Practice Startup Success

Question: LLC vs. PC

One reader was preparing his business plan and wondered about the difference between an LLC and a Professional Corporation (PC).  Here's my response:

This is a complicated subject and that there are many factors to consider in deciding what form of practice to use.  First, note that the reason most businesses use a form like an LLC or a corporation is to limit their liability for the debts of the business and for negligence and malpractice.

An LLC is a Limited Liability Company.  It's not a corporation, but it provides basically the same protection from liability from certain debt  It is set up with "members" (you can be a single-member LLC). There are several ways an LLC can be taxed, but most commonly a single-member LLC is taxed like a sole proprietorship (on your personal income tax return); an LLC with several members is taxed like a partnership.In many states, you can also set up a Professional LLC, which restricts membership to people licensed in that profession (so your spouse could not be a Member).  In an LLC (or PLLC), your liability is limited to your investment.

A PC is a Professional Corporation, which only certain types of professions (like chiropractors) can form.  The benefit to a PC is that you (one of the owners) aren't liable for the negligence or malpractice of one of the other owners.  If you are the only chiropractor in the PC, there really isn't much benefit. 

Most attorneys will try to get you to incorporate, since it is usually best to get an attorney to be sure you have followed all the rules. Incoroporation can cost $500 to $1000, depending upon what part of the country you're in and how your attorney works.  Attorneys will also try to get you to pay them $500 to help you set up an LLC, but you can do this yourself for under $100 in most states.  Just go to the website of the Secretary of State in your state, find the business section, and download the form. 
You can also get a book on LLC's from nolo.com and get more information.  As usual, it's a matter of deciding whether you want to take the time to do it yourself and save money or pay someone to do it and save time.

As I always say, I'm not an attorney, so listening to your attorney's opinion would be good.  I'm just offering an opinion.

What is a "Participating" Physician

I receive many questions about insurance and Medicare signup.  In a recent answer, I provided more detail on Medicare signup for chiropractors and "participating" physician status:

First, any health care provider, including chiropractors, that provides any services to someone with Medicare coverage must send in a "bill" to Medicare, even if the services are not covered.  You're correct that only adjustments are covered and only for "active" relief of specific conditions .  Makes no difference to Medicare if it's covered or not.  They still need the paperwork if you're caring for someone who is Medicare-eligible.  Crazy, I know.

So you do need an NPI and you need to be signed up for your practice to be a Medicare provider (855i or 855b).  Even if you never saw a Medicare patient, it would be a good idea to get this in place, since many insurance providers use the Medicare NPI as part of their own process. 

Second, when you sign up for Medicare, you can decide if you want to become a "participating" provider.  .
Here are the relevant facts about being a participating (PAR) physician:
1.  PAR providers receive the "full" amount of the benefit Medicare pays; non-PAR providers received 95%.  Providers receive "direct and timely" reimbursement from Medicare; non-participating providers may collect from the patient or collect from Medicare.  The doctor can bill Medicare whatever he/she feels is reasonable for the service, as long as Medicare patients are not billed more than non-Medicare patients. 
2.  PAR providers also have "one-stop" billing, since Medicare forwards claims to secondary insurers if this information is provided on the claim form. 

Since most chiropractic care is not covered by Medicare, most chiropractors choose to be non-participating,  Non-PAR doctors can't charge what they want for covered services; the charge is limited to what Medicare considers reasonable, if you don't accept assignment (this is explained in the next paragraph).  If you don't want to be a PAR doctor, you don't need to do anything.  If you want to participate, you must elect to do so, either immediately after you become a provider or during an enrollment period.  The form to use is CMS-460.

Third, (I warned you this was complicated!), there is the question of accepting assignment; that is, whether you want to get the money from the patient or from Medicare.  If you are a PAR doctor, you must accept assignment (that is, et paid by Medicare).  If you don't participate, you can decide if you want to accept assignment.  Since most chiropractic services will not be covered by Medicare, most chiropractors choose not to accept assignment, preferring to get paid directly by the patient for all services. 

BUT, if you don't accept assignment and you bill Medicare patients for services not covered by Medicare, you must notify the patients that they must pay you directly and that they can't expect Medicare to pay. This is actually a smart thing to require, since many elderly don't know what Medicare pays and what they don't, so it's helpful to have this conversation with them in the beginning of care.  You must have them sign an ABN (Advanced Beneficiary Notification) before you begin to provide services to a Medicare patient.  Here is the link to this form:  http://www.cms.hhs.gov/BNI/Downloads/CMSR131G.pdf

To recap:
1.  Get the NPI and apply to be a Medicare provider (855I for sole proprietor; 855B for other forms of practice).  Also get an NPI for your practice if you are not starting out as a sole proprietor.
2.  Decide if you want to be a PAR provider.  If you do, get the CMS-460 form and apply after you become a provider.
3.  Decide if you want to accept assignment.  If you don't want to accept assignment, have all Medicare patients sign an ABN.

Tips to help you with the Medicare enrollment process.

Checking on the Competition

You've got to be original, because if you're like someone else, what do they need you for?

Bernadette Peters, Inside the Actors Studio

If you don't know what the competition is doing, how do you know that you are setting yourself in the right "niche" in comparision with your competition?   Knowing how the competition is marketing can help you market yourself.  You should also check periodically on how your competitors are pricing their services and products.  So how do you do this?

1.  Find out how they are advertising.  Check their Yellow Pages ads, newspaper ads, radio and TV ads.  How are they setting out their competitive advantage? 
2.  Have someone do a "secret shopper" survey by calling offices of competitors.  One new DC I know did this to find out how other chiropractors were pricing their services and if the other offices were selling a certain brand of supplements.

HERE is a checklist (from Planning for Practice Success) to help you analyze your practice compared to your competitors:

                                                     

Who Has The   Edge?	You	Your   Competition
Quality
Price
Location
Delivery
Follow-up   service
Availability
Convenience
Reliability

Know any other ways to check out the competition?  Post a comment here.

Read more about marketing strategy in Planning for Practice Success

How to Get Paid in a "Cash" practice

Q:  I want to run a "cash" practice.  How do I set up my systems to be sure to gt paid, from Medicare, Workers Compensation, etc.?

A:  You are exactly right to take a "system" approach to this question.  The most important thing you can do is to work on a system by which you set down the exact words your staff will say to everyone about payment.  (Note that I said "your staff," not 'you."  This conversation should begin with the first visit, and continue with every visit thereafter.  i will talk more about the exact script in another blog post.  For this one, I'll focus on how you will be getting paid from various types of entities.

"Cash" patients.  Make it easy for them to pay by accepting credit/debit cards.  Get my e-book "Accepting Credit Cards" to learn how to set this up.

Medicare.  If you see Medicare-eligible patients you are required to bill Medicare.  But, you don't have to wait for Medicare to pay you.  Select the "non-participating" doctor option and don't accept assignment.  Ask the patient to pay you directly.  Then the patient will receive the money from Medicare.  The only service Medicare will pay for is adjustments for "active" treatment, so the patient will end up paying you anyway.  Your staff will need to explain all of this very carefully to the patient.

Worker's Compensation.  Payment is dictated by the state you live in.  If you get a Workers Compensation patient, you will have to file claims and get paid by the state.  It is unlikely that you can be paid by the patient.  Check with your state Worker's Compensation bureau for more information.

PI cases.  In an personal injury (PI) case, there is likely to be insurance and a lawsuit.  But it is the patient's responsibility to pay you.  Ask for payment as you go, explaining that the patient will get reimbursed at the end.  If the patient doesn't want to pay yet, check your state's laws regarding "physician's liens" or "medical liens."  If these liens are allowed, have the patient sign a lien, agreeing to give you your money when the case is settled.  Get in touch with the patient's attorney (if he/she hasn't already contacted you). Keep careful records of your care related to the accident.  Sometimes you can get paid through the "medical payment" section of the patient's insurance coverage.  Your staff will need to be diligent on this one.

Bottom line:  Just because you are a "cash" practice, doesn't mean you will get paid easily.  You and your staff will have to work hard to assure that you can get paid! 

pregnancy clause

Can I get a "pregnancy" clause in my associate contract?

You can ask for anything you want.  You may not get it, but you certainly won't get it if you don't ask. 
As for pregnancy, there is a federal law requiring employers to treat pregnancy as a disability, but it only applies to companies of over 15 employees.  If there is a disability section or clause in the contract, you could request that language be added that requires your employer to consider pregnancy as a disability.  If there is no disability clause in your contract, continuing your base pay for some period of time, there should be. 

Applying for malpractice insurance

As you begin to work on your business plan and start into chiropractic practice, you will want to find out the cost of malpractice insurance and make decisions on what kind of insurance to take.  Here is a discussion of the options available to you.

1.  What state will you be practicing in?  Cost of insurance varies by state, based on claims experience in that state.  Usually the most populated states (like New York, California, and Florida) have higher rates, but the scope of practice also is a consideration. 

2.  What level of coverage do you want?  The more coverage, the higher the cost.  The "typical" coverage is $1 million per occurrence/$3 million per year, because most insurance networks require this level as a minimum. 

3.  Do you want occurrence or claims made insurance?  The term "claims made" means that the policy must be active when the claim is made.  If a claim comes in after the policy has lapsed, it is as if there never was a policy.  If you want to be be covered for claims that come in after the policy stops, you must have "tail coverage."  Occurrence coverage includes "tail" coverage.  You will pay more for occurrence coverage in the first few years of practice.

4.  If you are a new chiropractor, you'll find that most malpractice insurance companies provide substantial discounts. NCMIC, one of the largest carriers, gives you a 75% reduction the first year, 40% the second, 35% the third and 15% the fourth year.

If you have no claims for a period of time, you may also be eligible for discounts.  You can get a quote by calling the insurance carriers directly.  Go to the Chiropractic Economics website Buyer's Guide for a listing of chiropractic malpractice insurance carriers.

How do I fix mistakes on my credit report?

You just got your credit report and looked over it and saw errors.  Or you saw an old negative that you believe is hurting your credit and should be removed.  What do you do?

The key is the "three D's"  - dispute, document, and be diligent.
First, dispute.  The credit reporting bureaus are required by federal law to investigate claims within 30 days.  If the creditor doesn't verify that the claim is accurate, it must be removed. The best way to file a claim is to use the claim form that each bureau includes with the credit report.  If a creditor still has an old negative on your credit report, write to that creditor and ask that they allow this to be removed.  When the negative or mistake is removed, the bureau is supposed to send you a new report showing that information has been removed.  If the information is on all three reports, you'll have to request that it be removed from all three; don't wait for each one to pick up the removal - that might take years.

Second, document.  Keep records of everything you do.  If you talk on the phone with someone, request that they verify in writing what they have agreed to do.  You also should write to that person stating your understanding of the discussion.  When talking with someone, request their name, so you can verify later who you talked with. 

Finally, be diligent.  It may be difficult to get people to talk with you, and more difficult to get action.  Remain calm and professional, but keep working on this.  It may take months, but it will be worth it in the end.

Each of the three credit reporting bureaus has an online dispute resolution process. 

Here is the link: for Equifax's online dispute resolution process. 

Here is the link for Transunion's online process.

Here is the link for the Experian credit dispute process.

What can SCORE do for me?

What is SCORE?  Can they help me get a startup loan?

SCORE is the Service Corps of Retired Executives.  They provide business advice and training.  SCORE has local offices all around the country.  They can help you write a business plan and work on the financial statements needed to take to a bank, but they don't fund business plans or help you get funding.

Having said that, it is quite possible that if you have a SCORE mentor, he or she might have contacts with local banks and may be able to steer you towards a bank who might be willing to help finance your practice.

Always ask; you never know who knows who.

For detailed information on preparing your business plan and getting it financed, buy Planning for Practice Success. 

STARK LAW questions

We need to talk about the Stark Law.  This law will affect you if:
1.  You are considering taking on an independent contractor (massage therapist, for example), or
2.  You are considering becoming an independent contractor within someone else's office.

I'm going to first go through the law as I understand it and as my attorney has described it.  Then we'll talk about the implications for you. 

 

The Stark Law,Section 1877 of the Social Security Act, prohibits certain referrals between physicians and entities with which the physician has a financial relationship to provide designated health services.  Stark has sometimes been incorrectly termed the "anti-kickback" law.  A chiropractor is considered a "physician" under this law, and massage therapy would be a "designated health service." Note that it specifically discusses referrals tof Medicare patients but it can be more broadly applied to all patients.

The type of compensation arrangement is the key.  If doctor has an ownership or investment interest in the person being referred to (the massage therapist, in this case), the referral is not allowed. There are exceptions under which the compensation arragement is allowed, and there is one that is of interest here.  Turning it to the negative, the compensation arrangement is not allowable if it is determined in a manner which considers the volume or value of the referrals by the referring physician. 

Think about that last sentence for a minute.  This is where the "light bulb" went off for me.  If a doctor refers patients to a massage therapist and then requires the massage therapist to pay a percentage of the VOLUME of patients, the doctor is getting money back for referring patients! 

I'll say it a different way.  Let's say Doctor A takes on Doctor B as an independent contractor, and requires that Doctor B pay a percentage of his/her patient volume to Doctor A.  Then Doctor A refers patients to Doctor B.  You're getting the picture, right?  Doctor A has just profited from this referral, even if it's indirect. 

Bottom line:  An IC agreement should only involve RENT; no percentages.  Don't enter into an Independent Contractor relationship that includes payment of a percentage.  If you are hiring an MT, have this person pay rent.  If you are entering an IC relationship, don't go into this relationship unless the other doctor agrees to RENT, not a percentage.

Too Much Office Space?

 I’ve had discussions with several clients recently who are concerned about taking on too much office space in a lease. A “typical” chiropractic office (if there is such a thing) is about 1000 to 1200 square feet. Unless you are getting a GREAT deal on this space (say, under $10 a square foot), don’t get talked into leasing more space.

Here is an example: Let’s say you lease 1800 square feet. That means you have 600 square feet that is “excess.” At $20 a square foot, that means you must pay an additional $1000 a month for unproductive space; i.e., space that you aren’t getting any revenue from. Now, if you can find a productive use for that space; say, by letting a massage therapist use it or by selling some products that can give you at least $1000 a month, it might be worth it. If you use it for a classroom in which to give lectures, you are not getting additional funds from the space. (You could as easily do the lectures in the public library at no cost.)

 In other words, if a real estate agent tries to convince you “This is the only property available in this area so you’d better take it,” check that story and think long and hard before you agree to rent unproductive space. For more information, buy our the “Leasing Your Office” e-book: http://www.dcpracticesuccess.com/p4ps_orderpage.html .