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Resolve Physician Agency

ACOs

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The 11 Hour of

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The clock is ticking. There’s not much time left. Both sides have been wrangling for quite some time but there’s still much to be decided in the final hour. Tick…tick….tick…..If it’s the latest action film, the deadline time might result in global calamity if the hero doesn’t come through. When it’s your employment contract negotiation, the stakes might not seem as high to others, but to you it’s critically important. Will the other side meet your primary objectives or will they allow the time to run out and simply walk away? Or will you simply cave under the pressure as the clock keeps ticking and accept what they’ve offered? There’s an old maxim in the ranks of professional negotiators that says 90% of the meaningful concessions made occur in the last 10% of available time. It makes sense when you stop

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and think about it. We’re all trained since early childhood to beat the clock and manage deadlines. Nearly every negotiation opportunity has some form of running clock it is set to. A physician completing training usually wants to secure their new job before they graduate from residency or fellowship so they can start earning a living right away. Those changing jobs have a contract that will expire soon with their current employers or want to find a new position in time for the upcoming school year to relocate the family. If you’re unemployed, there is definitely a clock ticking as each month you see your savings dwindling to pay living expenses while you look for something new.

You’re not alone Ticking clocks and deadlines aren’t unique to the employed physician,

though, as employers have many built-in clocks as well. Their current physician of a particular specialty might be retiring soon or another one has given his/her notice of leaving. The hospital’s physicians are swamped with new patients, overloaded with work or having to take an excessive amount of call and have been clamoring for months about needing some help. The board of directors agreed to float a bond issue to raise several million dollars to build on a new unit that is sitting vacant because there are no physicians to do procedures in it. The competitor up the road built a new clinic in a growing area and is gobbling up market share because this hospital has no physician on board to put there. In the overall mix, there’s just as much time pressure for the employer as there is for the employee.


The side that is more patient and methodical will likely get the better deal for themselves.

Negotiations Be Patient Rarely does the first round of nego-

tiations yield concessions on all of the items that you are looking for. Effective negotiating will likely involve back and forth discussions with several rounds. Many times the side that is more patient and methodical will likely get the better deal for themselves. Once you begin to feel the pressure of time working against you, you will begin to make concessions on items you identified as primary objectives earlier in the process. The key is in learning how to manage the clock effectively to use time pressures to benefit you. Setting your own deadlines and time expectations for the other side to respond to is a great way to do this. Your best and only leverage in this kind of negotiation is your willing-

ness and ability to walk away when the time runs out. If you’re not prepared to do this, or at least make the other side believe that you are, then you stand very little chance of getting the key concessions you seek in your new employment agreement. If this is your only offer under consideration, there is a lot more at risk, especially if you need to be working soon for personal financial reasons. Your leverage increases exponentially, however, if you have a solid fallback plan to go to should this one fall through, adequate time to work with and a good personal financial position to give you reserves to utilize during this time. Managing your own anxieties and fears during this time frame is a key to success. If you succumb to the pressure of time and the inevitable increase of tension as the deadline

Cord Harper is the CEO of Resolve Physician Agency, Inc. To discuss this article further please e-mail charper@resolvephysicianagency.com. approaches, the other side wins the day. But, if you can remain calm and methodically manage the game clock to your benefit you are much more likely to achieve the outcomes you desire.


Understanding Accountable Care Organizations

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The Potential Impact it Will Have on Physicians Following its inclusion in the Patient Protection and Affordable Care Act of 2010, the healthcare industry’s interest and investigation into the viability of Accountable Care Organizations (ACOs) has swept across the nation and continues to garner support as the new and improved model for delivering healthcare services. Even with many details still to be worked out and the federal ACO initiative not scheduled to launch until January 2012, hospitals, physician practices and insurers from coast to coast are racing ahead and announcing their plans to form ACOs.

What are Accountable Care Organizations? An ACO is a network of primary care physicians, specialists, hospitals and other

healthcare providers collectively sharing responsibility for providing efficient, quality care to patients.1 Under this model of delivery, provider and organization participants will be offered financial incentives to provide patients with good quality care, while simultaneously keeping costs down. As presented in the health reform bill, ACOs were primarily created as a mechanism to target and reduce Medicare spending in preparation for the expected spike in the program’s costs due to the


aging “Baby Boomer” population. In fact, under the new law, ACOs would be required to manage all of the healthcare needs for a minimum of 5,000 Medicare beneficiaries over a three year time span. However, the vast majority of ACOs being developed or proposed across the county are also utilizing this model of delivery for more than just Medicare beneficiaries.

What are the benefits? It’s no secret that there is much concern

about the continued escalation of our national healthcare expenditures. With trillions of dollars spent each year on healthcare (which will likely increase given the aforementioned “Baby Boomer” population approaching retirement age), the federal govern-

estimates, the ACO model will result in Medicare savings in the range $960 million over the first three years.What are the potential issues? As with any new idea or concept, there are many unknowns about how the model will actually work out. Even though the framework has been established and federal guidelines have been released recently to supplement the language presented in the reform bill, a significant portion of the finer details are still unknown. For example, there is still uncertainty about who will actually manage the ACOs – hospitals, physicians or insurers. Each party has presented their arguments for this role, but until there is a large

It’s no secret that there is much concern about the continued escalation of our national healthcare expenditures. ment is highly motivated to find any possible solution to counter these escalating costs - hence the significant push for healthcare reform over the past 1-2 years. A large criticism of our current delivery system is that it is highly segmented. There are a large number of constituents (e.g. hospitals, physicians, insurers, state and federal agencies) that all operate independently with no central governing agency. In this model, there is no cohesive, unified effort to work together in a manner that would control costs. Enter the ACO model. The ACO model would ideally bring together the different constituents and components of care such that all parts are working together towards the common goal of providing quality care in a more cost efficient manner. According to the Department of Health and Human Services (HHS)

sample size, we won’t actually know which form of governance will be most effective. To many critics, that is a pretty big unknown given the amount of resources that are being allocated to the formation of ACOs. Another potential issue associated with the formation of ACOs is the push for hospital mergers and physician consolidation. As hospitals and health systems position themselves to become larger integrated systems, their increased market share will give them significant leverage in negotiations with insurers – which will subsequently drive up health costs as well. This also brings up the concern that anti-trust and anti-fraud laws (which aim to limit market powers that drive up prices and hinder competition) will be violated.

What is the potential impact on physicians? Given the aforementioned uncer-

tainty surrounding who will actually manage the ACO, the true impact that the ACO model will have on physicians remains to be seen. At this point, there are two opinions being formed. On one end of the spectrum, some physicians see the increased physician alignment and integration as a push towards standardized medicine and a loss of their independent judgment and influence. On the other hand, some physicians see the opportunity to obtain financial incentives for quality outcomes and/ or the ability to serve in a leadership capacity (if it is determined that ACOs are best run by physicians) as a major step in the right direction. Either way, given their place on the “front-line”, there’s no question that physicians will play a major role – if not the most important role – in determining the success of the ACO model. References 1. 42 U.S.C. § 1899

Jeff Hinds is a Vice President of Resolve Physician Agency, Inc. He is an expert in the physician job market. To discuss this article further please email jhinds@resolvephysicianagency.com.


Tax Planning for your Signing Bonus

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Whether a Physician is signing his or her first employment agreement out of training, or simply making a career change, tax planning is an essential element for a successful career. Many employment agreements for Physicians today will contain a signing bonus and the structure of the signing bonus may be a detail that goes overlooked. Unfortunately, this oversight could have negative tax consequences for an unwary Physician. Utopia in the realm of tax planning can be summed up in one simple phrase: accelerate deductions and defer income. Following this simple rule does not change the amount of your tax liability due to the government, but rather changes the timing of when that tax must be paid. Why does timing matter? The reasoning lies in a concept many of us were taught in middle school: the time value of money. For those of us a little foggy on our 8th grade math, think of it as an interest free loan from the government and notice the benefit of deferred income illustrated by these 2 examples:

Example 1 Jack is finishing his residency in

Orthopedic Surgery and signs an employment agreement with Slice and Dice Surgical Associates. Upon execution of the employment agreement he is paid a signing bonus of $50,000. Assuming Jack’s effective tax rate is 35%, his tax liability on

the signing bonus will be $17,500 ($50,000 x 0.35). The tax will be due the following April when Jack files his tax returns. Let’s assume Jack wants to invest the remaining $32,500 and his rate of return is 5% on that investment. After 6 years, his investment will have grown to $43,553. See Figure 1 to the right.

Example 2 Jill is finishing her residency in

Dermatology and signs an employment agreement with No More Moles, P.C. Upon execution of the employment agreement she is given a signing bonus of $50,000 which is structured in the form of a loan. The loan documents provide that each year she remains employed the practice will forgive $10,000 of the loan. Assuming Jill’s effective tax rate is also 35%, her tax liability on the signing bonus the following April will be $0. Why? A loan is not considered taxable income due to the borrower’s offsetting obligation to repay the loan. Rather, the forgiveness of the loan is the taxable event. Therefore, in each subsequent year when the practice forgives $10,000 of the loan, that amount will be included in Jill’s taxable income. Again, let’s assume that Jill wants to invest her signing bonus and her rate of return is 5%. After 6 years her investment will have grown to $46,698. See Figure 1 to the right.

As these examples illustrate, Jill comes out $3,145 ahead of Jack through proper tax planning. The examples above are intended to be a simple illustration of how proper tax planning can have a substantial impact on your future earnings. Please note that the information contained in this article should not be used in any actual transaction without the advice and guidance of a professional Tax Advisor who is familiar with all the relevant facts. Furthermore, the information contained here may not be applicable to or suitable for your specific circumstances or needs and may require consideration of other matters. If you have questions pertaining to your individual situation, please feel free to contact Resolve Physician Agency and they can put you in touch with a tax professional.

Kyle Claussen is a Vice President of Resolve Physician Agency, Inc. He is also an attorney and has an LL.M. in Taxation. To discuss this article further please e-mail kclaussen@resolvephysicianage


Figure 1

Jack Year

Taxable Income

Tax Rate

Tax Liability

Amount to Invest

1

$50,000

35%

$17,500

$32,500

5%

$1,625

$34,125

2

-

-

$34,125

5%

$1,706

$35,831

3

-

-

$35,831

5%

$1,792

$37,623

4

-

-

$37,623

5%

$1,881

$39,504

5

-

-

$39,504

5%

$1,975

$41,479

6

-

-

$41,479

5%

$2,074

$43,553

Interest Rate Interest Gain

$17,500

Balance to Re-invest

$43,553

Jill Year

Taxable Income

Tax Rate

Tax Liability

Amount to Invest

1

0

35%

0

$50,000

5%

$2,500

$52,500

2

$10,000

35%

$3,500

$49,000

5%

$2,450

$51,450

3

$10,000

35%

$3,500

$47,950

5%

$2,398

$50,348

4

$10,000

35%

$3,500

$46,848

5%

$2,342

$49,190

5

$10,000

35%

$3,500

$45,690

5%

$2,284

$47,974

6

$10,000

35%

$3,500

$44,474

5%

$2,224

$46,698

$17,500

Interest Rate Interest Gain

Balance to Re-invest

$46,698


A New Three Letter Word

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Accountable Care Organizations. ACOs. Another new name to learn. Reminds me of the HMO days when we were first informed about these wonderful organizations that would oversee care, assure the patient received the best care and of course, reduced the fees paid to physicians. It was the first time I learned the Golden Rule of healthcare. he who owns the gold, RULES. Now we have accountable care, but to whom? We have always been accountable to our patients and their families, so what is new? Many are using the term enthusiasm in relationship to this new term, but I don’t hear that word in the world in which I work. I think consultants, bureaucrats and hospitals are using the term because it means revenue, control and power. Large systems are gearing up for this new age with meetings, seminars and consultants. Doctors are holding their collective breath and just doing what we do, seeing and caring for patients. Bundling is the new, old buzzword but simply means a large payment to a local organization from which physicians will be paid. Many hospital systems years ago thought this was a great idea and started their own HMOs. Years later, after millions of dollars of loss and alienated

Resolve Physician Agency

medical staffs, completely confused communities are still paying for this wonderful idea. Interestingly, the hospital based HMOs have basically disappeared. One thing I know for sure is that our patients will always need us. The complexity of healthcare will continue to increase from both a medical and business perspective, yet care still revolves around the doctor. We know what is best for our patients. The advocate for the physician is increasingly important in this changing world and we at RESOLVE are committed to the physician and their interests.

Sidney Christiansen, MD is the Founder and President of Resolve Physician Agency, Inc. To discuss this article further please e-mail sid@resolvephysicianagency.com

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Newsletter - April 2011