Simple steps for staff retirement plans
■ A column answering your questions about the business side of your practice
By Cathy B. Goldsticker amednews correspondent— Posted Dec. 19, 2005.
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Question: Our pediatric practice is composed of five physicians, two nurse practitioners and 17 other employees. It was established a few years ago. We don't have a retirement plan, but the doctors do contribute to their own IRA accounts, and they report the deductions on their personal income tax returns. Now we are thinking about funding some type of retirement benefit. Do you have any suggestions for us?
Answer: There are many varieties of retirement plans. Being relatively small, your practice doesn't need too many bells and whistles in your plan to have something that allows the physicians to save more on a pretax basis than their IRAs provide.
A defined contribution plan, as opposed to a defined benefit plan, would be a simpler and less expensive plan. A defined contribution plan provides for a fixed amount of contributions to be made each year, while a defined benefit plan requires actuarially calculated annual contributions to provide a targeted future benefit.
Ideally, your plan should allow employees to direct a portion of their salary into the plan, accept a matching of practice dollars and allow discretionary practice contributions.
A SIMPLE IRA is the least expensive plan available. It lets each eligible employee earning at least $5,000 defer up to $10,000 (an additional $2,000 if at least 50 years old) of their income with either employers matching with 3% of salary or an employer contribution for all employees of 2% of salary. There is no discrimination testing or tax filings required, so the administration costs are negligible.
If your physicians want to maximize the amount being set aside for retirement ($42,000 in 2005), then the plan will require the practice to significantly contribute for the rest of the employees. Otherwise, the plan will fail the discrimination tests and be disallowed as a qualified plan.
A plan that maximizes annual contributions is typically expensive to administer to cover the costs of the discrimination testing and calculations required, not to mention the costs for the actual contributions for each eligible employee.
Another choice is a safe-harbor profit-sharing plan that allows deferrals up to the maximum limit of $14,000 (for 2005) and a required employer contribution of either 4% of salary matching or a contribution of 3% of salary for all eligible employees.
There is no testing required, and the plan lets your physicians set aside an amount for retirement that is significantly higher than a SIMPLE. A safe-harbor plan works well for smaller practices that are willing to pay a modest administration fee for an opportunity to contribute nicely for retirement.
Question: My office manager recently showed me a list of the outstanding patient accounts, and I was horrified. Some of the patients have been seen several times throughout the year and have never paid for their medical care. What's the best way to address this without offending the patients?
Answer: Most physicians say they are in the business of taking care of patients and providing quality patient care. The key word here is "business." No matter how harsh it sounds, you cannot maintain a business unless you get paid in a timely manner for the services you provide.
One of the best ways to address this problem is to write and distribute a financial policy for every patient to read and sign. A copy of the signed document or an acknowledgement should be filed in the patient's chart.
A policy should include:
- Responsibility for payment. The patient is ultimately responsible even if enrolled in an insurance plan. This includes ensuring that the medical practice has the most current insurance information, and assisting the billing office staff in the appeal process if necessary. Most policies say payment in full is expected for all patients who do not have an up-to-date insurance card or are uninsured.
- When payment is due. Usually this is the date of service, unless other arrangements already were made.
- Handling of co-payments and deductibles. Co-pays are collected at each visit without exception.
- Acceptable forms of payment. These may be cash, personal checks, credit cards and debit cards. Some practices have eliminated cash as an acceptable form of payment to reduce the liability of having excessive cash in the office and as a way to have a better audit trail of payments.
- Missed appointments. This should be included if the practice charges for missed appointments.
- Services and procedures not covered by the insurer or Medicare, or those considered medically unnecessary. It's the practice's responsibility to inform the patient of these in advance. If the patient approves, he or she is also agreeing to pay for any of those services that are not covered by insurance.
- Nonpayment. This could include a statement that the practice will enlist a collection agency's help after three months of nonpayment.
Other policies and procedures could be implemented to improve patient collections. If the staff makes reminder calls for appointments, they should notify the patient of any outstanding balance and should remind the patient to bring payment at the time of the scheduled appointment.
Another idea is to have someone from billing review patient schedules at least two days in advance and highlight those patients who need to be directed to their department before being seen by the physician.
These ideas address the potential for delinquent patient accounts at the front end of the process. The practice needs to be committed to following through with them, as well as adhering to a stringent patient account follow-up policy once an account becomes the patient's responsibility.
Attending to the business aspect of a practice before and after providing service will increase your opportunity to reduce delinquent patient accounts and increase revenue.
Cathy B. Goldsticker amednews correspondent—