Rounds Online

By Kevin M. Reardon, CFP®, Member MD Preferred Financial Advisor Network

The great debate has begun pertaining the future direction of our healthcare system in the United States. Few would disagree that our healthcare system could be improved and that changes need to be made. However, rather than debate whether health coverage and patient care could be improved in a government controlled program, we instead would like to focus on the economics of nationalizing healthcare. Although the almighty dollar shouldn’t always be our primary focus, we can’t neglect the long term economic impacts of any legislation.

Right now, healthcare-related services consume over 15% of our Gross Domestic Product. Americans are spending a significant percentage of their family budgets to purchase health services. That number will continue to grow as the population ages and the cost of health services continues to go up.

Keep in mind that this significant outlay for healthcare isn’t all negative. The dollars we spend on healthcare go to people working in the healthcare field and to companies who sell healthcare goods and services. Obviously doctors, nurses, and other workers earn a living from our healthcare expenditures and they, in turn, invest into our economy when they own a home, purchase goods and services, save money into their retirement accounts, etc.

As opportunists, we can earn a return on our investment by purchasing publicly traded companies in the healthcare field. The healthcare sector is split into various sub-industry categories, including pharmaceutical, biomedical, medical devices, services, insurance, hospitals, and many other sub-categories. Many of these companies provide life-saving medical devices, prescription drugs, prosthetics, medical equipment, and countless other valuable goods and services. These companies frequently produce positive earnings through their innovations, research and development as they strive to serve the greater population. If the companies produce a product or service that isn’t desirable, or that is priced too high, we can choose not to buy it.

The Affordable Health Choices Act of 2009 would create a public health insurance alternative and require coverage for most Americans and from most employers. (continue reading…)

Interesting question…but it may be the wrong question. 

Most citizens have watched enough CNN coverage to have a general understanding of the process playing out in the Senate.  The Republicans have only 40 votes so they cannot defeat any Democratic bill.  However, in the Senate, it takes 60 votes to end debate on a bill so that it can be voted up or down.  And it is from the “filibuster” process that a minority draws its power.

A filibuster is nothing more than a process of endless debate carried out by a determined minority that has enough support to prevent “cloture.”  Cloture is the procedure that the majority uses to halt debate and bring the bill to a final vote.  Prior to 1975 it required a two thirds vote of all 100 Senators (67 votes) to achieve cloture.  In 1975 that number was reduced to three fifths (60 votes).  And that is where it stands today.

The Democratic Caucus controls 60 votes and could in theory vote cloture.  But two independents caucus with the Democrats and their votes are far from assured.  And there is considerable disention within the ranks on critical issues such as the public option, abortion and cost.  But lets assume for the sake of argument that in order to hold their 60 votes they drop the public option, offer moderate anti-abortion language and find a way to theoretically make the legislation revenue neutral.  And they vote cloture and bring the bill to the floor for an up or down vote.

They now need only 51 votes for passage and there is no question that it will pass.  But now things get very interesting and very tricky.  The bill now goes to a “conference committee” comprised of members from both houses.  They must hammer out a compromise between the bill passed by the House which does contain the public option and does contain very strong anti-abortion language and the one passed by the Senate.  There is a very good chance that the conference committee may write a report that reinserts the public option in the final draft of the bill and sends it back to the House and Senate for final consideration.

And here is where the Dems can stick it to the Republicans.  Because the Conference Committee Report is considered privilaged (a Senate concept that prevents any further amendments) the Democrats will no doubt vote the bill first in the House.  When they pass it as they surely will, the bill cannot be sent back to conference in the second house to vote.  Now the only option open is to try to filibuster the conference report.  But, if the Dems can show that the bill is really a budget resolution bill they can limit debate to only 10 hours. 

And even if that ploy fails, the Senate majority leader can simply refuse to bring any further legislation to the floor during debate…forcing the debate to go on continuously until all 40 opponents have had an opportunity to speak and then a vote can be forced.  The bottom line is that even with a limited victory in the Senate, Republicans may still be unable to prevent a “public option” from ending up on the President’s desk.  And you can be sure that he will complete the process.  A process that many fear will be the first step in a complete government takeover of healthcare.    Happy Holidays indeed.

Guest Contributor, David T. Mayes, MA, EA, CFP®

Starting in January 2010, practice owners who currently sponsor a retirement plan for themselves and their employees will have a new option to consider as an alternative to the ubiquitous 401(k). Commonly referred to as 414(x) or DB-K plans, this new option adds a defined benefit (pension) component to the more familiar 401(k). But, by combining the two, the administrative burden of operating separate plans is eliminated. These combined or hybrid plans were originally created under the Pension Protection Act of 2006, but were not slated to become effective until 2010.

If, as a practice owner, you would like to minimize your current taxes by setting aside as much as possible for retirement as well as attract and retain talented employees by offering valuable, significant retirement benefits, a DB-K plan may be a good alternative. Because of their defined benefit component, these plans allow for larger retirement plan contributions than 401(k) plans, helping to solve a couple of issues: 1) The practice owner’s need to maximize retirement plan contributions and 2) the employee’s desire for an additional source of guaranteed income to supplement social security.

In addition to simplifying administration by eliminating the need for separate 401(k) and pension plans, eligible combined plans are not subject to the administratively costly nondiscrimination or top-heavy testing imposed on the standard 401(k). This is because the 401(k) piece of the combined plan requires specific limits for employee salary deferrals and employer matching contributions. The DB-K plan requires automatic employee contributions equal to four percent of compensation, with the employer providing a 50% matching contribution. Employees may elect not to participate in the plan, or to have contributions made at a different rate.

The defined benefit portion of the plan provides for an annual retirement benefit equal to a percentage of the participant’s final average pay. The applicable percentage is determined by crediting each employee with 1 percent for each year of service, up to a maximum of 20%. Final average pay is defined as the period of consecutive years, up to a maximum of five, during which the participant had the greatest aggregate compensation. Because this formula requires larger contributions to the plan on behalf of older, higher-earning employees, the hybrid plan naturally generates substantial contributions for the benefit of the practice owners.

David T. Mayes, MA, EA, CFP® is a financial planner at Mackensen & Company, Inc., a fee-only financial planning firm in Hampton, NH. He is also a member of the National Association of Personal Financial Advisors (NAPFA) and the MD Preferred Financial Advisor Network. He can be reached at 603-926-1775 or david.mayes@mackensen.com.

The lack of honesty on both sides of the healthcare debate almost assures that any final program will be fatally flawed. The first thing any debate college debate coach teaches his or her students is that you cannot prepare to debate if you are going to ignore any of the pertinent issues. And yet or elected officials who spend most of their time debating one thing or another are intentionally ignoring some of the key issues facing successful healthcare reform.

Issue One – Tort Reform
The burden of defensive medicine and malpractice insurance is a major factor in the steady rise in healthcare costs. And yet the issue is off the table. We read no headlines. We hear no fiery statements for or against tort reform. It is simply being quietly ignored. Our thanks to the legal lobby.

Issue Two – Personal Responsibility
This country was built on the principle of hard work and personal responsibility. If a pioneer needed protection he built a sturdy house and kept his powder dry. If he needed the services of a physician, he found a way to pay for those services…even if it was with a chicken or a bag of grain. Exercise and a sensible diet was a part of every day life. No one considered themselves a victim. Today it would seem that everyone is a victim to one degree or another. A victim of greedy insurance companies, of greedy employers of the recession, the weather or the education system.

Issue Three – Supply and demand
In a capitalist economy one ignores supply and demand at their own peril. Right now there are too many patients demanding to much care from too few providers. The government wants to change the reality without addressing the forces at play. One cannot simply mandate lower costs and universal coverage. You can’t stuff 10 lbs of s… in a 5 lbs bag.

Issue Four – Rationing
This is truly a third rail. To even suggest that the natural result of a fixed supply of health resources means that someone will be denied something that they believe they need and someone else believes that they can do without. Rationing goes on right now. Health insurance companies deny coverage every day. Poor people do without every day. Doctors refuse new Medicaid patients everyday. How can we possibly strive for universal coverage without acknowledging the fact that there must be a process by which our limited resources are distributed?

Issue Five – Technology
Technology is a marvelous thing. One only needs to consider the computer on which you are reading this message and the internet that makes it possible. Medical technology is a voracious creature. Each new machine is bigger, faster, more complex, more capable and more expensive than the last. Every new pill has been developed through the expenditure of thousands if not millions of man hours with the use of the most sophisticated laboratories and equipment available. And each new pill is more effective and more expensive than the last. And with a pay as you go healthcare system, who can blame physicians, hospitals and patients from demanding the best of the best. But at what point will over use of the technology overwhelm the system?

Issue Six – Accepting the Inevitability Of Death
Every creature lives and dies. The human intellect has struggled with the meaning of life and the finality of death. Our machines and our doctors have expanded our life expectancies. But death still waits for each and every one of us. But with each new medical break through has come an expectation of the next. If we can live to be 85 why not 90…why not 100? But where is the point of diminishing returns? Who should decide how our medical resources are distributed? Is the life of a ten year old more worthy than that of a 90 year old? What percentage of resources should go to the oldest and what to the youngest? What percentage to the sickest and what to the healthy? And is it not reasonable that it is incumbent upon each of us to prepare for the end of life with grace and dignity and honesty?

There are a host of other important issues that are being ignored – or worse that are being hidden. Until we have an open and honest discussion of the facts that have brought us to this place, we will never find solutions that will take us where we wish to go.

The search for truth implies a duty. One must not conceal any part of what one has recognized to be true. –Albert Einstein

By Harry Salzman, President, Salzman Real Estate Services, Ltd

The prospect of relocating to a new city is overwhelming to most professionals. Unfortunately, many of the various tasks involved in the relocation process must be accomplished while you are either still working full-time at your present practice, or are about to complete your medical training. To make matters worse, you must now deal ‘long-distance’ with individuals and service providers that you have never even met.

The “to do” list of tasks includes such things as:

• Selling your present home, if necessary
• Finding a new home, or whatever type of housing you might need
• Making arrangements for temporary housing in your new location, if necessary
• Selecting schools for your children (Perhaps including Special Education facilities)
• Shipping your pet and boarding him until you arrive
• Renting a car
• Finding employment for your spouse
• Hiring a Moving company (Better have a certified check ready when your furniture arrives, or they won’t unload the van)
• Selecting a new bank
• Finding reliable sources for services in your new location, including: Mortgage lenders, Home Inspectors, Plumbers, Electricians, Pet Care facilities, Landscape companies, Decorators, etc.

The Bad News is that if neither you nor your new employer have established a relationship with all of these local service suppliers, you could end up living in a motel until all of the loose ends are tied up.

The Good News is that there are full service relocation specialists out there who already have these working relationships in place. They can help you resolve all of these problems as quickly and as painlessly as possible.

Relocation Specialists are Realtors who are trained and experienced in taking charge of all of the various tasks involved in moving individuals and families from one city to another. They act as your agent during the relocation process. They have established close working relationships with honest, reliable, local service providers in your new neighborhood and can even coordinate the sale of your present home with the acquisition of your new home. These Relocation Specialists can coordinate all aspects of your move either directly with you or with your Residency Program Director or Coordinator, depending upon the administrative structure of your new employer.

Relocation Specialists are usually in the top 2% of all of the Realtors in their market. When looking for a Relocation Specialist, be sure to look for a “Certified Relocation Professional” (awarded by Worldwide ERC, the International Trade Association for the Relocation industry). Your relocation specialist should work with a firm that is a member of the Relocation Directors Council, the organization for Relocation Directors and Broker/Owners of Real Estate Companies committed to Corporate Relocation.

One exceptional resource for any physician contemplating relocation would be Leading Real Estate Companies of the World, the largest, Independent group of Real Estate companies (approaching 150,000 members, worldwide). Their members are committed to providing the highest level of professionalism in Real Estate sales and relocation services in all metropolitan markets.

Harry Salzman has been a leader in the Colorado Springs and Pikes Peak Area Real Estate market since 1972. In the course of these 37 years, Harry has built a huge network of mortgage lenders, banks, relocation specialists and satisfied clients by offering professional, ethical, thorough representation of buyers, sellers and relocation clients. He recently was named the exclusive MD Preferred Real Estate firm for the Colorado Springs area. No matter where you are moving from or moving to, we are committed to The Power of Relocation Innovation. Contact Salzman Real Estate Services, Ltd at: 800-677-MOVE or by Email at harry@harrysalzman.com.

By Tim Russo, President, US Cardiology Associates

Information is the key to success when a practice opportunity comes along.  When entering the interview process a candidate can expect the practice to have their list of questions in hand.  It is equally important that the physician candidate be prepared to gather the information he will need to make a career decision.  How much, how long, how many are questions that usually come to mind: 

• What benefits does the health system offer?
• How many hours do the doctors work?
• What income can an associate expect?
• What income can a partner expect?
• How long is the track to partnership?
• Is there a buy-in?
• Is there a buy-out when older partners retire?
• Who pays for the buy-out?
• How is the call schedule determined?

But a candidate should not overlook important organizational and strategic considerations. The internet is an important resource. Google the organization to gather additional data.  Visit the hospital or practice web site.  Use both the web browser and the news browser for stories that may have appeared in the press.  I like to call these questions ‘fit in’ questions:

• Has your education and training prepared you to perform the procedures that the practice or hospital currently perform? 
• Do you possess skill sets that can bring new patients and new procedures to the group?
• Is the group prepared to provide marketing and technology support to help you build your practice?
• Have any partners left the practice recently?
• Why did they leave?
• Does the community need another doctor in your specialty?

And of course there are the family questions:

• Are the schools exceptional?
• Are there private as well as public school options?
• Are the neighborhoods safe and inviting?
• Are real estate values affordable?
• Are there cultural and entertainment opportunities for every member of your family?
• Does the practice or hospital offer a family support system?

Accepting a first practice opportunity out of medical training or relocating to accept a new career opportunity are life changing commitments.  Make sure you have a clear picture of what the employer is looking for in the long run.  Most groups invest in physicians who will be able to contribute to the practice on both a clinical and administrative level.  Expressing a willingness to work hard at building a secure future for the practice may separate you from other candidates.

Make sure you do your home work.  The time you spend before you arrive for the interview can be as important as the time you spend at the interview.

Tim Russo is an experienced physician practice administrator/medical group manager and President of U.S. Cardiology, a recruiting firm specializing in cardiologists.  A graduate of the University of Southern California’s Master of Health Administration program and member of MGMA, he has recruited doctors from both sides of the table - on behalf of doctors and on behalf of medical groups and hospitals as an in-house recruiter - and has developed and managed medical groups.