧ Rather than seek patient satisfaction through request fulfillment, physicians should provide patient-centered communication and evidence-based care. ➧ Preferences of patients should be based on straightforward information from their physicians – even when patients don’t like what they hear. ❚

May/June 2012 Your Healthy Practice

3


E-discovery continued from page 1 inaccessible in e-discovery. A computer forensics expert can access deleted files from hard drives with relative ease. If the data was also stored on a server, it can be accessed from there. Messages that were sent to others, like emails, are available from their computers. The metadata also can be problematic. (Metadata consists of the tags, dates, change notations, etc., that a computer records about the files it stores.) Even without opening a specific file, much can be learned about it. Another complicating factor in this e-discovery puzzle is that this data becomes relevant as soon as a dispute arises. The knee-jerk reaction of many people, when alerted to a problem, is to start deleting electronic files, thinking them to be private and untraceable. This is unwise because you have a duty to preserve such data if you are aware of the dispute. In fact, particular steps should be taken to be sure the data is preserved, like changing automatic record-deletion settings on computers or scheduled destruction of backup tapes that contain relevant data. Even turning on a computer that has relevant information can change the metadata related to the dispute. In some

cases, that could be considered tampering with evidence. Of course, if any legal issue arises, you should contact your attorney at once for specific counsel on the matter at hand. Failure to preserve data can be a very serious matter. In some cases, a judge may instruct the jury to assume you destroyed data on purpose because it would have been damning in nature. This is referred to as “spoliation” and can do serious damage to an individual’s case. In other instances, failure to preserve data could result in dismissal of a case to the detriment of the party that compromised the data. In short, it is unwise to do anything that would delete evidence, once an issue has been made known. And that brings us back to the initial advice of this article. Businesses and medical practices should have a well-documented and well-implemented record retention policy that includes all of the electronic data produced. This is a complex issue that should be well thought out and rigorously enforced. Failure to address this issue could cost your practice time, money, reputation and more. – Denise Altman, CPA, M.B.A.

Your Healthy Practice The technical information in this newsletter is necessarily brief. No final conclusion on these topics should be drawn without further review and consultation. Please be advised that, based on current IRS rules and standards, the information contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty assessed by the IRS. © 2012 CPAmerica International

100 Second Avenue South, Suite 600, St. Petersburg, Florida 33701 www.gsscpa.com | gss@gsscpa.com

(727) 821-6161 If we may answer any of your questions on the information contained in this publication, please contact us.

E-discovery

may complicate your record retention

The age of technology has brought about many good things. The ability to search, find, save and retrieve information in a flash has made us more efficient in many ways. But, it has also opened us up to risks we may not have anticipated. For years, businesses, including medical practices, have dealt with the necessity of record retention. There are rules and regulations in many fields about how long certain types of information should be kept. It has always been good practice to establish and adhere to an official record retention policy, but that is more critical today than ever because of a concept called e-discovery. E-discovery refers to the search and retrieval of electronic information for use in civil or criminal proceedings. Think about it. Every email, Word document, spreadsheet, text message, Tweet, calendar entry – the list goes on – could be subjected to e-discovery if you or your practice were ever party to a dispute. You don’t necessarily even have to be the main parties named in the dispute. Your records could be subpoenaed if you have any relevant connection to a third party’s dispute. This concept presents several serious issues that bear ­consideration: ➨ Quantity of data available. Because electronic records are so easy and inexpensive to keep, many businesses never purge

their electronic libraries of files. This means that years and years of data could be accessible if requested for a legal purpose. If it is accessible, you’ll most likely be required to make it available. For instance, a litigant might subpoena all electronic documents dealing with a certain patient or transaction file that covered several years. The task of locating and retrieving that data would be cumbersome and expensive. ➨ Type of data available. Technology changes over time, and our ability to retrieve information from old programs is sometimes difficult. However, if we have kept the data, on a backup tape for instance, we may have to make it available to the party requesting it. That means finding a way to retrieve it and make it readable for the other party. This could be time-consuming and expensive. ➨ Informality of data available. Many of the electronic files that may be requested are informal files like emails, text messages, IM’s and so on. Often, the language used in those communications is less precise and sometimes lax. Because the “conversations” are documented as ➜ Bankruptcy: What to electronic files, they are discoverable, know when all else fails and can be damaging in many cases. ➨ Permanence of data available. ➜ What if your practice Electronic f iles are diff icult to is one among many destroy. Even deleting a file doesn’t creditors? completely destroy it and make it

Inside

May/June 2012

See E-discovery on page 4

Inside

A financial and management bulletin to physicians and medical practices from:

100 Second Avenue South, Suite 600, St. Petersburg, Florida 33701 | (727) 821-6161 | www.gsscpa.com


Your Healthy Practice Newsletter May-June 2012 Edition