NEWS AND VIEWS FOR PTs
A complimentary newsletter from
MAILLY INGLETT & BARMAK, LLC
Educators and Consultants to Physical Therapists
JUNE, 2011 - Volume 2, Issue 6 |
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Succession planning is the process of preparing to hand over control of your business to others in a way that is the least disruptive to the business's operations and value. This is why having a formal, written succession plan is so very important.
A succession plan is important so that as an owner you can easily transition out of your practice for reasons such as loss of passion, burnout, death, disability, or for financial reasons. Succession planning takes time and effort, but you need to start the process as soon as possible. The ideal time would be to put a succession plan in place when you first open your practice. If you are already practicing, put a succession plan in place immediately.
There are many important things to be considered when developing a succession plan. For example, you need to consider if you want to transfer ownership to employees versus another clinician-owned or corporate-owned provider. You must also consider the importance of employee retention, you must perform an appropriate business valuation, and you need to consider the tax implications of a potential sale in consultation with your tax advisor.
Some of the important steps that need to be taken for succession planning are to develop specific job descriptions for your employees, develop a business plan, value your business, plan an exit strategy, meet with potential successors, and choose the best strategy to use to transfer your assets to others.
Many individuals start a practice with their main goal to grow the practice entity so that they might sell it later on for a profit. This is one on the central reasons for starting or investing in any business venture. Others value the importance of a practice and do not look at it as a business at all, and want to facilitate transition to a new physical therapist and not just to the highest bidder, often a corporation or physician.
One critical step is to determine what your practice entity is truly worth. This is not always as simple and obvious as it may appear to many Physical Therapists, mainly because of a lack of business, financial and legal knowledge. For this reason, it is imperative that you consult a team of individuals who will be able to value your practice entity, which in many ways is distinctly different than valuing any other type of business entity. Certainly, you may have tangible assets in terms or supplies and equipment, and other things that may need to be considered such as managed care contracts, but the most important likely asset is what is termed as "goodwill".
"Goodwill" is an intangible asset that arises as a result of the reputation and name recognition that a particular company or business has developed over a period of time. Referral sources, as well as patients, will utilize a practice because of the individual that owns that practice and the services they provide. Carrying on that name can be a very valuable asset and is attractive to any buyer. Therefore, the simplest formula that often needs to be utilized would be....A/R + equipment + goodwill = practice value.
You may have several choices that can be made in regards to transitioning out of your practice voluntarily, depending upon your particular State laws.
- You can close the doors, sell the equipment, collect the accounts receivable and pay off debt.
- You can sell the practice to a corporate entity, with or without an earn-out.
- You can sell the practice to an outside physical therapist or physical therapist-owned organization, with or without an earn-out.
- You can sell the practice to valued and mentored employees, minority partners, or stockholders.
- You can create a passive investment instrument wherein the practice owner retains part or all of the ownership, but has others run the operation.
The earn-out concept is very important for the buyer, keeping the seller on in some capacity to facilitate smooth transition. Many sellers do not want to be involved in an earn-out because they may be asked to do things that they may not agree with. We know of physical therapists that sold their practices back in the mid-80s to large corporations, and gave up their one third earn-out share because they were being asked to perform physical therapy in a way that was not only unethical, but possibly unlawful.
If you decide to bring in a new partner from the outside, it is imperative that you have a buy-sell agreement, as well as an appropriate practice valuation. The buy-sell agreement should be agreed upon by both parties, with input from their advisors. The agreement should specifically spell out what occurs upon death, disability, and dissolution. The buy-out agreement should be workable with reasonable outcomes to avoid future conflict. If your decision is to sell the practice, you will need specific policies and procedures, employment contracts with a non-compete clause, with a specific structured buy-out agreement. One interesting method that has been utilized is called the "rollup", which is a strategy for buying and combining a series of small businesses in the same or closely-related markets, into a single large business. This concept can be used for growth purposes, but also can be used to position your practice for sale.
One very important realization is that future practice growth will increasingly result from the efforts of others, rather than the owner's involvement. It can often be very difficult for sellers to accept that a practice entity will likely be worth more to others as they start to step away and distance themselves from everyday operations during the transition phase of the sale.
Another important thing to consider would be how you might choose your partners or staff. You need to determine if you really want relatives to work for you, which can be a cause for an entirely different set of problems. If you are picking business partners, you should seek differing talents with common goals, and if a partner has capital to invest that would be extremely helpful as well.
Practice protection has to be considered in consultation with your insurance consultant. Things to be considered would include key man insurance, life insurance, disability insurance, business overhead expense insurance and estate planning. There have been instances of practice owners passing away, only to find out that they cannot bequeath their practice to a family member because they would not be able to run the practice without violating practice structure statutes. It is illegal for a layperson to own physical therapy practice in NJ, for example.
We can't emphasize enough the extreme importance of obtaining competent consultants; including an attorney, accountant, insurance professional, retirement planning consultant, practice appraiser and, last but not least, a physical therapist consultant who understands the practice of physical therapy in your specific state.
In conclusion, succession planning is an extremely important aspect to protect the future of any practice, and to determine exactly what will occur when it comes time to retire, or if disability or death occurs. It's extremely important that such planning be done upon inception of the practice, or as soon as possible thereafter. You will need to develop a business plan, with specific goals based on your desires and needs. It is imperative that you put together a team of competent consultants that can help you make the best decisions possible, and to assist you in reaping the rewards for the time and effort you have put into developing and growing your practice. You have worked hard for your entire life, and are entitled to protect your retirement, or to pass your assets along to your family members.
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Question:
Just wondering if you knew of any HIPPA issues with utilizing e-mail to communicate with MD's regarding patient status?
Response:
This specific question is addressed by the U.S. Office for Civil Rights, the federal agency with responsibility for enforcement of the privacy and security rules of the Health Insurance Portability and Accountability Act (HIPAA). As you see, providers must "apply reasonable safeguards" when using e-mail for such communications, but they are not prohibited from doing so.
Does the HIPAA Privacy Rule permit a covered health care provider to e-mail or otherwise electronically exchange protected health information (PHI) with another provider for treatment purposes?
Answer: Yes. The Privacy Rule allows covered health care providers to share PHI electronically (or in any other form) for treatment purposes, as long as they apply reasonable safeguards when doing so. Thus, for example, a physician may consult with another physician by e-mail about a patient's condition, or health care providers may electronically exchange PHI to and through a health information organization (HIO) for patient care.
Source: http://www.hhs.gov/ocr/privacy/hipaa/faq/health_information_technology/568.html
Question:
My office continues to get pounded for copies of notes from attorneys. What is the current billing procedure for our time, paper, postage etc....?
Response:
NJ PT regulations specifically address this as outlined below. In short the maximum charge for all costs; including paper, postage, staff time and any other cost; is $100.00.
Reference:
13:39A-3.3 Release of patient record
(a) A licensed physical therapist shall provide one copy of the patient's record of physical therapy treatment within 15 days of a written request by the patient or any person whom the patient has designated to receive that record.
(b) Licensed physical therapists may require a record request to be in writing and may charge a fee for the reproduction of records, which shall be no greater than $1.00 per page or $100.00 for the entire record, whichever is less.
(If the record requested is less than 10 pages, the licensee may charge up to $10.00 to cover postage and the miscellaneous costs associated with retrieval of the record.) If the patient requests a summary in lieu of the actual record, the charge for the summary shall not exceed the cost that would be charged for the actual record.
(c) If the patient or a subsequent treating health care professional is unable to read the treatment record, either because it is illegible or prepared in a language other than English, the licensed physical therapist shall provide a transcription at no cost to the patient or the person requesting the record.
(d) Where the patient has requested the release of a professional treatment record or a portion thereof to a specified individual or entity, in order to protect the confidentiality of the records, the licensed physical therapist shall:
1. Secure and maintain a current written authorization. bearing the signature of the patient or an authorized representative;
2. Assure that the scope of the release is consistent with the request; and
3. Forward the records to the attention of the specific individual or entity identified and mark the material "Confidential."
(e) A licensed physical therapist shall not withhold or delay providing a record because the patient failed to pay for services rendered.
Question:
Is there another Malpractice Insurance provider for PT's other than HPSO??
Response:
There are a number of insurers who will underwrite professional liability (malpractice) policies for PTs besides HPSO. One such company is Marsh Affinity Services, which is sponsored by the Private Practice Section of APTA, if that is of interest to you. You might also consider contacting a local broker for additional assistance in locating one of many alternative carriers.
Information concerning Marsh can be accessed here: https://www.personal-plans.com/ppsapta/welcome.do
Question:
If the PT is OON for an insurance company and the insurance company reimburses only a small amount, like for only 1 CPT code and denies the rest of the CPT codes, is that the payment that the clinic needs to accept or can they balance bill the patient for the remainder of the bill?
Response:
If a provider is OON with a particular insurance company or plan they have no contract for either, and thus cannot be prohibited from balance billing patient for non-covered services. There is no law or regulation prohibiting balance billing in such circumstances; however PTs must notify patients that they will be billed for such non-covered services prior to delivering those services. This is not the only requirement that PTs have relative to financial dealings with patients, but the portion specific to your question is included below.
Reference:
N.J.A.C. 13:39A-3.4 financial arrangements with clients and third party payors
(b) Prior to the initiation of physical therapy, the licensed physical therapist or the licensed physical therapist's designee shall explain to the patient in an understandable manner the financial arrangements. The information provided to the patient shall include, but not be limited to:
1. The fee for services or the basis for determining the fee to be charged;
2. Whether the licensee will accept installment payments or assignment of benefits from a third party payor;
3. That insurance coverage may not be available in all circumstances; and
4. The financial consequences, if any, of missed sessions.
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Mailly Inglett & Barmak, LLC |
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Ken Mailly, PT, MPA, NJ Lic. # NJ40QAOO335900
Ken is a graduate of the State University of New York at Downstate Medical Center, and completed his Master's in Public Administration at Seton Hall University, with a concentration in Health Care Policy and Management. He is also certified as an Ergonomic Specialist, and as a Rehabilitation Agency Medicare Surveyor.
In addition to his graduate studies, with well over 2,500 hours of continuing physical therapy education, Ken has amassed an extremely diverse and extensive knowledge of the clinical practice of physical therapy, rehabilitation, and practice management. Ken's primary clinical focus is in orthopedics, chronic soft tissue disorders, and management of patients with bleeding disorders.
Along with this clinical knowledge base, Ken has devoted the last 10 years to the study of regulation, legislation, and reimbursement for physical therapy & rehabilitation services. He has served as an expert witness, on behalf of both plaintiffs and defendants, in numerous malpractice cases. He has also been consulted on state, federal, and third party payer inquiries regarding physical therapy and rehabilitation billing, regulatory, and legal issues.
Ken is a partner in Mailly & Inglett Consulting. His focus is on compliance with professional standards, state and federal regulations, as well as practice management strategies.
Barry G. Inglett, PT, CHT, Cert. MDT, NJ Lic # NJ40QA00146200
Barry is a graduate of Columbia University, a Certified Hand Therapist and a Credentialed McKenzie Therapist. He is a physical therapist and co-owner of Wayne Physical Therapy & Spine Center, a private practice established in 1977. Barry is also a partner in Mailly & Inglett Consulting, working with both physical therapists and Payers.
Barry is a guest lecturer for UMDNJ's Physical Therapy Program as well as a clinical instructor for several colleges including Columbia University, New York University, Temple University, Stockton State College, Kean College and the University of Medicine and Dentistry's Physical Therapy Program. He is also an instructor for HMW (Human Mechanical Wellness) Seminars, specializing in mechanically oriented treatment programs for the spine and extremities.
Barry has been retained by numerous insurance companies as well as the New Jersey Attorney General's Office offering expert witness testimony in physical therapy practice. He has been involved in utilization review and reimbursement issues in physical therapy for over 20 years. Barry also instituted, and was retained as the lead expert, in the largest PT fraud case in NJ history (Cobo v. MTF). He also served as a physical therapy consultant from 1997-2005 for Horizon Healthcare running the NJ Plus pre-certification program. Barry has served on the New Jersey Board of Physical Therapy Examiners in the past for eight years and has also served as the Chairman of the Board of Physical Therapy Examiners.
David S. Barmak, Esq.
David S. Barmak, Esq. received a JD from Cornell University and a BA from Duke University. The Law Offices Of David S. Barmak, LLC was established in 1984. David is licensed to practice law and has clients in the states of New York, New Jersey, Pennsylvania and Connecticut.
David's legal focus is in the areas of corporate compliance, risk management, human resources and operational legal affairs.
David has a strong background in operations, having served as both the Associate Administrator and General Counsel for a large New York Certified Home Health Agency, initiating and directing a New York Licensed Home Care Services Agency as well as owning and operating a Durable Medical Equipment company. David also provides defense of enterprises, directors, officers and other professionals accused of misconduct.
For more information, please contact us:
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| © Copyright, 2011. Mailly Inglett & Barmak, LLC. All rights reserved. No portion of these materials may be reproduced by any means without the advance permission of the author. |
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