Primary care physicians may well see payments increase under several federal pro-

grams next year.One change waves a carrot at

primary care physicians in the hopes of encouraging Medicaid program participation. The move comes at a time when, in some states, a growing number of physicians in private practice are contemplating whether to limit or no longer accept Medicare and Medicaid patients because of low reimbursement rates and burdensome governmental requirements.

Add to rising costs and regulatory pressures the threat posed by the Medicare sustainable growth rate (SGR) formula, and you have some physicians reassessing their ability to remain in business at all. The formula is the method used by the Centers for Medicare & Medicaid (CMS) in an effort to prevent the annual Medicare expense per beneficiary from rising above the growth in gross domestic product – a method that may result in a yearly payment adjustment for physician services.

A physician shortage just as the insured population is expected to explode under healthcare reform could be problematic. Some 15 million people will be added to Medicaid alone beginning in 2014 because anyone earning up to 133 percent of the federal poverty level will be eligible to enroll. The number of additional enrollees will swell to 24 million by 2016, according to the CMS Office of the Actuary.

The actual number of recipients will be subject to how many states ultimately decide to opt out of the Medicaid expansion. But even those states that refuse to accept the federal funding can opt in to the program at any future time.

Medicaid feesTo increase participation in the assistance program, the

Affordable Care Act requires that primary care physicians serving

Medicaid patients be reimbursed, at a minimum, at Medicare levels in 2013 and 2014.

Primary care physicians are defined as those practicing family medicine, general internal medi-cine, pediatric medicine and related subspecialties.

The provis ion extends to payments on a fee-for-service basis or through a Medicaid managed-care plan. Solely the federal government

will fund the increased payment. No matching payments are required from the states.

Critics point to the concern that the federal funding is for only two years, leaving questions about future reimbursement rates. Further, the results of November’s presidential election may well determine the Affordable Care Act’s ultimate fate.

Vaccines for Children feeRising also in 2013 are the regional

maximum fees that primary care phy-sicians can charge for administering vaccines to eligible children under the federal Vaccines for Children (VFC) program. The rates have not been updated since the vaccination program was established in 1994. The new rates will be adjusted using the Medicare Economic Index.

Nonphysician practitioners, such as nurse practitioners and physician assistants, also are eligible for the increased vaccine payment. However, the vaccine must be administered under the personal supervision of an

See Physician fees on page 4

I n s i d e

I n s i d e

Nov./Dec. 2012➜New healthcare laws

affect more than your practice

➜People! You can’t live with them, you can’t live without them

A financial and management bulletin to physicians and medical practices from:

100 Second Avenue South, Suite 600, St. Petersburg, Florida 33701 | (727) 821-6161 | www.gsscpa.com

You have undoubtedly read a lot about the impact the 2010 healthcare reform legislation may have on your medical practice. But do you know how that legislation

may affect your personal bottom line?Now that the

Supreme Court has upheld most of the provisions of the new health-care laws, two new taxes will go into effect Jan. 1, 2013, to help pay for the cost of the legislation.

One is a 0.9 percent hospital insurance tax that w i l l a p p l y t o earned income. The other is a 3.8

percent unearned income Medicare contribution tax that will apply to investment income.

New tax on earned income The additional 0.9 percent hospital insurance (HI) tax will

apply to wages and net earnings from self-employment in excess of a threshold amount. The threshold is $250,000 for married couples filing a joint return, $125,000 for married couples filing separately and $200,000 for those who are not married.

Since these amounts are not adjusted for inflation, even if you are below the threshold in 2013, you may become subject to the HI tax in the future. If you and your spouse both have earned income and the combined amount exceeds the threshold, the tax will apply to the excess.

If you operate your medical practice as a sole proprietor, partnership or LLC, your self-employment income will be subject to the additional HI tax. You will also be required to collect the additional tax through payroll withholding if you pay wages to employees in excess of the thresholds. But, unlike the regular 1.45 percent HI tax, there is no employer matching contribution.

New tax on net investment incomeThe 3.8 percent unearned income Medicare contribution

(UIMC) tax will be imposed on the lesser of:✷ Your net investment income; or ✷ The excess of your modified adjusted gross income

over a threshold amount.The threshold amounts are the same as those used for the

new HI tax – also not indexed for inflation.

Net investment income is the sum of the following items, less deductions properly allocable to such items:

✷ Gross income from interest, dividends, annuities, royalties and rents, other than such income derived in the ordinary course of a trade or business to which the UIMC tax does not apply

✷ Income from a passive trade or business ✷ Net gain attributable to the disposition of property,

other than property held in a trade or business that is not passive, which can include gains from the sale of your personal residence to the extent the gain is otherwise included in taxable income – i.e., gain in excess of the amount eligible to be excluded from taxable income

Business income from a passive activity is considered investment income for purposes of the UIMC tax. If you invest in rental real estate or a business in which you do not “materially participate,” your losses may be limited by the passive loss rules, and your profits may be subject to the UIMC tax.

The new UIMC tax will likely not apply to your share of the income from your medical practice, since it is most likely active business income.

Planning for the new taxesYou should meet with your tax adviser to begin planning

for the UIMC tax now. In 2013, the UIMC tax will be com-bined with the scheduled increase in the top marginal tax rate, significantly increasing the tax you may be paying on investment income.

If you can mini-mize either your modified adjusted gross income or your net invest-ment income, or b o t h , y ou w i l l reduce the impact of the UIMC tax.

Here are a few strategies you may consider:

✷ Choose investments that produce tax-exempt or tax-deferred income, such as non-dividend-paying growth stocks, tax-deferred annuities, or state and local government bonds.

✷ Accelerate income into 2012 through making sales earlier or electing out of the installment sales method of reporting gains.

See Healthcare taxes on page 3

New healthcare laws affect more than your practice

Nov./Dec. 2012 Your Healthy Practice2

Healthcare taxes continued from page 2

People are the heart of a medical practice. Patients, staff members, vendors – people are our reason for being.

Yet, dealing with people can be extremely frustrating.Here are a few suggestions for reducing your frustration

level when dealing with others, whether you’re a member of the front office staff, a nurse or a doctor:

✷ Understand the goals of both parties. If you have the task of checking patients in for their appointments, one of your goals might be effi-ciency – get each patient checked in and away from the window quickly so that you can address the next person in line.

Patients may appreciate efficiency because they want to see the doctor as soon as possible. But, they likely also want to feel as if someone cares about them personally, not just as a chart number.

If you can balance the efficiency with a genuine display of concern, you can often reduce the frustra-tion level for your patients, which may encourage them to be more cooperative with you.

✷ Don’t assume everyone knows what you know. You know how to do your job. You know how the system works and what needs to happen during the interaction.

Often, the people you’re dealing with don’t know these things. When you forget this fact, or assume that others understand more than they do, you cause frustration for both parties.

When you’re giving instructions or asking questions, slow down. Often, the instructions and questions have become so familiar that you may not even hear the words you’re saying (think about the flight attendant giving the safety speech on an airplane). Avoid confus-ing health lingo, such as CMS and COB. The person trying to understand and follow your instructions could easily become frustrated and uncooperative, resulting in frustration for you as well.

✷ Assume a positive intent. In most interactions, neither party is trying to be obstinate or annoying, yet you may find yourself feeling that the other person is intentionally making the interaction difficult. Once you assume a negative intent, you may become stubborn or inflexible, leading to more frustration for both parties.

If you assume each person is trying to do the best in the situation, you’ll approach the conversation differently.

For instance, if you’re asking a vendor to make special delivery arrangements, and the vendor says he can’t, you may become frustrated or argumentative.

If, however, you think from the vendor’s perspective and assume he’s trying to do the right thing within his job requirements, you may

approach the discussion differently. You’ll more likely open up discussion to find ways for him to maintain the control his company requires while still allowing you to receive the product within the needed time frame. You’ll work cooperatively instead of combatively.

✷ Take a deep breath between interactions. Your days are filled with interactions, and one difficult conver-sation can color the next four or five. When you’ve had a tough encounter, take a few seconds to close it off, box it up and put it away in your mind before interacting with someone else.

Be glad you have a new opportunity for a better interaction, and start fresh. It will take only a few seconds, and it will reduce your frustration level dramatically. – Denise Altman, CPA

✷ Elect installment reporting to spread the capital gain from a sale in 2013 or later over several years, reducing modified adjusted gross income and deferring the recognition of net investment income

✷ Try to avoid or reduce the UIMC tax by making tax-deductible retirement plan contributions to reduce modified adjusted gross income below the threshold level, if your income is near the threshold.

✷ Pay attention to all passive activities, whether they produce profits or losses.

✷ Consider the use of family limited partnerships and

other income-shifting techniques to transfer investment income to your children. Although your children’s investment income may be taxed at your marginal tax rate under the “kiddie tax” rules, your children will not be subject to the UIMC tax, unless their modified adjusted gross income exceeds $200,000, assuming they aren’t married.

While you may have been focused on year-end tax planning for 2012, it is not too early to begin planning for 2013 taxes, too. – Michael R. Redemske, CPA, Instructor in Residence, University of Connecticut

You can’t live with them, you can’t live without them

People!

Nov./Dec. 2012 Your Healthy Practice 3

eligible primary care physician and billed under that physi-cian’s program enrollment number.

Federally qualified health centers and rural health clinics are paid under a different structure and are not eligible under this program.

Medicare physician fee scheduleA stated goal of the Centers for Medicare & Medicaid

has been to develop initiatives that focus on providing payments to primary care physicians that more accurately reflect the value of their services. The proposed 2013 Medicare Physician Fee Schedule does just that.

While some specialties are staring at a decrease in payments of up to 19 percent, total allowed charges by family physicians are estimated to rise approximately 7 percent. The expected impact on other primary care specialties includes a 5 percent increase for internal medicine, pediatrics and nurse practitioners; 4 percent for geriatrics; and 3 percent for physical/occupational therapy and physi-cian assistants.

For 2013, CMS has proposed a new procedure code that will pay community physicians or qualified nonphysician

practitioners for coordinating care during the 30 days after their patients are discharged from a hospital or skilled nursing facility. This is a one-time payment per patient, per discharge.

The following elements will be required to qualify for the payment:

✷ Communication with the patient or caregiver within two business days of discharge either in person, by telephone or electronically

✷ Medical decision-making of moderate or high complexity during the service period

✷ A face-to-face evaluation and management visit with the patient in the 30 days prior to the transition in care or within 14 business days following the transition in care

The final Medicare physician fee schedule is expected to be released in November. Of course, the projected increases don’t take into account any reduction that might occur in the unlikely event that Congress fails to act on the impending sustainable growth factor cut. – Irene E. Lombardo

Physician fees continued from page 1

The technical information in this newsletter is necessarily brief. No final conclusion on these topics should be drawn without further review and consultation. Please be advised that, based on current IRS rules and standards, the information contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty assessed by the IRS. © 2012 CPAmerica International

Your Healthy Practice

100 Second Avenue South, Suite 600, St. Petersburg, Florida 33701www.gsscpa.com | gss@gsscpa.com

(727) 821-6161

If we may answer any of your questions on the information contained in this publication, please contact us.