The Office

A generation ago, the sale of a medical practice was much like the sale of any other business: A retiring physician would sell his or her practice to a young doctor, and the practice would continue on as before. Occasionally that still happens, but changes in the business of medicine – most significantly the growth of managed care – have had a big impact on the way medical practices are bought and sold.

For one thing, there are far fewer solo practitioners these days, and polls indicate that most young physicians intend to continue that trend. The buyer of a medical practice today is more likely to be an institution, such as a hospital, an HMO, or a large practice group, rather than an individual physician.

Also, because the rules governing such sales have become so numbingly complex, the services of expert (and expensive) third parties are essential.

While these issues may complicate matters, there is still a market for the sale of medical practices. However, you must do everything possible to ensure you identify the best possible buyer and structure the best deal.

The first hurdle is the accurate valuation of your practice, which was covered in some detail last month. For the protection of both parties, it is important that the appraisal be done by an experienced and neutral financial consultant, that all techniques used in the valuation be divulged and explained, and that documentation be supplied to support the conclusions reached.

Keep in mind that the valuation will not necessarily equal the purchase price; other factors may need to be considered before a final price can be agreed upon. Keep in mind, too, that there may be legal constraints on the purchase price. For example, if the buyer is a nonprofit corporation, such as a hospital or HMO, by law it cannot pay in excess of fair market value for the practice – which may rule out any valuation of “good will.” In some states, such as mine (New Jersey), the purchase of private practices by hospitals is prohibited altogether – so you might need to consider a long-term lease rather than a sale.

Once a value has been agreed upon, you must consider how the transaction will be structured. The most popular structures include purchase of assets, purchase of corporate stock, or merger.

Buyers, especially institutional buyers, prefer to purchase assets, because it allows them to pick and choose only those items that have value to them. This can leave the seller with a bunch of “odd lots” to dispose of. But depending on the circumstances, an asset sale may be to the advantage of both parties.

Sellers typically prefer to sell stock because it allows them to sell their entire practice, which is often worth more than the sum of its parts, and often provides tax advantages.

The third option, merger, continues to grow in popularity. I’ll cover some of the more common merger variants in a future column.

Tax issues must always be considered. Most private practices are corporations, and the sale of corporate stock will result in a long-term capital gain which will be taxed (under current law) at 28%. As the saying goes, it’s not what you earn, it’s what you keep; so it may benefit the seller to accept a slightly lower price if the sale can be structured to provide significantly lower tax treatment. However, any gain that does not qualify as a long-term capital gain will be taxed as regular income – currently around 40% – plus a social security tax of about 15%.

Payment in installments is a popular way to defer taxes, since they are incurred on each installment as it is paid. However, such payments may be mistaken by the Internal Revenue Service for payments for referrals, which is illegal. And there is always the problem of making certain all the payments are made.

The seller may wish to continue working at the practice as an employee, and this is often to the buyer’s advantage as well. Transitioning to new ownership in stages often maximizes the value of the business by improving patient retention, and allows patients to become accustomed to the transition. However, care must be taken, with the aid of good legal advice, to structure such an arrangement in a way that minimizes concerns of fraud and abuse.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is the author of numerous articles and textbook chapters, and is a longtime monthly columnist for Skin & Allergy News. Additional columns are available online at edermatologynews.com.

A generation ago, the sale of a medical practice was much like the sale of any other business: A retiring physician would sell his or her practice to a young doctor, and the practice would continue on as before. Occasionally that still happens, but changes in the business of medicine – most significantly the growth of managed care – have had a big impact on the way medical practices are bought and sold.

For one thing, there are far fewer solo practitioners these days, and polls indicate that most young physicians intend to continue that trend. The buyer of a medical practice today is more likely to be an institution, such as a hospital, an HMO, or a large practice group, rather than an individual physician.

Also, because the rules governing such sales have become so numbingly complex, the services of expert (and expensive) third parties are essential.

While these issues may complicate matters, there is still a market for the sale of medical practices. However, you must do everything possible to ensure you identify the best possible buyer and structure the best deal.

The first hurdle is the accurate valuation of your practice, which was covered in some detail last month. For the protection of both parties, it is important that the appraisal be done by an experienced and neutral financial consultant, that all techniques used in the valuation be divulged and explained, and that documentation be supplied to support the conclusions reached.

Keep in mind that the valuation will not necessarily equal the purchase price; other factors may need to be considered before a final price can be agreed upon. Keep in mind, too, that there may be legal constraints on the purchase price. For example, if the buyer is a nonprofit corporation, such as a hospital or HMO, by law it cannot pay in excess of fair market value for the practice – which may rule out any valuation of “good will.” In some states, such as mine (New Jersey), the purchase of private practices by hospitals is prohibited altogether – so you might need to consider a long-term lease rather than a sale.

Once a value has been agreed upon, you must consider how the transaction will be structured. The most popular structures include purchase of assets, purchase of corporate stock, or merger.

Buyers, especially institutional buyers, prefer to purchase assets, because it allows them to pick and choose only those items that have value to them. This can leave the seller with a bunch of “odd lots” to dispose of. But depending on the circumstances, an asset sale may be to the advantage of both parties.

Sellers typically prefer to sell stock because it allows them to sell their entire practice, which is often worth more than the sum of its parts, and often provides tax advantages.

The third option, merger, continues to grow in popularity. I’ll cover some of the more common merger variants in a future column.

Tax issues must always be considered. Most private practices are corporations, and the sale of corporate stock will result in a long-term capital gain which will be taxed (under current law) at 28%. As the saying goes, it’s not what you earn, it’s what you keep; so it may benefit the seller to accept a slightly lower price if the sale can be structured to provide significantly lower tax treatment. However, any gain that does not qualify as a long-term capital gain will be taxed as regular income – currently around 40% – plus a social security tax of about 15%.

Payment in installments is a popular way to defer taxes, since they are incurred on each installment as it is paid. However, such payments may be mistaken by the Internal Revenue Service for payments for referrals, which is illegal. And there is always the problem of making certain all the payments are made.

The seller may wish to continue working at the practice as an employee, and this is often to the buyer’s advantage as well. Transitioning to new ownership in stages often maximizes the value of the business by improving patient retention, and allows patients to become accustomed to the transition. However, care must be taken, with the aid of good legal advice, to structure such an arrangement in a way that minimizes concerns of fraud and abuse.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is the author of numerous articles and textbook chapters, and is a longtime monthly columnist for Skin & Allergy News. Additional columns are available online at edermatologynews.com.

A generation ago, the sale of a medical practice was much like the sale of any other business: A retiring physician would sell his or her practice to a young doctor, and the practice would continue on as before. Occasionally that still happens, but changes in the business of medicine – most significantly the growth of managed care – have had a big impact on the way medical practices are bought and sold.

For one thing, there are far fewer solo practitioners these days, and polls indicate that most young physicians intend to continue that trend. The buyer of a medical practice today is more likely to be an institution, such as a hospital, an HMO, or a large practice group, rather than an individual physician.

Also, because the rules governing such sales have become so numbingly complex, the services of expert (and expensive) third parties are essential.

While these issues may complicate matters, there is still a market for the sale of medical practices. However, you must do everything possible to ensure you identify the best possible buyer and structure the best deal.

The first hurdle is the accurate valuation of your practice, which was covered in some detail last month. For the protection of both parties, it is important that the appraisal be done by an experienced and neutral financial consultant, that all techniques used in the valuation be divulged and explained, and that documentation be supplied to support the conclusions reached.

Keep in mind that the valuation will not necessarily equal the purchase price; other factors may need to be considered before a final price can be agreed upon. Keep in mind, too, that there may be legal constraints on the purchase price. For example, if the buyer is a nonprofit corporation, such as a hospital or HMO, by law it cannot pay in excess of fair market value for the practice – which may rule out any valuation of “good will.” In some states, such as mine (New Jersey), the purchase of private practices by hospitals is prohibited altogether – so you might need to consider a long-term lease rather than a sale.

Once a value has been agreed upon, you must consider how the transaction will be structured. The most popular structures include purchase of assets, purchase of corporate stock, or merger.

Buyers, especially institutional buyers, prefer to purchase assets, because it allows them to pick and choose only those items that have value to them. This can leave the seller with a bunch of “odd lots” to dispose of. But depending on the circumstances, an asset sale may be to the advantage of both parties.

Sellers typically prefer to sell stock because it allows them to sell their entire practice, which is often worth more than the sum of its parts, and often provides tax advantages.

The third option, merger, continues to grow in popularity. I’ll cover some of the more common merger variants in a future column.

Tax issues must always be considered. Most private practices are corporations, and the sale of corporate stock will result in a long-term capital gain which will be taxed (under current law) at 28%. As the saying goes, it’s not what you earn, it’s what you keep; so it may benefit the seller to accept a slightly lower price if the sale can be structured to provide significantly lower tax treatment. However, any gain that does not qualify as a long-term capital gain will be taxed as regular income – currently around 40% – plus a social security tax of about 15%.

Payment in installments is a popular way to defer taxes, since they are incurred on each installment as it is paid. However, such payments may be mistaken by the Internal Revenue Service for payments for referrals, which is illegal. And there is always the problem of making certain all the payments are made.

The seller may wish to continue working at the practice as an employee, and this is often to the buyer’s advantage as well. Transitioning to new ownership in stages often maximizes the value of the business by improving patient retention, and allows patients to become accustomed to the transition. However, care must be taken, with the aid of good legal advice, to structure such an arrangement in a way that minimizes concerns of fraud and abuse.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is the author of numerous articles and textbook chapters, and is a longtime monthly columnist for Skin & Allergy News. Additional columns are available online at edermatologynews.com.

The Food and Drug Administration recently approved another weight-loss drug (Contrave), a combination of naltrexone (indicated for opioid dependence) and bupropion (indicated for depression). This is the third weight-loss drug approved in the past 2 years. The FDA previously approved lorcaserin (Belviq) and topiramate/phentermine (Qsymia). This approval activity signals pharmaceutical interest in a multibillion dollar weight loss industry and perhaps, maybe less so, the FDA’s recognition of our public health crisis.

For patients who meet criteria for the use of these medications, they should be offered if they can be afforded. However, these medications may make patients behave differently.

It’s called “license.”

License is the psychological phenomenon in which people who feel they have made progress toward a goal feel liberated to make an incongruent choice. Think of a patient interested in losing weight who now takes a weight-loss pill. Despite not having lost any weight yet and perhaps just after taking the first pill, the patient then makes a choice to consume a high-calorie dessert.

Here are some data that support that this could be happening.

One team of investigators randomized subjects to being informed they were taking a placebo or a weight-loss supplement (which was actually the same placebo tablet as in the other study arm). After receiving the supplement, participants were allowed access to a reward buffet lunch at which their food consumption was recorded. Compared with controls, participants receiving a purported weight-loss supplement ate more food at the reward buffet. This effect seemed to occur through a perceived sense that they were making progress toward their weight-loss goal by taking the pill (Nutrition 2014;30:1007-14).

This is critical for us to think about and incorporate into our clinical teaching when prescribing these medications. Psychological liberation threatens any health gains we can make at a population level with any weight-loss approach. We need to help our patients understand that these medications should be used in combination with sustainable lifestyle changes or they may as well be taking a placebo.

Dr. Ebbert is professor of medicine, a general internist at the Mayo Clinic in Rochester, Minn., and a diplomate of the American Board of Addiction Medicine. The opinions expressed are those of the author. The opinions expressed in this article should not be used to diagnose or treat any medical condition nor should they be used as a substitute for medical advice from a qualified, board-certified practicing clinician.

The Food and Drug Administration recently approved another weight-loss drug (Contrave), a combination of naltrexone (indicated for opioid dependence) and bupropion (indicated for depression). This is the third weight-loss drug approved in the past 2 years. The FDA previously approved lorcaserin (Belviq) and topiramate/phentermine (Qsymia). This approval activity signals pharmaceutical interest in a multibillion dollar weight loss industry and perhaps, maybe less so, the FDA’s recognition of our public health crisis.

For patients who meet criteria for the use of these medications, they should be offered if they can be afforded. However, these medications may make patients behave differently.

It’s called “license.”

License is the psychological phenomenon in which people who feel they have made progress toward a goal feel liberated to make an incongruent choice. Think of a patient interested in losing weight who now takes a weight-loss pill. Despite not having lost any weight yet and perhaps just after taking the first pill, the patient then makes a choice to consume a high-calorie dessert.

Here are some data that support that this could be happening.

One team of investigators randomized subjects to being informed they were taking a placebo or a weight-loss supplement (which was actually the same placebo tablet as in the other study arm). After receiving the supplement, participants were allowed access to a reward buffet lunch at which their food consumption was recorded. Compared with controls, participants receiving a purported weight-loss supplement ate more food at the reward buffet. This effect seemed to occur through a perceived sense that they were making progress toward their weight-loss goal by taking the pill (Nutrition 2014;30:1007-14).

This is critical for us to think about and incorporate into our clinical teaching when prescribing these medications. Psychological liberation threatens any health gains we can make at a population level with any weight-loss approach. We need to help our patients understand that these medications should be used in combination with sustainable lifestyle changes or they may as well be taking a placebo.

Dr. Ebbert is professor of medicine, a general internist at the Mayo Clinic in Rochester, Minn., and a diplomate of the American Board of Addiction Medicine. The opinions expressed are those of the author. The opinions expressed in this article should not be used to diagnose or treat any medical condition nor should they be used as a substitute for medical advice from a qualified, board-certified practicing clinician.

The Food and Drug Administration recently approved another weight-loss drug (Contrave), a combination of naltrexone (indicated for opioid dependence) and bupropion (indicated for depression). This is the third weight-loss drug approved in the past 2 years. The FDA previously approved lorcaserin (Belviq) and topiramate/phentermine (Qsymia). This approval activity signals pharmaceutical interest in a multibillion dollar weight loss industry and perhaps, maybe less so, the FDA’s recognition of our public health crisis.

For patients who meet criteria for the use of these medications, they should be offered if they can be afforded. However, these medications may make patients behave differently.

It’s called “license.”

License is the psychological phenomenon in which people who feel they have made progress toward a goal feel liberated to make an incongruent choice. Think of a patient interested in losing weight who now takes a weight-loss pill. Despite not having lost any weight yet and perhaps just after taking the first pill, the patient then makes a choice to consume a high-calorie dessert.

Here are some data that support that this could be happening.

One team of investigators randomized subjects to being informed they were taking a placebo or a weight-loss supplement (which was actually the same placebo tablet as in the other study arm). After receiving the supplement, participants were allowed access to a reward buffet lunch at which their food consumption was recorded. Compared with controls, participants receiving a purported weight-loss supplement ate more food at the reward buffet. This effect seemed to occur through a perceived sense that they were making progress toward their weight-loss goal by taking the pill (Nutrition 2014;30:1007-14).

This is critical for us to think about and incorporate into our clinical teaching when prescribing these medications. Psychological liberation threatens any health gains we can make at a population level with any weight-loss approach. We need to help our patients understand that these medications should be used in combination with sustainable lifestyle changes or they may as well be taking a placebo.

Dr. Ebbert is professor of medicine, a general internist at the Mayo Clinic in Rochester, Minn., and a diplomate of the American Board of Addiction Medicine. The opinions expressed are those of the author. The opinions expressed in this article should not be used to diagnose or treat any medical condition nor should they be used as a substitute for medical advice from a qualified, board-certified practicing clinician.

At least once during your career, you probably will have to put a value on your practice. The need arises more often than you might think – if you sell it, of course (more on that next month); but also for estate planning, preparation of financial statements, or divorce negotiations; or when an associate joins or leaves your office; or if you have occasion to combine or partner your practice with one or more others, as I will discuss in detail in a future issue.

As you might guess, a medical practice is trickier to value than an ordinary business, and usually requires the services of an experienced professional appraiser. Entire books have been written about the process, so I can’t hope to cover it completely in a few hundred words, but three basic yardsticks are essential for a practice appraisal:

Tangible assets: equipment, cash, accounts receivable, and other property owned by the practice.

Liabilities: accounts payable, outstanding loans, and anything else owed to others.

Intangible assets: sometimes called “good will” – the reputation of the physicians, the location and name recognition of the practice, the loyalty and volume of patients, and other, well, intangibles.

Armed with those numbers, an appraiser can then determine the “equity,” or book value, of the practice.

Valuing tangible assets is comparatively straightforward, but there are several ways to do it, and when reviewing a practice appraisal you should ask which of them was used. Depreciated value is the book value of equipment and supplies as determined by their purchase price, less the amount their value has decreased since purchase. Remaining useful life value estimates how long the equipment can be expected to last. Market (or replacement) value is the amount it would cost on the open market to replace all equipment and supplies.

Intangible assets are more difficult to value. Many components are analyzed, including location, interior and exterior decor, accessibility to patients, age and functional status of equipment, systems in place to promote efficiency, reasons patients come back (if they do), and the overall reputation of the practice in the community. Other important factors include the “payer mix” (what percentage pays cash, how many third-party contracts are in place and how well they pay, etc.), the extent and strength of the referral base, and the presence of clinical studies or other supplemental income streams.

It is also important to determine to what extent intangible assets are transferrable. For example, unique skills with a laser, neurotoxins, or filler substances (or extraordinary personal charisma) may increase your practice’s value to you, but they are worthless to the next owner, and he or she will be unwilling to pay for them unless your services become part of the deal.

Once again, there are many ways to estimate intangible asset value, and once again you should ask which were used. Cash flow analysis works on the assumption that cash flow is a measure of intangible value. Capitalization of earnings puts a value, or capitalization, on the practice’s income streams using a variety of assumptions. Guideline comparison uses various databases to compare your practice with other, similar ones that have changed hands in the past.

Two newer techniques, which some consider to provide a better estimate of intangible assets, are the replacement method, which estimates the costs of starting the practice over again in the current market; and the excess earnings method, which measures how far above average your practice’s earnings are (and thus its overall value).

Asset-based valuation is the most popular, but by no means the only, method available. Income-based valuation looks at the source and strength of a practice’s income stream as a creator of value, as well as whether or not the income stream under a different owner would mirror its present one. This in turn becomes the basis for an understanding of the fair market value of both tangible and intangible assets. Market valuation combines the asset-based and income-based approaches, along with an analysis of sales and mergers of comparable practices in the community, to determine the value of a practice in its local market.

Whatever methods are used, it is important that the appraisal be done by an experienced financial consultant, that all techniques used in the valuation be divulged and explained, and that documentation is supplied to support the conclusions reached. This is especially important if the appraisal will be relied upon in the sale or merger of the practice. I’ll talk about sales and mergers over the next several columns.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is the author of numerous articles and textbook chapters, and is a longtime monthly columnist for Skin & Allergy News.

At least once during your career, you probably will have to put a value on your practice. The need arises more often than you might think – if you sell it, of course (more on that next month); but also for estate planning, preparation of financial statements, or divorce negotiations; or when an associate joins or leaves your office; or if you have occasion to combine or partner your practice with one or more others, as I will discuss in detail in a future issue.

As you might guess, a medical practice is trickier to value than an ordinary business, and usually requires the services of an experienced professional appraiser. Entire books have been written about the process, so I can’t hope to cover it completely in a few hundred words, but three basic yardsticks are essential for a practice appraisal:

Tangible assets: equipment, cash, accounts receivable, and other property owned by the practice.

Liabilities: accounts payable, outstanding loans, and anything else owed to others.

Intangible assets: sometimes called “good will” – the reputation of the physicians, the location and name recognition of the practice, the loyalty and volume of patients, and other, well, intangibles.

Armed with those numbers, an appraiser can then determine the “equity,” or book value, of the practice.

Valuing tangible assets is comparatively straightforward, but there are several ways to do it, and when reviewing a practice appraisal you should ask which of them was used. Depreciated value is the book value of equipment and supplies as determined by their purchase price, less the amount their value has decreased since purchase. Remaining useful life value estimates how long the equipment can be expected to last. Market (or replacement) value is the amount it would cost on the open market to replace all equipment and supplies.

Intangible assets are more difficult to value. Many components are analyzed, including location, interior and exterior decor, accessibility to patients, age and functional status of equipment, systems in place to promote efficiency, reasons patients come back (if they do), and the overall reputation of the practice in the community. Other important factors include the “payer mix” (what percentage pays cash, how many third-party contracts are in place and how well they pay, etc.), the extent and strength of the referral base, and the presence of clinical studies or other supplemental income streams.

It is also important to determine to what extent intangible assets are transferrable. For example, unique skills with a laser, neurotoxins, or filler substances (or extraordinary personal charisma) may increase your practice’s value to you, but they are worthless to the next owner, and he or she will be unwilling to pay for them unless your services become part of the deal.

Once again, there are many ways to estimate intangible asset value, and once again you should ask which were used. Cash flow analysis works on the assumption that cash flow is a measure of intangible value. Capitalization of earnings puts a value, or capitalization, on the practice’s income streams using a variety of assumptions. Guideline comparison uses various databases to compare your practice with other, similar ones that have changed hands in the past.

Two newer techniques, which some consider to provide a better estimate of intangible assets, are the replacement method, which estimates the costs of starting the practice over again in the current market; and the excess earnings method, which measures how far above average your practice’s earnings are (and thus its overall value).

Asset-based valuation is the most popular, but by no means the only, method available. Income-based valuation looks at the source and strength of a practice’s income stream as a creator of value, as well as whether or not the income stream under a different owner would mirror its present one. This in turn becomes the basis for an understanding of the fair market value of both tangible and intangible assets. Market valuation combines the asset-based and income-based approaches, along with an analysis of sales and mergers of comparable practices in the community, to determine the value of a practice in its local market.

Whatever methods are used, it is important that the appraisal be done by an experienced financial consultant, that all techniques used in the valuation be divulged and explained, and that documentation is supplied to support the conclusions reached. This is especially important if the appraisal will be relied upon in the sale or merger of the practice. I’ll talk about sales and mergers over the next several columns.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is the author of numerous articles and textbook chapters, and is a longtime monthly columnist for Skin & Allergy News.

At least once during your career, you probably will have to put a value on your practice. The need arises more often than you might think – if you sell it, of course (more on that next month); but also for estate planning, preparation of financial statements, or divorce negotiations; or when an associate joins or leaves your office; or if you have occasion to combine or partner your practice with one or more others, as I will discuss in detail in a future issue.

As you might guess, a medical practice is trickier to value than an ordinary business, and usually requires the services of an experienced professional appraiser. Entire books have been written about the process, so I can’t hope to cover it completely in a few hundred words, but three basic yardsticks are essential for a practice appraisal:

Tangible assets: equipment, cash, accounts receivable, and other property owned by the practice.

Liabilities: accounts payable, outstanding loans, and anything else owed to others.

Intangible assets: sometimes called “good will” – the reputation of the physicians, the location and name recognition of the practice, the loyalty and volume of patients, and other, well, intangibles.

Armed with those numbers, an appraiser can then determine the “equity,” or book value, of the practice.

Valuing tangible assets is comparatively straightforward, but there are several ways to do it, and when reviewing a practice appraisal you should ask which of them was used. Depreciated value is the book value of equipment and supplies as determined by their purchase price, less the amount their value has decreased since purchase. Remaining useful life value estimates how long the equipment can be expected to last. Market (or replacement) value is the amount it would cost on the open market to replace all equipment and supplies.

Intangible assets are more difficult to value. Many components are analyzed, including location, interior and exterior decor, accessibility to patients, age and functional status of equipment, systems in place to promote efficiency, reasons patients come back (if they do), and the overall reputation of the practice in the community. Other important factors include the “payer mix” (what percentage pays cash, how many third-party contracts are in place and how well they pay, etc.), the extent and strength of the referral base, and the presence of clinical studies or other supplemental income streams.

It is also important to determine to what extent intangible assets are transferrable. For example, unique skills with a laser, neurotoxins, or filler substances (or extraordinary personal charisma) may increase your practice’s value to you, but they are worthless to the next owner, and he or she will be unwilling to pay for them unless your services become part of the deal.

Once again, there are many ways to estimate intangible asset value, and once again you should ask which were used. Cash flow analysis works on the assumption that cash flow is a measure of intangible value. Capitalization of earnings puts a value, or capitalization, on the practice’s income streams using a variety of assumptions. Guideline comparison uses various databases to compare your practice with other, similar ones that have changed hands in the past.

Two newer techniques, which some consider to provide a better estimate of intangible assets, are the replacement method, which estimates the costs of starting the practice over again in the current market; and the excess earnings method, which measures how far above average your practice’s earnings are (and thus its overall value).

Asset-based valuation is the most popular, but by no means the only, method available. Income-based valuation looks at the source and strength of a practice’s income stream as a creator of value, as well as whether or not the income stream under a different owner would mirror its present one. This in turn becomes the basis for an understanding of the fair market value of both tangible and intangible assets. Market valuation combines the asset-based and income-based approaches, along with an analysis of sales and mergers of comparable practices in the community, to determine the value of a practice in its local market.

Whatever methods are used, it is important that the appraisal be done by an experienced financial consultant, that all techniques used in the valuation be divulged and explained, and that documentation is supplied to support the conclusions reached. This is especially important if the appraisal will be relied upon in the sale or merger of the practice. I’ll talk about sales and mergers over the next several columns.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is the author of numerous articles and textbook chapters, and is a longtime monthly columnist for Skin & Allergy News.

Last year, when the Physician Payment Sunshine Act became law, I recommended that all physicians involved in any sort of financial relationship with the pharmaceutical industry review the data reported about them prior to public posting of the information. Since that posting is due to occur at the end of this month, a reminder is in order.

Under a new bureaucracy created by the Affordable Care Act – formally called the Open Payments program – all manufacturers of drugs, devices, and medical supplies covered by federal health care programs must report any financial interactions with physicians and teaching hospitals to the Centers for Medicare & Medicaid Services (CMS).

Reportable interactions include consulting; food; ownership or investment interest; direct compensation for speakers at education programs; and research. Compensation for conducting clinical trials must be reported, but will not be posted on the website until the product receives approval from the Food and Drug Administration or until 4 years after the payment, whichever is earlier. Payments for trials involving a new indication for an approved drug will be posted immediately.

There are a number of specific exclusions, such as certified and accredited continuing medical education activities funded by manufacturers, and product samples for patient use. Medical students and residents are excluded entirely.

Under the law, you are allowed to review your data and seek corrections before it is published. Publication is scheduled to occur on Sept. 30, so if you have not yet done this, there is no time to waste. Although you will have an additional 2 years to pursue corrections after the online content goes live, any erroneous information will remain on the site until corrections can be made, so the best time to find and fix errors is now.

If you don’t see drug reps, accept sponsored lunches, or give sponsored talks, don’t assume that you won’t be on the website. Check anyway; you might be indirectly involved in a compensation situation that you were not aware of, or you may have been reported in error.

To review your data, register at the CMS Enterprise Portal, and request access to the Open Payments system.

Once you are satisfied that your interactions have been reported accurately, the question of what effect the law will have on research, continuing education, and private practice remains. The short answer is that no one knows. Much will depend on how the public interprets the data – if they take notice at all.

Sunshine laws have been in effect for several years in six states: California, Colorado, Massachusetts, Minnesota, Vermont, and West Virginia; plus the District of Columbia. (Maine repealed its law in 2011.) Observers disagree on their impact. Studies in Maine and West Virginia showed no significant public reaction or changes in prescribing patterns, according to a 2012 article in Archives of Internal Medicine (Arch. Intern. Med. 2012;172:819-21).

Potential effects on physician-patient interactions are equally unclear. Do patients think less of doctors who accept the occasional industry-sponsored lunch for their employees? Do they think more of doctors who speak at meetings or conduct industry-sponsored clinical research? There are no objective data, as far as I know.

My guess is that attorneys, activists, and the occasional reporter will data-mine the website on a regular basis, and perhaps use their findings as ammunition in any agenda that they might be pushing, but few patients will ever bother to visit. Nevertheless, you should review each year’s reportage to ensure the accuracy of anything posted about you.

The data must be reported to CMS by March 31 each year, so you will need to set aside time each April or May to review it. If you have many or complex industry relationships, you should probably contact each company in January or February and ask to see the data before it is submitted. Then, review it again once CMS gets it, to be sure nothing was changed. A free app is available to help physicians track payments and other reportable industry interactions; search for "Open Payments" at your favorite app store.

Maintaining accurate financial records has always been important, but it will be even more so now, to effectively dispute any inconsistencies. While the extra work may turn out to have been unnecessary, it is still a prudent precaution, given the possible consequences of any increased government or public scrutiny that may (or may not) result.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is the author of numerous articles and textbook chapters, and is a long-time monthly columnist for Skin & Allergy News.

Last year, when the Physician Payment Sunshine Act became law, I recommended that all physicians involved in any sort of financial relationship with the pharmaceutical industry review the data reported about them prior to public posting of the information. Since that posting is due to occur at the end of this month, a reminder is in order.

Under a new bureaucracy created by the Affordable Care Act – formally called the Open Payments program – all manufacturers of drugs, devices, and medical supplies covered by federal health care programs must report any financial interactions with physicians and teaching hospitals to the Centers for Medicare & Medicaid Services (CMS).

Reportable interactions include consulting; food; ownership or investment interest; direct compensation for speakers at education programs; and research. Compensation for conducting clinical trials must be reported, but will not be posted on the website until the product receives approval from the Food and Drug Administration or until 4 years after the payment, whichever is earlier. Payments for trials involving a new indication for an approved drug will be posted immediately.

There are a number of specific exclusions, such as certified and accredited continuing medical education activities funded by manufacturers, and product samples for patient use. Medical students and residents are excluded entirely.

Under the law, you are allowed to review your data and seek corrections before it is published. Publication is scheduled to occur on Sept. 30, so if you have not yet done this, there is no time to waste. Although you will have an additional 2 years to pursue corrections after the online content goes live, any erroneous information will remain on the site until corrections can be made, so the best time to find and fix errors is now.

If you don’t see drug reps, accept sponsored lunches, or give sponsored talks, don’t assume that you won’t be on the website. Check anyway; you might be indirectly involved in a compensation situation that you were not aware of, or you may have been reported in error.

To review your data, register at the CMS Enterprise Portal, and request access to the Open Payments system.

Once you are satisfied that your interactions have been reported accurately, the question of what effect the law will have on research, continuing education, and private practice remains. The short answer is that no one knows. Much will depend on how the public interprets the data – if they take notice at all.

Sunshine laws have been in effect for several years in six states: California, Colorado, Massachusetts, Minnesota, Vermont, and West Virginia; plus the District of Columbia. (Maine repealed its law in 2011.) Observers disagree on their impact. Studies in Maine and West Virginia showed no significant public reaction or changes in prescribing patterns, according to a 2012 article in Archives of Internal Medicine (Arch. Intern. Med. 2012;172:819-21).

Potential effects on physician-patient interactions are equally unclear. Do patients think less of doctors who accept the occasional industry-sponsored lunch for their employees? Do they think more of doctors who speak at meetings or conduct industry-sponsored clinical research? There are no objective data, as far as I know.

My guess is that attorneys, activists, and the occasional reporter will data-mine the website on a regular basis, and perhaps use their findings as ammunition in any agenda that they might be pushing, but few patients will ever bother to visit. Nevertheless, you should review each year’s reportage to ensure the accuracy of anything posted about you.

The data must be reported to CMS by March 31 each year, so you will need to set aside time each April or May to review it. If you have many or complex industry relationships, you should probably contact each company in January or February and ask to see the data before it is submitted. Then, review it again once CMS gets it, to be sure nothing was changed. A free app is available to help physicians track payments and other reportable industry interactions; search for "Open Payments" at your favorite app store.

Maintaining accurate financial records has always been important, but it will be even more so now, to effectively dispute any inconsistencies. While the extra work may turn out to have been unnecessary, it is still a prudent precaution, given the possible consequences of any increased government or public scrutiny that may (or may not) result.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is the author of numerous articles and textbook chapters, and is a long-time monthly columnist for Skin & Allergy News.

Last year, when the Physician Payment Sunshine Act became law, I recommended that all physicians involved in any sort of financial relationship with the pharmaceutical industry review the data reported about them prior to public posting of the information. Since that posting is due to occur at the end of this month, a reminder is in order.

Under a new bureaucracy created by the Affordable Care Act – formally called the Open Payments program – all manufacturers of drugs, devices, and medical supplies covered by federal health care programs must report any financial interactions with physicians and teaching hospitals to the Centers for Medicare & Medicaid Services (CMS).

Reportable interactions include consulting; food; ownership or investment interest; direct compensation for speakers at education programs; and research. Compensation for conducting clinical trials must be reported, but will not be posted on the website until the product receives approval from the Food and Drug Administration or until 4 years after the payment, whichever is earlier. Payments for trials involving a new indication for an approved drug will be posted immediately.

There are a number of specific exclusions, such as certified and accredited continuing medical education activities funded by manufacturers, and product samples for patient use. Medical students and residents are excluded entirely.

Under the law, you are allowed to review your data and seek corrections before it is published. Publication is scheduled to occur on Sept. 30, so if you have not yet done this, there is no time to waste. Although you will have an additional 2 years to pursue corrections after the online content goes live, any erroneous information will remain on the site until corrections can be made, so the best time to find and fix errors is now.

If you don’t see drug reps, accept sponsored lunches, or give sponsored talks, don’t assume that you won’t be on the website. Check anyway; you might be indirectly involved in a compensation situation that you were not aware of, or you may have been reported in error.

To review your data, register at the CMS Enterprise Portal, and request access to the Open Payments system.

Once you are satisfied that your interactions have been reported accurately, the question of what effect the law will have on research, continuing education, and private practice remains. The short answer is that no one knows. Much will depend on how the public interprets the data – if they take notice at all.

Sunshine laws have been in effect for several years in six states: California, Colorado, Massachusetts, Minnesota, Vermont, and West Virginia; plus the District of Columbia. (Maine repealed its law in 2011.) Observers disagree on their impact. Studies in Maine and West Virginia showed no significant public reaction or changes in prescribing patterns, according to a 2012 article in Archives of Internal Medicine (Arch. Intern. Med. 2012;172:819-21).

Potential effects on physician-patient interactions are equally unclear. Do patients think less of doctors who accept the occasional industry-sponsored lunch for their employees? Do they think more of doctors who speak at meetings or conduct industry-sponsored clinical research? There are no objective data, as far as I know.

My guess is that attorneys, activists, and the occasional reporter will data-mine the website on a regular basis, and perhaps use their findings as ammunition in any agenda that they might be pushing, but few patients will ever bother to visit. Nevertheless, you should review each year’s reportage to ensure the accuracy of anything posted about you.

The data must be reported to CMS by March 31 each year, so you will need to set aside time each April or May to review it. If you have many or complex industry relationships, you should probably contact each company in January or February and ask to see the data before it is submitted. Then, review it again once CMS gets it, to be sure nothing was changed. A free app is available to help physicians track payments and other reportable industry interactions; search for "Open Payments" at your favorite app store.

Maintaining accurate financial records has always been important, but it will be even more so now, to effectively dispute any inconsistencies. While the extra work may turn out to have been unnecessary, it is still a prudent precaution, given the possible consequences of any increased government or public scrutiny that may (or may not) result.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is the author of numerous articles and textbook chapters, and is a long-time monthly columnist for Skin & Allergy News.

Last July, I summarized the significant changes in the Health Insurance Portability and Accountability Act (HIPAA). With the last of the deadlines mandated by those changes fast approaching, and a significant enforcement action levied against a dermatology group in the interim, an update is warranted.

The deadline is Sept. 23; by then, all of your business associate (BA) agreements must be modified to reflect the new privacy rules. A recent enforcement action involved a Massachusetts dermatology group that was hit with a substantial fine for violating one of those rules, sending a clear signal from the Centers for Medicare & Medicaid Services (CMS) and its enforcer, the Office for Civil Rights, that these tighter regulations cannot be taken lightly.

The criteria for identifying BAs remain the same: Nonemployees, performing "functions or activities" on behalf of the "covered entity" (your practice), that involve "creating, receiving, maintaining, or transmitting" personal health information (PHI).

Typical BAs include answering and billing services, independent transcriptionists, hardware and software companies, and any other vendors involved in creating or maintaining your medical records. Practice management consultants, attorneys, companies that store or microfilm medical records, and record-shredding services are BAs if they must have direct access to PHI in order to do their jobs.

Mail carriers, package delivery people, cleaning services, copier repairmen, bank employees, and the like are not considered BAs, even though they might conceivably come in contact with PHI on occasion. You are required to use "reasonable diligence" in limiting the PHI that these folks may encounter, but you do not need to enter into written BA agreements with them.

Independent contractors who work within your practice – aestheticians and physical therapists, for example – are not considered BAs either, and do not need to sign a BA agreement; just train them, as you do your employees. (More on HIPAA and OSHA training soon.)

What is new is the additional onus placed on physicians for confidentiality breaches committed by their BAs. It’s not enough to simply have a BA contract; you are expected to use "reasonable diligence" in monitoring the work of your BAs. BAs and their subcontractors are directly responsible for their own actions, but the primary responsibility is yours. Furthermore, you must now assume the worst-case scenario. Previously, when PHI was compromised, you would only have to notify affected patients (and the government) if there was a "significant risk of financial or reputational harm," but now, any incident involving patient records is assumed to be a breach, and must be reported.

Failure to report could subject your practice, as well as the contractor, to significant fines. That is where the Massachusetts group had trouble: It lost a thumb drive containing unencrypted PHI, and was forced to pay a $150,000 fine early this year as a result. There is no excuse for not encrypting HIPAA-protected information; encryption software is cheap, readily available, and easy to use. Had the drive lost in Massachusetts been encrypted, according to the CMS, the incident would not have been considered a breach, because its contents would not have been viewable by the finder. Stay tuned for a list of popular encryption programs. (As always, I have no financial interest in any company or product that I mention in this column.)

Patients have new rights under the new rules as well; they may now restrict any PHI shared with third-party insurers and health plans, if they pay for the services themselves. They also have the right to request copies of their electronic health records. You can bill the costs of responding to such requests. If you have EHRs, work out a system for doing this, because the response time has been decreased from 90 days to 30 – and is even shorter in some states.

If you haven’t yet revised your Notice of Privacy Practices (NPP) to explain your relationships with BAs, and their status under the new rules, do it now. You need to explain the breach notification process, as well as the new patient rights mentioned above. You must post your revised NPP in your office, and make copies available there; but you need not mail a copy to every patient.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is the author of numerous articles and textbook chapters, and is a long-time monthly columnist for Skin & Allergy News.

Last July, I summarized the significant changes in the Health Insurance Portability and Accountability Act (HIPAA). With the last of the deadlines mandated by those changes fast approaching, and a significant enforcement action levied against a dermatology group in the interim, an update is warranted.

The deadline is Sept. 23; by then, all of your business associate (BA) agreements must be modified to reflect the new privacy rules. A recent enforcement action involved a Massachusetts dermatology group that was hit with a substantial fine for violating one of those rules, sending a clear signal from the Centers for Medicare & Medicaid Services (CMS) and its enforcer, the Office for Civil Rights, that these tighter regulations cannot be taken lightly.

The criteria for identifying BAs remain the same: Nonemployees, performing "functions or activities" on behalf of the "covered entity" (your practice), that involve "creating, receiving, maintaining, or transmitting" personal health information (PHI).

Typical BAs include answering and billing services, independent transcriptionists, hardware and software companies, and any other vendors involved in creating or maintaining your medical records. Practice management consultants, attorneys, companies that store or microfilm medical records, and record-shredding services are BAs if they must have direct access to PHI in order to do their jobs.

Mail carriers, package delivery people, cleaning services, copier repairmen, bank employees, and the like are not considered BAs, even though they might conceivably come in contact with PHI on occasion. You are required to use "reasonable diligence" in limiting the PHI that these folks may encounter, but you do not need to enter into written BA agreements with them.

Independent contractors who work within your practice – aestheticians and physical therapists, for example – are not considered BAs either, and do not need to sign a BA agreement; just train them, as you do your employees. (More on HIPAA and OSHA training soon.)

What is new is the additional onus placed on physicians for confidentiality breaches committed by their BAs. It’s not enough to simply have a BA contract; you are expected to use "reasonable diligence" in monitoring the work of your BAs. BAs and their subcontractors are directly responsible for their own actions, but the primary responsibility is yours. Furthermore, you must now assume the worst-case scenario. Previously, when PHI was compromised, you would only have to notify affected patients (and the government) if there was a "significant risk of financial or reputational harm," but now, any incident involving patient records is assumed to be a breach, and must be reported.

Failure to report could subject your practice, as well as the contractor, to significant fines. That is where the Massachusetts group had trouble: It lost a thumb drive containing unencrypted PHI, and was forced to pay a $150,000 fine early this year as a result. There is no excuse for not encrypting HIPAA-protected information; encryption software is cheap, readily available, and easy to use. Had the drive lost in Massachusetts been encrypted, according to the CMS, the incident would not have been considered a breach, because its contents would not have been viewable by the finder. Stay tuned for a list of popular encryption programs. (As always, I have no financial interest in any company or product that I mention in this column.)

Patients have new rights under the new rules as well; they may now restrict any PHI shared with third-party insurers and health plans, if they pay for the services themselves. They also have the right to request copies of their electronic health records. You can bill the costs of responding to such requests. If you have EHRs, work out a system for doing this, because the response time has been decreased from 90 days to 30 – and is even shorter in some states.

If you haven’t yet revised your Notice of Privacy Practices (NPP) to explain your relationships with BAs, and their status under the new rules, do it now. You need to explain the breach notification process, as well as the new patient rights mentioned above. You must post your revised NPP in your office, and make copies available there; but you need not mail a copy to every patient.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is the author of numerous articles and textbook chapters, and is a long-time monthly columnist for Skin & Allergy News.

Last July, I summarized the significant changes in the Health Insurance Portability and Accountability Act (HIPAA). With the last of the deadlines mandated by those changes fast approaching, and a significant enforcement action levied against a dermatology group in the interim, an update is warranted.

The deadline is Sept. 23; by then, all of your business associate (BA) agreements must be modified to reflect the new privacy rules. A recent enforcement action involved a Massachusetts dermatology group that was hit with a substantial fine for violating one of those rules, sending a clear signal from the Centers for Medicare & Medicaid Services (CMS) and its enforcer, the Office for Civil Rights, that these tighter regulations cannot be taken lightly.

The criteria for identifying BAs remain the same: Nonemployees, performing "functions or activities" on behalf of the "covered entity" (your practice), that involve "creating, receiving, maintaining, or transmitting" personal health information (PHI).

Typical BAs include answering and billing services, independent transcriptionists, hardware and software companies, and any other vendors involved in creating or maintaining your medical records. Practice management consultants, attorneys, companies that store or microfilm medical records, and record-shredding services are BAs if they must have direct access to PHI in order to do their jobs.

Mail carriers, package delivery people, cleaning services, copier repairmen, bank employees, and the like are not considered BAs, even though they might conceivably come in contact with PHI on occasion. You are required to use "reasonable diligence" in limiting the PHI that these folks may encounter, but you do not need to enter into written BA agreements with them.

Independent contractors who work within your practice – aestheticians and physical therapists, for example – are not considered BAs either, and do not need to sign a BA agreement; just train them, as you do your employees. (More on HIPAA and OSHA training soon.)

What is new is the additional onus placed on physicians for confidentiality breaches committed by their BAs. It’s not enough to simply have a BA contract; you are expected to use "reasonable diligence" in monitoring the work of your BAs. BAs and their subcontractors are directly responsible for their own actions, but the primary responsibility is yours. Furthermore, you must now assume the worst-case scenario. Previously, when PHI was compromised, you would only have to notify affected patients (and the government) if there was a "significant risk of financial or reputational harm," but now, any incident involving patient records is assumed to be a breach, and must be reported.

Failure to report could subject your practice, as well as the contractor, to significant fines. That is where the Massachusetts group had trouble: It lost a thumb drive containing unencrypted PHI, and was forced to pay a $150,000 fine early this year as a result. There is no excuse for not encrypting HIPAA-protected information; encryption software is cheap, readily available, and easy to use. Had the drive lost in Massachusetts been encrypted, according to the CMS, the incident would not have been considered a breach, because its contents would not have been viewable by the finder. Stay tuned for a list of popular encryption programs. (As always, I have no financial interest in any company or product that I mention in this column.)

Patients have new rights under the new rules as well; they may now restrict any PHI shared with third-party insurers and health plans, if they pay for the services themselves. They also have the right to request copies of their electronic health records. You can bill the costs of responding to such requests. If you have EHRs, work out a system for doing this, because the response time has been decreased from 90 days to 30 – and is even shorter in some states.

If you haven’t yet revised your Notice of Privacy Practices (NPP) to explain your relationships with BAs, and their status under the new rules, do it now. You need to explain the breach notification process, as well as the new patient rights mentioned above. You must post your revised NPP in your office, and make copies available there; but you need not mail a copy to every patient.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is the author of numerous articles and textbook chapters, and is a long-time monthly columnist for Skin & Allergy News.

If you are still on the fence on meaningful use – our government’s motivational strategy for popularizing electronic health records – the point of no return is rapidly approaching: If you want to qualify for at least a portion of the incentive money, plus avoid a 1% penalty (eventually rising to 5%) on your Medicare Part B reimbursements, this year is your final opportunity to join the party. And, unfortunately, it is not simply a matter of adopting an electronic record system.

Each year, you must attest to demonstrating "meaningful use" (MU) of that system. To do that, you must continually monitor your progress toward meeting the necessary percentage benchmarks, making course corrections as you go. If the numbers are not there when your practice is ready to attest, it will have all been for naught, and a major waste of time and resources.

That being the case, private practitioners who have not yet taken the plunge – and those who have, but are undecided on progressing to stage 2 – must ask themselves whether the significant temporal and monetary investment is worth the trouble.

Many, apparently, have decided that it is not. While a substantial percentage of eligible practitioners signed up for stage 1, approximately 20% of them stopped participating in 2013. And according to the Centers for Medicare & Medicaid Services’ own data, only 4 hospitals and 50 individual practitioners in the entire country had attested to stage 2 through March of 2014.

The American Medical Association has little faith in the program, at least in its current form. In an open letter to the CMS in May 2014, they predicted significantly higher dropout rates unless major modifications are made. Specifically, they singled out the requirement that providers meet all requirements at each stage. Rather than "all or nothing," they proposed a 75% achievement level to receive incentive payments, and a 50% minimum to avoid financial penalties. The AMA also recommended eliminating all benchmarks beyond physicians’ control, such as the stage 2 goal of 5% patient participation on the practice’s electronic health record (EHR) portal.

Another problem that falls outside the control of physicians is maintenance of EHR software. Nearly one EHR-equipped office in five, according to the CMS, is running software that does not meet stage 2 standards. The unfortunate owners of systems that cannot be upgraded before the stage 2 deadline will – through no fault of their own – be faced with a Morton’s fork of replacing their EHR on short notice or abandoning their quest for stage 2 attestation.

While the CMS has not yet indicated whether it has any inclination to address these issues or ease any of the requirements, one official did announce that the agency will be more flexible with its hardship exemptions on a case-by-case basis. Currently, such exemptions are available to new providers, those recovering from natural disasters, and others, such as pathologists, who do not interact face-to-face with patients.

So the question remains: Is the investment of time and resources needed to capture all of the data necessary for successful MU attestation worth making? Is it justified by the promise of MU incentive dollars and the benefits to your practice and your patients? And what exactly are those purported benefits, anyway?

Proponents maintain that integrated EHR will lead to improved documentation, which in turn should lead to improvements in patient care. Errors would be more easily identified because entries from generalists, specialists, labs, and others would be available to all at any time. All involved providers, theoretically, would be on the same page with every individual patient. The downside, of course, is that the real world seldom reflects the ideal situation envisioned by bureaucrats.

Ultimately, the choice is yours: Each private practitioner must decide whether starting (or continuing) meaningful use is worth the financial and time burden in his or her particular situation. If you are still undecided, time is almost up: You must begin your 90-day stage 1 reporting period in July 2014 in order to attest by the final deadline of October 1. The last calendar quarter to begin stage 2 reporting starts on October 1 as well. Detailed instructions for meeting stage 1 and stage 2 deadlines are available from many sources, including the American Academy of Dermatology website.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is the author of numerous articles and textbook chapters, and is a long-time monthly columnist for Skin & Allergy News.

If you are still on the fence on meaningful use – our government’s motivational strategy for popularizing electronic health records – the point of no return is rapidly approaching: If you want to qualify for at least a portion of the incentive money, plus avoid a 1% penalty (eventually rising to 5%) on your Medicare Part B reimbursements, this year is your final opportunity to join the party. And, unfortunately, it is not simply a matter of adopting an electronic record system.

Each year, you must attest to demonstrating "meaningful use" (MU) of that system. To do that, you must continually monitor your progress toward meeting the necessary percentage benchmarks, making course corrections as you go. If the numbers are not there when your practice is ready to attest, it will have all been for naught, and a major waste of time and resources.

That being the case, private practitioners who have not yet taken the plunge – and those who have, but are undecided on progressing to stage 2 – must ask themselves whether the significant temporal and monetary investment is worth the trouble.

Many, apparently, have decided that it is not. While a substantial percentage of eligible practitioners signed up for stage 1, approximately 20% of them stopped participating in 2013. And according to the Centers for Medicare & Medicaid Services’ own data, only 4 hospitals and 50 individual practitioners in the entire country had attested to stage 2 through March of 2014.

The American Medical Association has little faith in the program, at least in its current form. In an open letter to the CMS in May 2014, they predicted significantly higher dropout rates unless major modifications are made. Specifically, they singled out the requirement that providers meet all requirements at each stage. Rather than "all or nothing," they proposed a 75% achievement level to receive incentive payments, and a 50% minimum to avoid financial penalties. The AMA also recommended eliminating all benchmarks beyond physicians’ control, such as the stage 2 goal of 5% patient participation on the practice’s electronic health record (EHR) portal.

Another problem that falls outside the control of physicians is maintenance of EHR software. Nearly one EHR-equipped office in five, according to the CMS, is running software that does not meet stage 2 standards. The unfortunate owners of systems that cannot be upgraded before the stage 2 deadline will – through no fault of their own – be faced with a Morton’s fork of replacing their EHR on short notice or abandoning their quest for stage 2 attestation.

While the CMS has not yet indicated whether it has any inclination to address these issues or ease any of the requirements, one official did announce that the agency will be more flexible with its hardship exemptions on a case-by-case basis. Currently, such exemptions are available to new providers, those recovering from natural disasters, and others, such as pathologists, who do not interact face-to-face with patients.

So the question remains: Is the investment of time and resources needed to capture all of the data necessary for successful MU attestation worth making? Is it justified by the promise of MU incentive dollars and the benefits to your practice and your patients? And what exactly are those purported benefits, anyway?

Proponents maintain that integrated EHR will lead to improved documentation, which in turn should lead to improvements in patient care. Errors would be more easily identified because entries from generalists, specialists, labs, and others would be available to all at any time. All involved providers, theoretically, would be on the same page with every individual patient. The downside, of course, is that the real world seldom reflects the ideal situation envisioned by bureaucrats.

Ultimately, the choice is yours: Each private practitioner must decide whether starting (or continuing) meaningful use is worth the financial and time burden in his or her particular situation. If you are still undecided, time is almost up: You must begin your 90-day stage 1 reporting period in July 2014 in order to attest by the final deadline of October 1. The last calendar quarter to begin stage 2 reporting starts on October 1 as well. Detailed instructions for meeting stage 1 and stage 2 deadlines are available from many sources, including the American Academy of Dermatology website.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is the author of numerous articles and textbook chapters, and is a long-time monthly columnist for Skin & Allergy News.

If you are still on the fence on meaningful use – our government’s motivational strategy for popularizing electronic health records – the point of no return is rapidly approaching: If you want to qualify for at least a portion of the incentive money, plus avoid a 1% penalty (eventually rising to 5%) on your Medicare Part B reimbursements, this year is your final opportunity to join the party. And, unfortunately, it is not simply a matter of adopting an electronic record system.

Each year, you must attest to demonstrating "meaningful use" (MU) of that system. To do that, you must continually monitor your progress toward meeting the necessary percentage benchmarks, making course corrections as you go. If the numbers are not there when your practice is ready to attest, it will have all been for naught, and a major waste of time and resources.

That being the case, private practitioners who have not yet taken the plunge – and those who have, but are undecided on progressing to stage 2 – must ask themselves whether the significant temporal and monetary investment is worth the trouble.

Many, apparently, have decided that it is not. While a substantial percentage of eligible practitioners signed up for stage 1, approximately 20% of them stopped participating in 2013. And according to the Centers for Medicare & Medicaid Services’ own data, only 4 hospitals and 50 individual practitioners in the entire country had attested to stage 2 through March of 2014.

The American Medical Association has little faith in the program, at least in its current form. In an open letter to the CMS in May 2014, they predicted significantly higher dropout rates unless major modifications are made. Specifically, they singled out the requirement that providers meet all requirements at each stage. Rather than "all or nothing," they proposed a 75% achievement level to receive incentive payments, and a 50% minimum to avoid financial penalties. The AMA also recommended eliminating all benchmarks beyond physicians’ control, such as the stage 2 goal of 5% patient participation on the practice’s electronic health record (EHR) portal.

Another problem that falls outside the control of physicians is maintenance of EHR software. Nearly one EHR-equipped office in five, according to the CMS, is running software that does not meet stage 2 standards. The unfortunate owners of systems that cannot be upgraded before the stage 2 deadline will – through no fault of their own – be faced with a Morton’s fork of replacing their EHR on short notice or abandoning their quest for stage 2 attestation.

While the CMS has not yet indicated whether it has any inclination to address these issues or ease any of the requirements, one official did announce that the agency will be more flexible with its hardship exemptions on a case-by-case basis. Currently, such exemptions are available to new providers, those recovering from natural disasters, and others, such as pathologists, who do not interact face-to-face with patients.

So the question remains: Is the investment of time and resources needed to capture all of the data necessary for successful MU attestation worth making? Is it justified by the promise of MU incentive dollars and the benefits to your practice and your patients? And what exactly are those purported benefits, anyway?

Proponents maintain that integrated EHR will lead to improved documentation, which in turn should lead to improvements in patient care. Errors would be more easily identified because entries from generalists, specialists, labs, and others would be available to all at any time. All involved providers, theoretically, would be on the same page with every individual patient. The downside, of course, is that the real world seldom reflects the ideal situation envisioned by bureaucrats.

Ultimately, the choice is yours: Each private practitioner must decide whether starting (or continuing) meaningful use is worth the financial and time burden in his or her particular situation. If you are still undecided, time is almost up: You must begin your 90-day stage 1 reporting period in July 2014 in order to attest by the final deadline of October 1. The last calendar quarter to begin stage 2 reporting starts on October 1 as well. Detailed instructions for meeting stage 1 and stage 2 deadlines are available from many sources, including the American Academy of Dermatology website.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is the author of numerous articles and textbook chapters, and is a long-time monthly columnist for Skin & Allergy News.

As the economy continues its slow and uneven recovery, economic crime is on the rise, according to many law enforcement officials around the country.

Despite the current bull market, unemployment remains high and money remains tight.

Tight money increases embezzlement temptations, so this is an excellent time to review your bookkeeping procedures and remove any obvious opportunities for theft by your employees.

Embezzlement is more common than you might think. Discovering it is often easy, because most embezzlers are not particularly skillful at what they do, or adept at covering their tracks. But it often goes undetected, sometimes for years, simply because no one is looking for it.

The experience of a friend of mine was all too typical: His bookkeeper wrote sizable checks to herself, disguising them in the ledger as payments to vendors commonly used by his practice. Since she also balanced the checkbook, she got away with it for many months.

"It wasn’t at all clever," he told me. "And I’m somewhat chagrined to admit that it happened to me."

Is it happening to you, too? You won’t know unless you look.

Detecting fraud is an inexact science; there is no textbook approach that one can follow, but a few simple measures can uncover or prevent a large percentage of dishonest behavior:

• Hire honest employees. Check applicants’ references; find out if they are really as good as they look on paper. And for a few dollars, you can screen prospective employees on one of several public information websites to find out whether they have criminal records, or have been sued (or are suing others). My columns on hiring and background checks are in the archives at edermatologynews.com.

• Minimize opportunities for dishonesty. Theft and embezzlement are often products of opportunity, and there are many ways to minimize those opportunities. No one person should be in charge of the entire bookkeeping process. The person who enters charges should not be the one who enters payments. The employee who writes the checks should not balance the checkbook, and so on. Internal audits should occur on a regular basis, and all employees should know that. Your accountant can help with this.

• Reconcile receipts and cash daily. The most common form of embezzlement is simply employees taking cash out of the till. In a typical scenario, a patient pays a $15 copay in cash; the receptionist records the payment as $5 and pockets the rest. Make sure a receipt is generated for every cash transaction, and that someone other than the person accepting cash reconciles the receipts and the cash daily.

• Insist on separate accounting duties. Another common scam – the one to which my friend fell victim – is false invoices. You think you are paying for supplies and services, but the money is going to an employee. Once again, separation of duties is the key to prevention. One employee should enter invoices into the data system, another should issue the check or make the electronic transfer, and a third should match invoices to goods and services received.

• Verify expense reports. False expense reports are another common form of fraud. When an employee asks for reimbursement of expenses, make sure the expenses are real.

• Safeguard your computers. Today’s technology has made embezzlement easier and more tempting. Data are usually concentrated in one place, accounts can be accessed from remote workstations or off-premises servers, and a paper trail is often eliminated. Your computer vendor should be aware of this, and should have safeguards built into your system. Ask about them.

• Look for red flags. Do you have an employee who refuses to take vacations, because someone else will have to look at the books? Does someone insist on approving or entering expenses that are another employee’s responsibility? Is one employee suddenly living beyond his or her means?

• Consider bonding your employees. The mere knowledge that your staff is bonded will frighten off most dishonest applicants, and you will be assured of some measure of recovery should your safeguards fail.

Most embezzlement is not ingenious, or even particularly well concealed. It often sits in full view of physicians who are convinced that theft from within cannot happen to them. It can, and it does, but a little awareness can go a long way toward keeping it from happening to you.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He holds teaching positions at several hospitals and has delivered more than 500 academic speaking presentations. He is the author of numerous articles and textbook chapters, and is a long-time monthly columnist for Skin & Allergy News.

As the economy continues its slow and uneven recovery, economic crime is on the rise, according to many law enforcement officials around the country.

Despite the current bull market, unemployment remains high and money remains tight.

Tight money increases embezzlement temptations, so this is an excellent time to review your bookkeeping procedures and remove any obvious opportunities for theft by your employees.

Embezzlement is more common than you might think. Discovering it is often easy, because most embezzlers are not particularly skillful at what they do, or adept at covering their tracks. But it often goes undetected, sometimes for years, simply because no one is looking for it.

The experience of a friend of mine was all too typical: His bookkeeper wrote sizable checks to herself, disguising them in the ledger as payments to vendors commonly used by his practice. Since she also balanced the checkbook, she got away with it for many months.

"It wasn’t at all clever," he told me. "And I’m somewhat chagrined to admit that it happened to me."

Is it happening to you, too? You won’t know unless you look.

Detecting fraud is an inexact science; there is no textbook approach that one can follow, but a few simple measures can uncover or prevent a large percentage of dishonest behavior:

• Hire honest employees. Check applicants’ references; find out if they are really as good as they look on paper. And for a few dollars, you can screen prospective employees on one of several public information websites to find out whether they have criminal records, or have been sued (or are suing others). My columns on hiring and background checks are in the archives at edermatologynews.com.

• Minimize opportunities for dishonesty. Theft and embezzlement are often products of opportunity, and there are many ways to minimize those opportunities. No one person should be in charge of the entire bookkeeping process. The person who enters charges should not be the one who enters payments. The employee who writes the checks should not balance the checkbook, and so on. Internal audits should occur on a regular basis, and all employees should know that. Your accountant can help with this.

• Reconcile receipts and cash daily. The most common form of embezzlement is simply employees taking cash out of the till. In a typical scenario, a patient pays a $15 copay in cash; the receptionist records the payment as $5 and pockets the rest. Make sure a receipt is generated for every cash transaction, and that someone other than the person accepting cash reconciles the receipts and the cash daily.

• Insist on separate accounting duties. Another common scam – the one to which my friend fell victim – is false invoices. You think you are paying for supplies and services, but the money is going to an employee. Once again, separation of duties is the key to prevention. One employee should enter invoices into the data system, another should issue the check or make the electronic transfer, and a third should match invoices to goods and services received.

• Verify expense reports. False expense reports are another common form of fraud. When an employee asks for reimbursement of expenses, make sure the expenses are real.

• Safeguard your computers. Today’s technology has made embezzlement easier and more tempting. Data are usually concentrated in one place, accounts can be accessed from remote workstations or off-premises servers, and a paper trail is often eliminated. Your computer vendor should be aware of this, and should have safeguards built into your system. Ask about them.

• Look for red flags. Do you have an employee who refuses to take vacations, because someone else will have to look at the books? Does someone insist on approving or entering expenses that are another employee’s responsibility? Is one employee suddenly living beyond his or her means?

• Consider bonding your employees. The mere knowledge that your staff is bonded will frighten off most dishonest applicants, and you will be assured of some measure of recovery should your safeguards fail.

Most embezzlement is not ingenious, or even particularly well concealed. It often sits in full view of physicians who are convinced that theft from within cannot happen to them. It can, and it does, but a little awareness can go a long way toward keeping it from happening to you.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He holds teaching positions at several hospitals and has delivered more than 500 academic speaking presentations. He is the author of numerous articles and textbook chapters, and is a long-time monthly columnist for Skin & Allergy News.

As the economy continues its slow and uneven recovery, economic crime is on the rise, according to many law enforcement officials around the country.

Despite the current bull market, unemployment remains high and money remains tight.

Tight money increases embezzlement temptations, so this is an excellent time to review your bookkeeping procedures and remove any obvious opportunities for theft by your employees.

Embezzlement is more common than you might think. Discovering it is often easy, because most embezzlers are not particularly skillful at what they do, or adept at covering their tracks. But it often goes undetected, sometimes for years, simply because no one is looking for it.

The experience of a friend of mine was all too typical: His bookkeeper wrote sizable checks to herself, disguising them in the ledger as payments to vendors commonly used by his practice. Since she also balanced the checkbook, she got away with it for many months.

"It wasn’t at all clever," he told me. "And I’m somewhat chagrined to admit that it happened to me."

Is it happening to you, too? You won’t know unless you look.

Detecting fraud is an inexact science; there is no textbook approach that one can follow, but a few simple measures can uncover or prevent a large percentage of dishonest behavior:

• Hire honest employees. Check applicants’ references; find out if they are really as good as they look on paper. And for a few dollars, you can screen prospective employees on one of several public information websites to find out whether they have criminal records, or have been sued (or are suing others). My columns on hiring and background checks are in the archives at edermatologynews.com.

• Minimize opportunities for dishonesty. Theft and embezzlement are often products of opportunity, and there are many ways to minimize those opportunities. No one person should be in charge of the entire bookkeeping process. The person who enters charges should not be the one who enters payments. The employee who writes the checks should not balance the checkbook, and so on. Internal audits should occur on a regular basis, and all employees should know that. Your accountant can help with this.

• Reconcile receipts and cash daily. The most common form of embezzlement is simply employees taking cash out of the till. In a typical scenario, a patient pays a $15 copay in cash; the receptionist records the payment as $5 and pockets the rest. Make sure a receipt is generated for every cash transaction, and that someone other than the person accepting cash reconciles the receipts and the cash daily.

• Insist on separate accounting duties. Another common scam – the one to which my friend fell victim – is false invoices. You think you are paying for supplies and services, but the money is going to an employee. Once again, separation of duties is the key to prevention. One employee should enter invoices into the data system, another should issue the check or make the electronic transfer, and a third should match invoices to goods and services received.

• Verify expense reports. False expense reports are another common form of fraud. When an employee asks for reimbursement of expenses, make sure the expenses are real.

• Safeguard your computers. Today’s technology has made embezzlement easier and more tempting. Data are usually concentrated in one place, accounts can be accessed from remote workstations or off-premises servers, and a paper trail is often eliminated. Your computer vendor should be aware of this, and should have safeguards built into your system. Ask about them.

• Look for red flags. Do you have an employee who refuses to take vacations, because someone else will have to look at the books? Does someone insist on approving or entering expenses that are another employee’s responsibility? Is one employee suddenly living beyond his or her means?

• Consider bonding your employees. The mere knowledge that your staff is bonded will frighten off most dishonest applicants, and you will be assured of some measure of recovery should your safeguards fail.

Most embezzlement is not ingenious, or even particularly well concealed. It often sits in full view of physicians who are convinced that theft from within cannot happen to them. It can, and it does, but a little awareness can go a long way toward keeping it from happening to you.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He holds teaching positions at several hospitals and has delivered more than 500 academic speaking presentations. He is the author of numerous articles and textbook chapters, and is a long-time monthly columnist for Skin & Allergy News.

A lot of mythology regarding the new Health Insurance Portability and Accountability Act rules (which I discussed in detail a few months ago) continues to circulate. One of the biggest myths is that e-mail communication with patients is now forbidden, so let’s debunk that one right now.

Here is a statement lifted verbatim from the official HIPAA web site (FAQ section):

"Patients may initiate communications with a provider using e-mail. If this situation occurs, the health care provider can assume (unless the patient has explicitly stated otherwise) that e-mail communications are acceptable to the individual.

"If the provider feels the patient may not be aware of the possible risks of using unencrypted e-mail, or has concerns about potential liability, the provider can alert the patient of those risks, and let the patient decide whether to continue e-mail communications."

Okay, so it’s permissible – but is it a good idea? Aside from the obvious privacy issues, many physicians balk at taking on one more unreimbursed demand on their time. While no one denies that these concerns are real, there also are real benefits to be gained from properly managed online communication – among them increased practice efficiency, and increased quality of care and satisfaction for patients.

I started giving one of my e-mail addresses to selected patients several years ago as an experiment, hoping to take some pressure off of our overloaded telephone system. The patients were grateful for simplified and more direct access, and I appreciated the decrease in phone messages and interruptions while I was seeing patients. I also noticed a decrease in those frustrating, unnecessary office visits – you know, "The rash is completely gone, but you told me to come back ..."

In general, I have found that the advantages for everyone involved (not least my nurses and receptionists) far outweigh the problems. And now, newer technologies such as encryption, web-based messaging, and integrated online communication should go a long way toward assuaging privacy concerns.

Encryption software is now inexpensive, readily available, and easily added to most e-mail systems. Packages are available from companies such as EMC, Hilgraeve, Kryptiq, Proofpoint, Axway, and ZixCorp, among many others. (As always, I have no financial interest in any company mentioned in this column.)

Rather than simply encrypting their e-mail, increasing numbers of physicians are opting for the route taken by most online banking and shopping sites: a secure website. Patients sign onto it and send a message to your office. Physicians or staffers are notified in their regular e-mail of messages on the website, and then they post a reply to the patient on the site that can only be accessed by the patient. The patient is notified of the practice’s reply in his or her regular e-mail. Web-based messaging services can be incorporated into existing practice sites or can stand on their own. Medfusion, MyDocOnline, and RelayHealth are among the many vendors that offer secure cloud-based messaging services.

A big advantage of using such a service is that you’re partnering with a vendor who has to stay on top of HIPAA and other privacy requirements. Another is the option of using electronic forms, or templates. Templates ensure that patients’ messages include the information needed to process prescription refill requests, or to adequately describe their problems and provide some clinical assessment data for the physician or nurse. They also can be designed to triage messages to the front- and back-office staff, so that time is not wasted bouncing messages around the office until the proper responder is found.

Many electronic health record systems now allow you to integrate a web-based messaging system. Advantages here include the ability to view the patient’s medical record from home or anywhere else before answering the communication, and the fact that all messages automatically become a part of the patient’s record. Electronic health record vendors that provide this type of system include Allscripts, CompuGroup Medical, Cerner, Epic, GE Medical Systems, NextGen, McKesson, and Siemens.

As with any cloud-based service, insist on multiple layers of security, uninterruptible power sources, instant switchover to backup hardware in the event of a crash, and frequent, reliable backups.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is a clinical associate professor of dermatology at Seton Hall University School of Graduate Medical Education in South Orange, N.J. Dr. Eastern is a two-time past president of the Dermatological Society of New Jersey, and currently serves on its executive board. He holds teaching positions at several hospitals and has delivered more than 500 academic speaking presentations. He is the author of numerous articles and textbook chapters, and is a long-time monthly columnist for Skin & Allergy News.

A lot of mythology regarding the new Health Insurance Portability and Accountability Act rules (which I discussed in detail a few months ago) continues to circulate. One of the biggest myths is that e-mail communication with patients is now forbidden, so let’s debunk that one right now.

Here is a statement lifted verbatim from the official HIPAA web site (FAQ section):

"Patients may initiate communications with a provider using e-mail. If this situation occurs, the health care provider can assume (unless the patient has explicitly stated otherwise) that e-mail communications are acceptable to the individual.

"If the provider feels the patient may not be aware of the possible risks of using unencrypted e-mail, or has concerns about potential liability, the provider can alert the patient of those risks, and let the patient decide whether to continue e-mail communications."

Okay, so it’s permissible – but is it a good idea? Aside from the obvious privacy issues, many physicians balk at taking on one more unreimbursed demand on their time. While no one denies that these concerns are real, there also are real benefits to be gained from properly managed online communication – among them increased practice efficiency, and increased quality of care and satisfaction for patients.

I started giving one of my e-mail addresses to selected patients several years ago as an experiment, hoping to take some pressure off of our overloaded telephone system. The patients were grateful for simplified and more direct access, and I appreciated the decrease in phone messages and interruptions while I was seeing patients. I also noticed a decrease in those frustrating, unnecessary office visits – you know, "The rash is completely gone, but you told me to come back ..."

In general, I have found that the advantages for everyone involved (not least my nurses and receptionists) far outweigh the problems. And now, newer technologies such as encryption, web-based messaging, and integrated online communication should go a long way toward assuaging privacy concerns.

Encryption software is now inexpensive, readily available, and easily added to most e-mail systems. Packages are available from companies such as EMC, Hilgraeve, Kryptiq, Proofpoint, Axway, and ZixCorp, among many others. (As always, I have no financial interest in any company mentioned in this column.)

Rather than simply encrypting their e-mail, increasing numbers of physicians are opting for the route taken by most online banking and shopping sites: a secure website. Patients sign onto it and send a message to your office. Physicians or staffers are notified in their regular e-mail of messages on the website, and then they post a reply to the patient on the site that can only be accessed by the patient. The patient is notified of the practice’s reply in his or her regular e-mail. Web-based messaging services can be incorporated into existing practice sites or can stand on their own. Medfusion, MyDocOnline, and RelayHealth are among the many vendors that offer secure cloud-based messaging services.

A big advantage of using such a service is that you’re partnering with a vendor who has to stay on top of HIPAA and other privacy requirements. Another is the option of using electronic forms, or templates. Templates ensure that patients’ messages include the information needed to process prescription refill requests, or to adequately describe their problems and provide some clinical assessment data for the physician or nurse. They also can be designed to triage messages to the front- and back-office staff, so that time is not wasted bouncing messages around the office until the proper responder is found.

Many electronic health record systems now allow you to integrate a web-based messaging system. Advantages here include the ability to view the patient’s medical record from home or anywhere else before answering the communication, and the fact that all messages automatically become a part of the patient’s record. Electronic health record vendors that provide this type of system include Allscripts, CompuGroup Medical, Cerner, Epic, GE Medical Systems, NextGen, McKesson, and Siemens.

As with any cloud-based service, insist on multiple layers of security, uninterruptible power sources, instant switchover to backup hardware in the event of a crash, and frequent, reliable backups.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is a clinical associate professor of dermatology at Seton Hall University School of Graduate Medical Education in South Orange, N.J. Dr. Eastern is a two-time past president of the Dermatological Society of New Jersey, and currently serves on its executive board. He holds teaching positions at several hospitals and has delivered more than 500 academic speaking presentations. He is the author of numerous articles and textbook chapters, and is a long-time monthly columnist for Skin & Allergy News.

A lot of mythology regarding the new Health Insurance Portability and Accountability Act rules (which I discussed in detail a few months ago) continues to circulate. One of the biggest myths is that e-mail communication with patients is now forbidden, so let’s debunk that one right now.

Here is a statement lifted verbatim from the official HIPAA web site (FAQ section):

"Patients may initiate communications with a provider using e-mail. If this situation occurs, the health care provider can assume (unless the patient has explicitly stated otherwise) that e-mail communications are acceptable to the individual.

"If the provider feels the patient may not be aware of the possible risks of using unencrypted e-mail, or has concerns about potential liability, the provider can alert the patient of those risks, and let the patient decide whether to continue e-mail communications."

Okay, so it’s permissible – but is it a good idea? Aside from the obvious privacy issues, many physicians balk at taking on one more unreimbursed demand on their time. While no one denies that these concerns are real, there also are real benefits to be gained from properly managed online communication – among them increased practice efficiency, and increased quality of care and satisfaction for patients.

I started giving one of my e-mail addresses to selected patients several years ago as an experiment, hoping to take some pressure off of our overloaded telephone system. The patients were grateful for simplified and more direct access, and I appreciated the decrease in phone messages and interruptions while I was seeing patients. I also noticed a decrease in those frustrating, unnecessary office visits – you know, "The rash is completely gone, but you told me to come back ..."

In general, I have found that the advantages for everyone involved (not least my nurses and receptionists) far outweigh the problems. And now, newer technologies such as encryption, web-based messaging, and integrated online communication should go a long way toward assuaging privacy concerns.

Encryption software is now inexpensive, readily available, and easily added to most e-mail systems. Packages are available from companies such as EMC, Hilgraeve, Kryptiq, Proofpoint, Axway, and ZixCorp, among many others. (As always, I have no financial interest in any company mentioned in this column.)

Rather than simply encrypting their e-mail, increasing numbers of physicians are opting for the route taken by most online banking and shopping sites: a secure website. Patients sign onto it and send a message to your office. Physicians or staffers are notified in their regular e-mail of messages on the website, and then they post a reply to the patient on the site that can only be accessed by the patient. The patient is notified of the practice’s reply in his or her regular e-mail. Web-based messaging services can be incorporated into existing practice sites or can stand on their own. Medfusion, MyDocOnline, and RelayHealth are among the many vendors that offer secure cloud-based messaging services.

A big advantage of using such a service is that you’re partnering with a vendor who has to stay on top of HIPAA and other privacy requirements. Another is the option of using electronic forms, or templates. Templates ensure that patients’ messages include the information needed to process prescription refill requests, or to adequately describe their problems and provide some clinical assessment data for the physician or nurse. They also can be designed to triage messages to the front- and back-office staff, so that time is not wasted bouncing messages around the office until the proper responder is found.

Many electronic health record systems now allow you to integrate a web-based messaging system. Advantages here include the ability to view the patient’s medical record from home or anywhere else before answering the communication, and the fact that all messages automatically become a part of the patient’s record. Electronic health record vendors that provide this type of system include Allscripts, CompuGroup Medical, Cerner, Epic, GE Medical Systems, NextGen, McKesson, and Siemens.

As with any cloud-based service, insist on multiple layers of security, uninterruptible power sources, instant switchover to backup hardware in the event of a crash, and frequent, reliable backups.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is a clinical associate professor of dermatology at Seton Hall University School of Graduate Medical Education in South Orange, N.J. Dr. Eastern is a two-time past president of the Dermatological Society of New Jersey, and currently serves on its executive board. He holds teaching positions at several hospitals and has delivered more than 500 academic speaking presentations. He is the author of numerous articles and textbook chapters, and is a long-time monthly columnist for Skin & Allergy News.

For many, the making and breaking of New Year’s resolutions have become a humorless cliché. Still, the beginning of a new year is as good a time as any for reflection and inspiration; and if you restrict your fix-it list to a few realistic promises that can actually be kept, resolution time does not have to remain an exercise in futility.

I can’t presume to know what needs improving in your practice, but I do know the issues I get the most questions about. Perhaps the following Top Ten list will inspire you to create a realistic list of your own.

1. Do a HIPAA risk assessment. The new HIPAA rules are now in effect, as I discussed a few months ago. Is your office up to speed? Review every procedure that involves confidential information; make sure there are no violations. Penalties for carelessness are much stiffer now.

2. Encrypt your mobile devices. This is a subset of item 1. The biggest HIPAA vulnerability in many practices is laptops and tablets that carry confidential patient information; losing one could be a disaster. Encryption software is cheap and readily available, and a lost or stolen mobile device will probably not be treated as a HIPAA breach if it is properly encrypted.

3. Reduce your accounts receivable by keeping a credit card number on file for each patient, and charging patient-owed balances as they come in. A series of my past columns in the archives at edermatologynews.com explains exactly how to do it. Every hotel in the world does this, and you should too.

4. Review your coding habits. For example, are you billing for 99213 each and every time your evaluation and treatment meet the criteria for that code? If not, you’re leaving money on the table; and that will become a more and more significant issue if reimbursements tighten up in the next few years – as they almost surely will.

5. Clear your "horizontal file cabinet." That’s the mess on your desk, all the paperwork you never seem to get to (probably because you’re tweeting or answering e-mail). Set aside an hour or two and get it all done. You’ll find some interesting stuff in there. Then, for every piece of paper that arrives on your desk from now on, follow the DDD Rule: Do it, Delegate it, or Destroy it. Don’t start a new mess.

6. Keep a closer eye on your office finances. Most physicians delegate the bookkeeping, and that’s fine. But ignoring the financial side creates an atmosphere that facilitates embezzlement. Set aside a few hours each month to review the books personally. And make sure your employees know you’re doing it.

7. Make sure your long-range financial planning is on track. This is another task physicians tend to "set and forget," but the Great Recession was an eye-opener for many of us. Once a year, sit down with your accountant and planner and make sure your investments are well diversified and all other aspects of your finances – budgets, credit ratings, insurance coverage, tax situations, college savings, estate plans, and retirement accounts – are in the best shape possible. Now would be a good time.

8. Back up your data. Now is also an excellent time to verify that the information on your office and personal computers is being backed up – locally and online – on a regular schedule. Don’t wait until something crashes.

9. Take more vacations. Remember Eastern’s First Law: Your last words will not be, "I wish I had spent more time in the office." This is the year to start spending more time enjoying your life, your friends and family, and the world. As John Lennon said, "Life is what happens to you while you’re busy making other plans."

10. Look at yourself. A private practice lives or dies on the personalities of its physicians, and your staff copies your personality and style. Take a hard, honest look at yourself. Identify your negative personality traits and work to eliminate them. If you have any difficulty finding the things that need changing ... ask your spouse. He or she will be happy to outline them for you in great detail.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is a clinical associate professor of dermatology at Seton Hall University School of Graduate Medical Education in South Orange, N.J. Dr. Eastern is a two-time past president of the Dermatological Society of New Jersey, and currently serves on its executive board. He holds teaching positions at several hospitals and has delivered more than 500 academic speaking presentations. He is the author of numerous articles and textbook chapters, and is a long-time monthly columnist for Skin & Allergy News.

For many, the making and breaking of New Year’s resolutions have become a humorless cliché. Still, the beginning of a new year is as good a time as any for reflection and inspiration; and if you restrict your fix-it list to a few realistic promises that can actually be kept, resolution time does not have to remain an exercise in futility.

I can’t presume to know what needs improving in your practice, but I do know the issues I get the most questions about. Perhaps the following Top Ten list will inspire you to create a realistic list of your own.

1. Do a HIPAA risk assessment. The new HIPAA rules are now in effect, as I discussed a few months ago. Is your office up to speed? Review every procedure that involves confidential information; make sure there are no violations. Penalties for carelessness are much stiffer now.

2. Encrypt your mobile devices. This is a subset of item 1. The biggest HIPAA vulnerability in many practices is laptops and tablets that carry confidential patient information; losing one could be a disaster. Encryption software is cheap and readily available, and a lost or stolen mobile device will probably not be treated as a HIPAA breach if it is properly encrypted.

3. Reduce your accounts receivable by keeping a credit card number on file for each patient, and charging patient-owed balances as they come in. A series of my past columns in the archives at edermatologynews.com explains exactly how to do it. Every hotel in the world does this, and you should too.

4. Review your coding habits. For example, are you billing for 99213 each and every time your evaluation and treatment meet the criteria for that code? If not, you’re leaving money on the table; and that will become a more and more significant issue if reimbursements tighten up in the next few years – as they almost surely will.

5. Clear your "horizontal file cabinet." That’s the mess on your desk, all the paperwork you never seem to get to (probably because you’re tweeting or answering e-mail). Set aside an hour or two and get it all done. You’ll find some interesting stuff in there. Then, for every piece of paper that arrives on your desk from now on, follow the DDD Rule: Do it, Delegate it, or Destroy it. Don’t start a new mess.

6. Keep a closer eye on your office finances. Most physicians delegate the bookkeeping, and that’s fine. But ignoring the financial side creates an atmosphere that facilitates embezzlement. Set aside a few hours each month to review the books personally. And make sure your employees know you’re doing it.

7. Make sure your long-range financial planning is on track. This is another task physicians tend to "set and forget," but the Great Recession was an eye-opener for many of us. Once a year, sit down with your accountant and planner and make sure your investments are well diversified and all other aspects of your finances – budgets, credit ratings, insurance coverage, tax situations, college savings, estate plans, and retirement accounts – are in the best shape possible. Now would be a good time.

8. Back up your data. Now is also an excellent time to verify that the information on your office and personal computers is being backed up – locally and online – on a regular schedule. Don’t wait until something crashes.

9. Take more vacations. Remember Eastern’s First Law: Your last words will not be, "I wish I had spent more time in the office." This is the year to start spending more time enjoying your life, your friends and family, and the world. As John Lennon said, "Life is what happens to you while you’re busy making other plans."

10. Look at yourself. A private practice lives or dies on the personalities of its physicians, and your staff copies your personality and style. Take a hard, honest look at yourself. Identify your negative personality traits and work to eliminate them. If you have any difficulty finding the things that need changing ... ask your spouse. He or she will be happy to outline them for you in great detail.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is a clinical associate professor of dermatology at Seton Hall University School of Graduate Medical Education in South Orange, N.J. Dr. Eastern is a two-time past president of the Dermatological Society of New Jersey, and currently serves on its executive board. He holds teaching positions at several hospitals and has delivered more than 500 academic speaking presentations. He is the author of numerous articles and textbook chapters, and is a long-time monthly columnist for Skin & Allergy News.

For many, the making and breaking of New Year’s resolutions have become a humorless cliché. Still, the beginning of a new year is as good a time as any for reflection and inspiration; and if you restrict your fix-it list to a few realistic promises that can actually be kept, resolution time does not have to remain an exercise in futility.

I can’t presume to know what needs improving in your practice, but I do know the issues I get the most questions about. Perhaps the following Top Ten list will inspire you to create a realistic list of your own.

1. Do a HIPAA risk assessment. The new HIPAA rules are now in effect, as I discussed a few months ago. Is your office up to speed? Review every procedure that involves confidential information; make sure there are no violations. Penalties for carelessness are much stiffer now.

2. Encrypt your mobile devices. This is a subset of item 1. The biggest HIPAA vulnerability in many practices is laptops and tablets that carry confidential patient information; losing one could be a disaster. Encryption software is cheap and readily available, and a lost or stolen mobile device will probably not be treated as a HIPAA breach if it is properly encrypted.

3. Reduce your accounts receivable by keeping a credit card number on file for each patient, and charging patient-owed balances as they come in. A series of my past columns in the archives at edermatologynews.com explains exactly how to do it. Every hotel in the world does this, and you should too.

4. Review your coding habits. For example, are you billing for 99213 each and every time your evaluation and treatment meet the criteria for that code? If not, you’re leaving money on the table; and that will become a more and more significant issue if reimbursements tighten up in the next few years – as they almost surely will.

5. Clear your "horizontal file cabinet." That’s the mess on your desk, all the paperwork you never seem to get to (probably because you’re tweeting or answering e-mail). Set aside an hour or two and get it all done. You’ll find some interesting stuff in there. Then, for every piece of paper that arrives on your desk from now on, follow the DDD Rule: Do it, Delegate it, or Destroy it. Don’t start a new mess.

6. Keep a closer eye on your office finances. Most physicians delegate the bookkeeping, and that’s fine. But ignoring the financial side creates an atmosphere that facilitates embezzlement. Set aside a few hours each month to review the books personally. And make sure your employees know you’re doing it.

7. Make sure your long-range financial planning is on track. This is another task physicians tend to "set and forget," but the Great Recession was an eye-opener for many of us. Once a year, sit down with your accountant and planner and make sure your investments are well diversified and all other aspects of your finances – budgets, credit ratings, insurance coverage, tax situations, college savings, estate plans, and retirement accounts – are in the best shape possible. Now would be a good time.

8. Back up your data. Now is also an excellent time to verify that the information on your office and personal computers is being backed up – locally and online – on a regular schedule. Don’t wait until something crashes.

9. Take more vacations. Remember Eastern’s First Law: Your last words will not be, "I wish I had spent more time in the office." This is the year to start spending more time enjoying your life, your friends and family, and the world. As John Lennon said, "Life is what happens to you while you’re busy making other plans."

10. Look at yourself. A private practice lives or dies on the personalities of its physicians, and your staff copies your personality and style. Take a hard, honest look at yourself. Identify your negative personality traits and work to eliminate them. If you have any difficulty finding the things that need changing ... ask your spouse. He or she will be happy to outline them for you in great detail.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is a clinical associate professor of dermatology at Seton Hall University School of Graduate Medical Education in South Orange, N.J. Dr. Eastern is a two-time past president of the Dermatological Society of New Jersey, and currently serves on its executive board. He holds teaching positions at several hospitals and has delivered more than 500 academic speaking presentations. He is the author of numerous articles and textbook chapters, and is a long-time monthly columnist for Skin & Allergy News.

Insurance – so goes the hoary cliché – is the one product you buy hoping never to use. While no one enjoys foreseeing unforeseeable calamities, regular meetings with your insurance broker are important. Overinsuring is a waste of money, but underinsuring can prove even more costly, should the unforeseeable happen.

Malpractice premiums continue to rise. If yours are getting out of hand, ask your broker about alternatives.

"Occurrence" policies remain the coverage of choice where they are available and affordable, but they are becoming an endangered species as fewer insurers are willing to write them. "Claims-made" policies are usually cheaper, and provide the same coverage as long as you remain in practice. You will need "tail" coverage against belated claims after you retire, but many companies provide free tail coverage after you’ve been insured for a minimum period (usually 5 years).

Other alternatives are gaining popularity as the demand for more reasonably priced insurance increases. The most common, known as reciprocal exchanges, are very similar to traditional insurers, but differ in certain aspects of funding and operations. For example, most exchanges require policyholders to make capital contributions in addition to payment of premiums, at least in their early stages. You get your investment back, with interest, when (if) the exchange becomes solvent.

Another option, called a captive, is an insurance company formed by several noninsurance entities (such as medical practices) to write their own insurance policies. All participants are shareholders, and all premiums (less administrative expenses) go toward building the security of the captive. Most captives purchase reinsurance to protect against catastrophic losses. If all goes well, individual owners sell their shares at retirement for a nice profit, which has grown tax free in the interim.

Risk Retention Groups (RRGs) are a combination of exchanges and captives, in that capital investments are usually required, and the owners are the insureds themselves; but all responsibility for management and adequate funding falls on the insureds’ shoulders, and reinsurance is rarely an option. Most medical malpractice RRGs are licensed in Vermont or South Carolina, because of favorable laws in those states, but they can be based in any state that allows them.

Exchanges, captives, and RRGs all carry risk: A few large claims can eat up all the profits, and may even put you in a financial hole. But of course, traditional malpractice policies offer zero profit opportunity.

If your financial situation has changed since your last insurance review, your life insurance needs have probably changed, too. As your retirement savings accumulate, less insurance is necessary. And if you own any expensive whole life policies, you can probably convert them to much cheaper term insurance.

Disability insurance is not something to skimp on, but if you are approaching retirement age, you may be able to decrease your coverage, or even eliminate it entirely, if your retirement plan is far enough along.

Liability insurance is likewise no place to pinch pennies, but you might be able to add an umbrella policy providing comprehensive catastrophic coverage, which may allow you to decrease your regular coverage, or raise your deductible limits.

One additional policy to consider is Employment Practices Liability Insurance, which protects you from lawsuits brought by militant or disgruntled employees. More on that next month.

Health insurance premiums continue to soar; Obamacare might offer a favorable alternative for your office policy. Open enrollment began Oct. 1, with coverage scheduled to begin Jan. 1, 2014. If you are considering such an option, go to the Center for Consumer Information and Insurance Oversight and pick a plan for your employees to enroll in.

Workers’ compensation insurance is mandatory in most states, and heavily regulated, so there is little room for cutting expenses. However, some states do not require you, as the employer, to cover yourself, and eliminating that coverage could save you a substantial amount. This is only worth considering, of course, if you have adequate health and disability policies in place.

If you’re over 50 years old, look into long-term care insurance as well. It’s relatively inexpensive if you buy it while you’re still healthy, and it could save you and your heirs a load of money on the other end. If you have shouldered the expense of a chronically ill parent or grandparent, you know what I’m talking about.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J., and has been a long-time monthly columnist for Dermatology News.

Insurance – so goes the hoary cliché – is the one product you buy hoping never to use. While no one enjoys foreseeing unforeseeable calamities, regular meetings with your insurance broker are important. Overinsuring is a waste of money, but underinsuring can prove even more costly, should the unforeseeable happen.

Malpractice premiums continue to rise. If yours are getting out of hand, ask your broker about alternatives.

"Occurrence" policies remain the coverage of choice where they are available and affordable, but they are becoming an endangered species as fewer insurers are willing to write them. "Claims-made" policies are usually cheaper, and provide the same coverage as long as you remain in practice. You will need "tail" coverage against belated claims after you retire, but many companies provide free tail coverage after you’ve been insured for a minimum period (usually 5 years).

Other alternatives are gaining popularity as the demand for more reasonably priced insurance increases. The most common, known as reciprocal exchanges, are very similar to traditional insurers, but differ in certain aspects of funding and operations. For example, most exchanges require policyholders to make capital contributions in addition to payment of premiums, at least in their early stages. You get your investment back, with interest, when (if) the exchange becomes solvent.

Another option, called a captive, is an insurance company formed by several noninsurance entities (such as medical practices) to write their own insurance policies. All participants are shareholders, and all premiums (less administrative expenses) go toward building the security of the captive. Most captives purchase reinsurance to protect against catastrophic losses. If all goes well, individual owners sell their shares at retirement for a nice profit, which has grown tax free in the interim.

Risk Retention Groups (RRGs) are a combination of exchanges and captives, in that capital investments are usually required, and the owners are the insureds themselves; but all responsibility for management and adequate funding falls on the insureds’ shoulders, and reinsurance is rarely an option. Most medical malpractice RRGs are licensed in Vermont or South Carolina, because of favorable laws in those states, but they can be based in any state that allows them.

Exchanges, captives, and RRGs all carry risk: A few large claims can eat up all the profits, and may even put you in a financial hole. But of course, traditional malpractice policies offer zero profit opportunity.

If your financial situation has changed since your last insurance review, your life insurance needs have probably changed, too. As your retirement savings accumulate, less insurance is necessary. And if you own any expensive whole life policies, you can probably convert them to much cheaper term insurance.

Disability insurance is not something to skimp on, but if you are approaching retirement age, you may be able to decrease your coverage, or even eliminate it entirely, if your retirement plan is far enough along.

Liability insurance is likewise no place to pinch pennies, but you might be able to add an umbrella policy providing comprehensive catastrophic coverage, which may allow you to decrease your regular coverage, or raise your deductible limits.

One additional policy to consider is Employment Practices Liability Insurance, which protects you from lawsuits brought by militant or disgruntled employees. More on that next month.

Health insurance premiums continue to soar; Obamacare might offer a favorable alternative for your office policy. Open enrollment began Oct. 1, with coverage scheduled to begin Jan. 1, 2014. If you are considering such an option, go to the Center for Consumer Information and Insurance Oversight and pick a plan for your employees to enroll in.

Workers’ compensation insurance is mandatory in most states, and heavily regulated, so there is little room for cutting expenses. However, some states do not require you, as the employer, to cover yourself, and eliminating that coverage could save you a substantial amount. This is only worth considering, of course, if you have adequate health and disability policies in place.

If you’re over 50 years old, look into long-term care insurance as well. It’s relatively inexpensive if you buy it while you’re still healthy, and it could save you and your heirs a load of money on the other end. If you have shouldered the expense of a chronically ill parent or grandparent, you know what I’m talking about.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J., and has been a long-time monthly columnist for Dermatology News.

Insurance – so goes the hoary cliché – is the one product you buy hoping never to use. While no one enjoys foreseeing unforeseeable calamities, regular meetings with your insurance broker are important. Overinsuring is a waste of money, but underinsuring can prove even more costly, should the unforeseeable happen.

Malpractice premiums continue to rise. If yours are getting out of hand, ask your broker about alternatives.

"Occurrence" policies remain the coverage of choice where they are available and affordable, but they are becoming an endangered species as fewer insurers are willing to write them. "Claims-made" policies are usually cheaper, and provide the same coverage as long as you remain in practice. You will need "tail" coverage against belated claims after you retire, but many companies provide free tail coverage after you’ve been insured for a minimum period (usually 5 years).

Other alternatives are gaining popularity as the demand for more reasonably priced insurance increases. The most common, known as reciprocal exchanges, are very similar to traditional insurers, but differ in certain aspects of funding and operations. For example, most exchanges require policyholders to make capital contributions in addition to payment of premiums, at least in their early stages. You get your investment back, with interest, when (if) the exchange becomes solvent.

Another option, called a captive, is an insurance company formed by several noninsurance entities (such as medical practices) to write their own insurance policies. All participants are shareholders, and all premiums (less administrative expenses) go toward building the security of the captive. Most captives purchase reinsurance to protect against catastrophic losses. If all goes well, individual owners sell their shares at retirement for a nice profit, which has grown tax free in the interim.

Risk Retention Groups (RRGs) are a combination of exchanges and captives, in that capital investments are usually required, and the owners are the insureds themselves; but all responsibility for management and adequate funding falls on the insureds’ shoulders, and reinsurance is rarely an option. Most medical malpractice RRGs are licensed in Vermont or South Carolina, because of favorable laws in those states, but they can be based in any state that allows them.

Exchanges, captives, and RRGs all carry risk: A few large claims can eat up all the profits, and may even put you in a financial hole. But of course, traditional malpractice policies offer zero profit opportunity.

If your financial situation has changed since your last insurance review, your life insurance needs have probably changed, too. As your retirement savings accumulate, less insurance is necessary. And if you own any expensive whole life policies, you can probably convert them to much cheaper term insurance.

Disability insurance is not something to skimp on, but if you are approaching retirement age, you may be able to decrease your coverage, or even eliminate it entirely, if your retirement plan is far enough along.

Liability insurance is likewise no place to pinch pennies, but you might be able to add an umbrella policy providing comprehensive catastrophic coverage, which may allow you to decrease your regular coverage, or raise your deductible limits.

One additional policy to consider is Employment Practices Liability Insurance, which protects you from lawsuits brought by militant or disgruntled employees. More on that next month.

Health insurance premiums continue to soar; Obamacare might offer a favorable alternative for your office policy. Open enrollment began Oct. 1, with coverage scheduled to begin Jan. 1, 2014. If you are considering such an option, go to the Center for Consumer Information and Insurance Oversight and pick a plan for your employees to enroll in.

Workers’ compensation insurance is mandatory in most states, and heavily regulated, so there is little room for cutting expenses. However, some states do not require you, as the employer, to cover yourself, and eliminating that coverage could save you a substantial amount. This is only worth considering, of course, if you have adequate health and disability policies in place.

If you’re over 50 years old, look into long-term care insurance as well. It’s relatively inexpensive if you buy it while you’re still healthy, and it could save you and your heirs a load of money on the other end. If you have shouldered the expense of a chronically ill parent or grandparent, you know what I’m talking about.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J., and has been a long-time monthly columnist for Dermatology News.