It's December and that means it's time for your medical practice's annual exam to remain healthy for next year and years to come.
It is very hard to believe, but 2012 is quickly nearing the end. As the year ends, the daily work flow goes on. Patients come in for routine follow-up, preventive exams, screenings, etc. As physicians continue doing what we do best, taking care of our patients, it is important to remember that for those of us in private practice we must analyze our practice and ensure that it stays robust for the years to come.
For my practice, December usually means planning the annual Christmas party for employees, passing out year-end bonuses based upon productivity, and the like. As physicians reward their employees for their hard work, it is very important to take note that we must carefully analyze our practice health. In doing so, this generally means reviewing payments from insurance companies based on the most frequently provided services. Deciding whether or not to continue participating with certain insurance plans is also very important as well. Taking inventory of practice equipment, supplies, hardware, etc., is very important to ensure that our practice is operating efficiently so that we can continue providing care without difficulty.
To steal a scene from the movie "Groundhog Day," it seems as if the pattern continually repeats itself. The flawed Medicare SGR formula is once again at the center of attention and physicians must decide once again whether or not to continue participating in the Medicare plans. As usually happens, our legislators will place a short-term Band-aid on the hemorrhaging payments and either freeze the payments for 2013 to equal that of 2012 or possibly give us a very small 0.5 percent or 1 percent payment increase. For those of us in private practice, the repetitive nature of this activity is getting old very quickly. My wish for 2013 is that this formula will ultimately be replaced with a measure that does not create such nail-biting at the end of each year.
Analyzing my practice's computer equipment is also completed during the end of each calendar year. Any new hardware purchases would routinely be made in December because it is by this time that we can actually determine what we can and can't afford to purchase. Whether it means getting a new database server, upgrading existing desktop computers or installing newer and fasting wireless access points, each item is reviewed carefully. Even though upgrading equipment can be expensive, we must remember that keeping our practice running as smoothly and with the best work flow possible requires that the most up to date hardware and software be used. Unfortunately, this requires ongoing capital expenditures.
In order to prevent the IRS from taking a large bite from the profits earned in the current year, physicians must complete all purchases for equipment and then bonus out the remainder of the bank account. Failing to pay out bonuses at the end of the year can result in the dreaded double taxation effect.
To describe this situation, let's say the practice has $10,000 in profits on December 31. Leaving this money in the account will provide a net profit for the upcoming tax return and typically the IRS will take a 35 percent piece of the profit. Once the tax has been levied, if the remainder is then paid out to providers and employees, the IRS will once again take their piece in terms of the federal tax, the Medicare tax, and the Social Security tax.
In order to avoid the double taxation effect, practices must do their best to completely empty their bank accounts before December 31. This can pose a problem for the upcoming year. Expenses never stop, employees still must be paid and the large nest egg that was in place on December 31 is now gone by January 1. For most physicians in private practice, this forces them to pass on taking their first paycheck of the new year in order to allow employees to get their payroll completed and ongoing expenses paid.
It is very important to routinely provide the wellness exam for your practice. Not only is the year-end review important, but continued monitoring of employee performance, expenditures, and other vital signs of the practice must be continuously monitored as the year passes. Making sure your practice operates as a well-oiled machine will provide for great efficiency, improved work flow and will ultimately result in high patient and employee satisfaction. Such continued monitoring will insure that your practice will continue to remain "healthy" for many years to come.