Joseph S. Eastern, MD

Recently, I wrote that springtime is an excellent time to spruce up your office, to check your equipment for malfunctions, to resharpen your curettes and scissors, and to back up your computer files and upgrade software. More important than any of that, though, is reevaluating your most important asset: yourself.

I write this reminder every couple of years because it’s so easy to lose sight of the big picture among the pressures of our daily routines. Sooner or later, no matter how dedicated we are, the grind gets to all of us, leading to fatigue, irritability, and a progressive decline in motivation. And we are too busy to sit down and think about what we might do to break that vicious cycle. This is detrimental to our own well-being, as well as that of our patients.

There are many ways to maintain your intellectual and emotional health, but here’s how I do it: I take individual days off (average of 1 a month) to catch up on journals or taking a CME course; or to try something new – something I’ve been thinking about doing “someday, when there is time” – such as a piano or sailing lesson; or a long weekend away with my wife. And I take no less than 4 weeks vacation per year.

I know how some of you feel about “wasting” a workday. Vacations are even worse, because patients might go elsewhere while we’re gone, and every day the office is idle we “lose money.”

That whole paradigm is wrong. Stop thinking day to day; think year to year instead. You bring in a given amount of revenue per year – more on some days, less on other days, none on weekends and vacation days; it all averages out in the end.

Besides, this is much more important than money. This is breaking the routine, clearing the cobwebs, living your life. Trust me – your practice will still be there when you return.

Last month, my wife and I hiked up a mountain in the Himalayas to the fabled Tiger’s Nest Monastery in Bhutan. As I huffed and puffed up the trail, I didn’t have the time – or the slightest inclination – to worry about the office. When the trek was over, I returned ready to take on the world, and my practice, anew.

And I jotted down some great ideas – practical, medical, and literary. Original thoughts are hard to come by during the daily grind, but they often appear, unannounced, in a new and refreshing environment.

Creative people have long recognized the value of “sharpening the saw.” A classic example is the oft-told story of Swiss physicist K. Alex Müller and German physicist J. Georg Bednorz. In 1986, they reached a major impasse in their superconductivity research; it appeared 2 decades of work might be for naught. The harder they pressed, the more elusive the answer became. So Müller decided to take some time off, put aside his troubles, and research a subject that had always interested him: ceramics.

Nothing could have been further from his research field, of course, since ceramics are among the poorest conductors known. Yet, as he relaxed, it occurred to Müller that a unique property of ceramics might apply to their project. Back in the lab, the team created a ceramic compound that became the first successful “high-temperature” superconductor.

The rest, as they say, is history; Müller and Bednorz won a Nobel Prize and triggered an explosion of research leading to breakthroughs in computing, electricity transmission, magnetically levitated trains, and many other applications that are still being realized.

Sharpening your saw may not change the world, but it will change you; any nudge out of your comfort zone will give you fresh ideas and help you look at the same old problems in completely new ways.

And to those who still can’t bear the thought of taking time off, remember Eastern’s First Law: Your last words will NOT be, “I wish I had spent more time in the office!”

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 Dermatology News.

Recently, I wrote that springtime is an excellent time to spruce up your office, to check your equipment for malfunctions, to resharpen your curettes and scissors, and to back up your computer files and upgrade software. More important than any of that, though, is reevaluating your most important asset: yourself.

I write this reminder every couple of years because it’s so easy to lose sight of the big picture among the pressures of our daily routines. Sooner or later, no matter how dedicated we are, the grind gets to all of us, leading to fatigue, irritability, and a progressive decline in motivation. And we are too busy to sit down and think about what we might do to break that vicious cycle. This is detrimental to our own well-being, as well as that of our patients.

There are many ways to maintain your intellectual and emotional health, but here’s how I do it: I take individual days off (average of 1 a month) to catch up on journals or taking a CME course; or to try something new – something I’ve been thinking about doing “someday, when there is time” – such as a piano or sailing lesson; or a long weekend away with my wife. And I take no less than 4 weeks vacation per year.

I know how some of you feel about “wasting” a workday. Vacations are even worse, because patients might go elsewhere while we’re gone, and every day the office is idle we “lose money.”

That whole paradigm is wrong. Stop thinking day to day; think year to year instead. You bring in a given amount of revenue per year – more on some days, less on other days, none on weekends and vacation days; it all averages out in the end.

Besides, this is much more important than money. This is breaking the routine, clearing the cobwebs, living your life. Trust me – your practice will still be there when you return.

Last month, my wife and I hiked up a mountain in the Himalayas to the fabled Tiger’s Nest Monastery in Bhutan. As I huffed and puffed up the trail, I didn’t have the time – or the slightest inclination – to worry about the office. When the trek was over, I returned ready to take on the world, and my practice, anew.

And I jotted down some great ideas – practical, medical, and literary. Original thoughts are hard to come by during the daily grind, but they often appear, unannounced, in a new and refreshing environment.

Creative people have long recognized the value of “sharpening the saw.” A classic example is the oft-told story of Swiss physicist K. Alex Müller and German physicist J. Georg Bednorz. In 1986, they reached a major impasse in their superconductivity research; it appeared 2 decades of work might be for naught. The harder they pressed, the more elusive the answer became. So Müller decided to take some time off, put aside his troubles, and research a subject that had always interested him: ceramics.

Nothing could have been further from his research field, of course, since ceramics are among the poorest conductors known. Yet, as he relaxed, it occurred to Müller that a unique property of ceramics might apply to their project. Back in the lab, the team created a ceramic compound that became the first successful “high-temperature” superconductor.

The rest, as they say, is history; Müller and Bednorz won a Nobel Prize and triggered an explosion of research leading to breakthroughs in computing, electricity transmission, magnetically levitated trains, and many other applications that are still being realized.

Sharpening your saw may not change the world, but it will change you; any nudge out of your comfort zone will give you fresh ideas and help you look at the same old problems in completely new ways.

And to those who still can’t bear the thought of taking time off, remember Eastern’s First Law: Your last words will NOT be, “I wish I had spent more time in the office!”

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 Dermatology News.

Recently, I wrote that springtime is an excellent time to spruce up your office, to check your equipment for malfunctions, to resharpen your curettes and scissors, and to back up your computer files and upgrade software. More important than any of that, though, is reevaluating your most important asset: yourself.

I write this reminder every couple of years because it’s so easy to lose sight of the big picture among the pressures of our daily routines. Sooner or later, no matter how dedicated we are, the grind gets to all of us, leading to fatigue, irritability, and a progressive decline in motivation. And we are too busy to sit down and think about what we might do to break that vicious cycle. This is detrimental to our own well-being, as well as that of our patients.

There are many ways to maintain your intellectual and emotional health, but here’s how I do it: I take individual days off (average of 1 a month) to catch up on journals or taking a CME course; or to try something new – something I’ve been thinking about doing “someday, when there is time” – such as a piano or sailing lesson; or a long weekend away with my wife. And I take no less than 4 weeks vacation per year.

I know how some of you feel about “wasting” a workday. Vacations are even worse, because patients might go elsewhere while we’re gone, and every day the office is idle we “lose money.”

That whole paradigm is wrong. Stop thinking day to day; think year to year instead. You bring in a given amount of revenue per year – more on some days, less on other days, none on weekends and vacation days; it all averages out in the end.

Besides, this is much more important than money. This is breaking the routine, clearing the cobwebs, living your life. Trust me – your practice will still be there when you return.

Last month, my wife and I hiked up a mountain in the Himalayas to the fabled Tiger’s Nest Monastery in Bhutan. As I huffed and puffed up the trail, I didn’t have the time – or the slightest inclination – to worry about the office. When the trek was over, I returned ready to take on the world, and my practice, anew.

And I jotted down some great ideas – practical, medical, and literary. Original thoughts are hard to come by during the daily grind, but they often appear, unannounced, in a new and refreshing environment.

Creative people have long recognized the value of “sharpening the saw.” A classic example is the oft-told story of Swiss physicist K. Alex Müller and German physicist J. Georg Bednorz. In 1986, they reached a major impasse in their superconductivity research; it appeared 2 decades of work might be for naught. The harder they pressed, the more elusive the answer became. So Müller decided to take some time off, put aside his troubles, and research a subject that had always interested him: ceramics.

Nothing could have been further from his research field, of course, since ceramics are among the poorest conductors known. Yet, as he relaxed, it occurred to Müller that a unique property of ceramics might apply to their project. Back in the lab, the team created a ceramic compound that became the first successful “high-temperature” superconductor.

The rest, as they say, is history; Müller and Bednorz won a Nobel Prize and triggered an explosion of research leading to breakthroughs in computing, electricity transmission, magnetically levitated trains, and many other applications that are still being realized.

Sharpening your saw may not change the world, but it will change you; any nudge out of your comfort zone will give you fresh ideas and help you look at the same old problems in completely new ways.

And to those who still can’t bear the thought of taking time off, remember Eastern’s First Law: Your last words will NOT be, “I wish I had spent more time in the office!”

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 Dermatology News.

Every year around now, as spring begins to revive the landscape, I like to take a tour of my office from the perspective of a patient visiting our facility for the first time, because more often than not, the internal environment could use a bit of a revival as well.

We tend not to notice gradual deterioration in the workplace we inhabit every day: Carpets fade and dull with constant traffic and cleaning; wallpaper and paint accumulate dirt, stains, and damage; furniture gets dirty and dented, fabric rips, hardware goes missing.

When did you last take a good look at your waiting room? Have your patients been snacking and spilling drinks in there, despite the signs begging them not to? Is the wallpaper smudged on the walls behind chairs, where they rest their heads? How are the carpeting and upholstery holding up?

Even if you don’t find anything obvious, it’s wise to check periodically for subtle evidence of age: Find some patches of protected carpeting and flooring – under desks, for example – and compare them with exposed floors.

And look at the decor itself; is it dated or just plain old looking? Any interior designer will tell you he or she can determine quite accurately when a space was last decorated, simply by the color and style of the materials used. If your office is stuck in the ’90s, it’s probably time for a change.

If you’re planning a vacation this summer (and I hope you are), that would be the perfect time for a redo. Your patients will be spared the dust and turmoil, tradespeople won’t have to work around your office hours, and you won’t have to cancel any hours that weren’t already canceled. Best of all, you’ll come back to a clean, fresh environment.

Start by reviewing your color scheme. If it’s hopelessly out of date and style, or if you are just tired of it, change it. Wallpaper and carpeting should be long-wearing industrial quality, paint should be high-quality eggshell finish to facilitate cleaning, and everything should be professionally applied. (This is neither the time nor place for do-it-yourself experiments.) And get your building’s maintenance crew to fix any nagging plumbing, electrical, or heating/air conditioning problems while pipes, ducts, and wires are more readily accessible.

If your wall decorations are dated and unattractive, now would be a good time to replace at least some of them. This need not be an expensive proposition. I recently redecorated my exam room walls with framed photos from my travel adventures, to very positive responses from patients and staff alike. If you’re not an artist or photographer, invite family members, local artists, or talented patients to display some of their creations on your walls.

Plants are great accents and excellent stress reducers for apprehensive patients, yet many offices have little or no plant life. If you are hesitant to take on the extra work of plant upkeep, consider using one of the many corporate plant services that rent you the plants, keep them healthy, and replace them as necessary.

Furniture is another important element in keeping your office environment fresh and inviting. You may be able to resurface and reupholster what you have now, but if not, shop carefully. Beware of nonmedical products promoted specifically to physicians, as they tend to be overpriced. If you shop online, remember to factor in shipping costs, which can be considerable for furniture. Don’t be afraid to ask for discounts; you won’t get them if you don’t ask.

This is also a good time to clear out old textbooks, magazines, and files that you will never open again – not in this digital age.

Finally, spruce-up time is an excellent opportunity to inventory your medical equipment. We’ve all seen vintage offices full of gadgets that were state-of-the-art decades ago. Nostalgia is nice, but would you want to be treated by a physician whose office could be a Smithsonian exhibit titled, “Doctor’s Office Circa 1975?” Neither would your patients, for the most part. In fact, many of them – particularly younger ones – assume that doctors who don’t keep up with technologic innovations don’t keep up with anything else, either.

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 Dermatology News.

Every year around now, as spring begins to revive the landscape, I like to take a tour of my office from the perspective of a patient visiting our facility for the first time, because more often than not, the internal environment could use a bit of a revival as well.

We tend not to notice gradual deterioration in the workplace we inhabit every day: Carpets fade and dull with constant traffic and cleaning; wallpaper and paint accumulate dirt, stains, and damage; furniture gets dirty and dented, fabric rips, hardware goes missing.

When did you last take a good look at your waiting room? Have your patients been snacking and spilling drinks in there, despite the signs begging them not to? Is the wallpaper smudged on the walls behind chairs, where they rest their heads? How are the carpeting and upholstery holding up?

Even if you don’t find anything obvious, it’s wise to check periodically for subtle evidence of age: Find some patches of protected carpeting and flooring – under desks, for example – and compare them with exposed floors.

And look at the decor itself; is it dated or just plain old looking? Any interior designer will tell you he or she can determine quite accurately when a space was last decorated, simply by the color and style of the materials used. If your office is stuck in the ’90s, it’s probably time for a change.

If you’re planning a vacation this summer (and I hope you are), that would be the perfect time for a redo. Your patients will be spared the dust and turmoil, tradespeople won’t have to work around your office hours, and you won’t have to cancel any hours that weren’t already canceled. Best of all, you’ll come back to a clean, fresh environment.

Start by reviewing your color scheme. If it’s hopelessly out of date and style, or if you are just tired of it, change it. Wallpaper and carpeting should be long-wearing industrial quality, paint should be high-quality eggshell finish to facilitate cleaning, and everything should be professionally applied. (This is neither the time nor place for do-it-yourself experiments.) And get your building’s maintenance crew to fix any nagging plumbing, electrical, or heating/air conditioning problems while pipes, ducts, and wires are more readily accessible.

If your wall decorations are dated and unattractive, now would be a good time to replace at least some of them. This need not be an expensive proposition. I recently redecorated my exam room walls with framed photos from my travel adventures, to very positive responses from patients and staff alike. If you’re not an artist or photographer, invite family members, local artists, or talented patients to display some of their creations on your walls.

Plants are great accents and excellent stress reducers for apprehensive patients, yet many offices have little or no plant life. If you are hesitant to take on the extra work of plant upkeep, consider using one of the many corporate plant services that rent you the plants, keep them healthy, and replace them as necessary.

Furniture is another important element in keeping your office environment fresh and inviting. You may be able to resurface and reupholster what you have now, but if not, shop carefully. Beware of nonmedical products promoted specifically to physicians, as they tend to be overpriced. If you shop online, remember to factor in shipping costs, which can be considerable for furniture. Don’t be afraid to ask for discounts; you won’t get them if you don’t ask.

This is also a good time to clear out old textbooks, magazines, and files that you will never open again – not in this digital age.

Finally, spruce-up time is an excellent opportunity to inventory your medical equipment. We’ve all seen vintage offices full of gadgets that were state-of-the-art decades ago. Nostalgia is nice, but would you want to be treated by a physician whose office could be a Smithsonian exhibit titled, “Doctor’s Office Circa 1975?” Neither would your patients, for the most part. In fact, many of them – particularly younger ones – assume that doctors who don’t keep up with technologic innovations don’t keep up with anything else, either.

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 Dermatology News.

Every year around now, as spring begins to revive the landscape, I like to take a tour of my office from the perspective of a patient visiting our facility for the first time, because more often than not, the internal environment could use a bit of a revival as well.

We tend not to notice gradual deterioration in the workplace we inhabit every day: Carpets fade and dull with constant traffic and cleaning; wallpaper and paint accumulate dirt, stains, and damage; furniture gets dirty and dented, fabric rips, hardware goes missing.

When did you last take a good look at your waiting room? Have your patients been snacking and spilling drinks in there, despite the signs begging them not to? Is the wallpaper smudged on the walls behind chairs, where they rest their heads? How are the carpeting and upholstery holding up?

Even if you don’t find anything obvious, it’s wise to check periodically for subtle evidence of age: Find some patches of protected carpeting and flooring – under desks, for example – and compare them with exposed floors.

And look at the decor itself; is it dated or just plain old looking? Any interior designer will tell you he or she can determine quite accurately when a space was last decorated, simply by the color and style of the materials used. If your office is stuck in the ’90s, it’s probably time for a change.

If you’re planning a vacation this summer (and I hope you are), that would be the perfect time for a redo. Your patients will be spared the dust and turmoil, tradespeople won’t have to work around your office hours, and you won’t have to cancel any hours that weren’t already canceled. Best of all, you’ll come back to a clean, fresh environment.

Start by reviewing your color scheme. If it’s hopelessly out of date and style, or if you are just tired of it, change it. Wallpaper and carpeting should be long-wearing industrial quality, paint should be high-quality eggshell finish to facilitate cleaning, and everything should be professionally applied. (This is neither the time nor place for do-it-yourself experiments.) And get your building’s maintenance crew to fix any nagging plumbing, electrical, or heating/air conditioning problems while pipes, ducts, and wires are more readily accessible.

If your wall decorations are dated and unattractive, now would be a good time to replace at least some of them. This need not be an expensive proposition. I recently redecorated my exam room walls with framed photos from my travel adventures, to very positive responses from patients and staff alike. If you’re not an artist or photographer, invite family members, local artists, or talented patients to display some of their creations on your walls.

Plants are great accents and excellent stress reducers for apprehensive patients, yet many offices have little or no plant life. If you are hesitant to take on the extra work of plant upkeep, consider using one of the many corporate plant services that rent you the plants, keep them healthy, and replace them as necessary.

Furniture is another important element in keeping your office environment fresh and inviting. You may be able to resurface and reupholster what you have now, but if not, shop carefully. Beware of nonmedical products promoted specifically to physicians, as they tend to be overpriced. If you shop online, remember to factor in shipping costs, which can be considerable for furniture. Don’t be afraid to ask for discounts; you won’t get them if you don’t ask.

This is also a good time to clear out old textbooks, magazines, and files that you will never open again – not in this digital age.

Finally, spruce-up time is an excellent opportunity to inventory your medical equipment. We’ve all seen vintage offices full of gadgets that were state-of-the-art decades ago. Nostalgia is nice, but would you want to be treated by a physician whose office could be a Smithsonian exhibit titled, “Doctor’s Office Circa 1975?” Neither would your patients, for the most part. In fact, many of them – particularly younger ones – assume that doctors who don’t keep up with technologic innovations don’t keep up with anything else, either.

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 Dermatology News.

The ongoing sea change in medicine has led to a substantial erosion of physician autonomy, and to ever-increasing administrative burdens that hit small practices the hardest. Does this mean that the independent private physician practice model is doomed, as some predict? Absolutely not; but it will force many solo practitioners and small groups to join forces to protect themselves.

Those practices that offer unique services, or fill an unmet niche, may be able to remain small; but most smaller practices will need to consider a larger alternative. In a previous column, I outlined the basics of one such protective strategy – merging two or more small practices into a larger entity – but there are other options to consider.

One attractive and relatively straightforward strategy is the formation of a cooperative group. In most areas, there are very likely several small practices in similar predicaments that might be receptive to discussing a collaboration on billing and purchasing. This allows each participant to maintain independence as a private practice, while pooling resources to ease the administrative burdens of all. Once that arrangement is in place, the group can consider more ambitious projects, such as the joint purchase of an EHR system, sharing of personnel to lower staffing costs, and an integrated scheduling system. The latter will be particularly attractive to participants in later stages of their careers who are considering an intermediate option, somewhere between full-time work and complete retirement.

After a time, when the structure is stabilized and everyone agrees that his or her individual and shared interests and goals are being met, an outright merger can be contemplated. Projects of this scope require careful planning and implementation, and should not be undertaken without the help of competent legal counsel and an experienced business consultant.

A more complex but increasingly popular option is to join other small practices and providers in an independent practice association (IPA). An IPA is a legal entity organized and directed by physicians for the purpose of negotiating contracts with insurance companies on their behalf. Because of its structure, an IPA is better positioned to enter into such financial arrangements, and to counterbalance the leverage of insurers, but there are legal issues to consider. Many IPAs are vulnerable to antitrust charges because they include competing health care providers. You should check with legal counsel before signing on to an IPA, to make sure that it abides by antitrust and price fixing laws. IPAs have also been known to fail, particularly in states where they are not adequately regulated.

A possible successor to IPAs is the accountable care organization (ACO), an entity born as a component of the Affordable Care Act. While the official definition remains nebulous, an ACO is basically a network of doctors and hospitals that shares financial and medical responsibility for providing coordinated and efficient care to patients. The goal of ACO participants is to limit unnecessary spending, both individually and collectively, according to criteria established by the Centers for Medicare & Medicaid Services, without compromising quality of care in the process. More than 600 ACOs had been approved by the CMS as of the beginning of 2014.

It is important to remember that the ACO model remains very much a work in progress. ACOs make providers jointly accountable for the health of their patients. They offer financial incentives to cooperate, and to save money by avoiding unnecessary tests and procedures. A key component is the sharing of information. Providers who save money while also meeting quality targets are theoretically entitled to a portion of the savings.

As with IPAs, ACO ventures involve a measure of risk. ACOs that fail to meet the CMS performance and savings benchmarks can be stuck with the bill for investments made to improve care, such as equipment and computer purchases and the hiring of mid-level providers and managers, and they may be assessed monetary penalties as well. ACOs sponsored by physicians or rural providers, however, can apply to receive payments in advance to help finance infrastructure investments – a concession the Obama administration made after receiving complaints from rural hospitals.

Clearly, the price of remaining autonomous will be significant, and many private practitioners will be unwilling to pay it: Only 36% of physicians remained in independent practice at the end of the 2013, according to data from the American Medical Association – down from 57% in 2000 – but those of us who remain committed to independence will find ways to preserve it. In medicine, as in life, those most responsive to change will survive and flourish.

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 Dermatology News.

The ongoing sea change in medicine has led to a substantial erosion of physician autonomy, and to ever-increasing administrative burdens that hit small practices the hardest. Does this mean that the independent private physician practice model is doomed, as some predict? Absolutely not; but it will force many solo practitioners and small groups to join forces to protect themselves.

Those practices that offer unique services, or fill an unmet niche, may be able to remain small; but most smaller practices will need to consider a larger alternative. In a previous column, I outlined the basics of one such protective strategy – merging two or more small practices into a larger entity – but there are other options to consider.

One attractive and relatively straightforward strategy is the formation of a cooperative group. In most areas, there are very likely several small practices in similar predicaments that might be receptive to discussing a collaboration on billing and purchasing. This allows each participant to maintain independence as a private practice, while pooling resources to ease the administrative burdens of all. Once that arrangement is in place, the group can consider more ambitious projects, such as the joint purchase of an EHR system, sharing of personnel to lower staffing costs, and an integrated scheduling system. The latter will be particularly attractive to participants in later stages of their careers who are considering an intermediate option, somewhere between full-time work and complete retirement.

After a time, when the structure is stabilized and everyone agrees that his or her individual and shared interests and goals are being met, an outright merger can be contemplated. Projects of this scope require careful planning and implementation, and should not be undertaken without the help of competent legal counsel and an experienced business consultant.

A more complex but increasingly popular option is to join other small practices and providers in an independent practice association (IPA). An IPA is a legal entity organized and directed by physicians for the purpose of negotiating contracts with insurance companies on their behalf. Because of its structure, an IPA is better positioned to enter into such financial arrangements, and to counterbalance the leverage of insurers, but there are legal issues to consider. Many IPAs are vulnerable to antitrust charges because they include competing health care providers. You should check with legal counsel before signing on to an IPA, to make sure that it abides by antitrust and price fixing laws. IPAs have also been known to fail, particularly in states where they are not adequately regulated.

A possible successor to IPAs is the accountable care organization (ACO), an entity born as a component of the Affordable Care Act. While the official definition remains nebulous, an ACO is basically a network of doctors and hospitals that shares financial and medical responsibility for providing coordinated and efficient care to patients. The goal of ACO participants is to limit unnecessary spending, both individually and collectively, according to criteria established by the Centers for Medicare & Medicaid Services, without compromising quality of care in the process. More than 600 ACOs had been approved by the CMS as of the beginning of 2014.

It is important to remember that the ACO model remains very much a work in progress. ACOs make providers jointly accountable for the health of their patients. They offer financial incentives to cooperate, and to save money by avoiding unnecessary tests and procedures. A key component is the sharing of information. Providers who save money while also meeting quality targets are theoretically entitled to a portion of the savings.

As with IPAs, ACO ventures involve a measure of risk. ACOs that fail to meet the CMS performance and savings benchmarks can be stuck with the bill for investments made to improve care, such as equipment and computer purchases and the hiring of mid-level providers and managers, and they may be assessed monetary penalties as well. ACOs sponsored by physicians or rural providers, however, can apply to receive payments in advance to help finance infrastructure investments – a concession the Obama administration made after receiving complaints from rural hospitals.

Clearly, the price of remaining autonomous will be significant, and many private practitioners will be unwilling to pay it: Only 36% of physicians remained in independent practice at the end of the 2013, according to data from the American Medical Association – down from 57% in 2000 – but those of us who remain committed to independence will find ways to preserve it. In medicine, as in life, those most responsive to change will survive and flourish.

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 Dermatology News.

The ongoing sea change in medicine has led to a substantial erosion of physician autonomy, and to ever-increasing administrative burdens that hit small practices the hardest. Does this mean that the independent private physician practice model is doomed, as some predict? Absolutely not; but it will force many solo practitioners and small groups to join forces to protect themselves.

Those practices that offer unique services, or fill an unmet niche, may be able to remain small; but most smaller practices will need to consider a larger alternative. In a previous column, I outlined the basics of one such protective strategy – merging two or more small practices into a larger entity – but there are other options to consider.

One attractive and relatively straightforward strategy is the formation of a cooperative group. In most areas, there are very likely several small practices in similar predicaments that might be receptive to discussing a collaboration on billing and purchasing. This allows each participant to maintain independence as a private practice, while pooling resources to ease the administrative burdens of all. Once that arrangement is in place, the group can consider more ambitious projects, such as the joint purchase of an EHR system, sharing of personnel to lower staffing costs, and an integrated scheduling system. The latter will be particularly attractive to participants in later stages of their careers who are considering an intermediate option, somewhere between full-time work and complete retirement.

After a time, when the structure is stabilized and everyone agrees that his or her individual and shared interests and goals are being met, an outright merger can be contemplated. Projects of this scope require careful planning and implementation, and should not be undertaken without the help of competent legal counsel and an experienced business consultant.

A more complex but increasingly popular option is to join other small practices and providers in an independent practice association (IPA). An IPA is a legal entity organized and directed by physicians for the purpose of negotiating contracts with insurance companies on their behalf. Because of its structure, an IPA is better positioned to enter into such financial arrangements, and to counterbalance the leverage of insurers, but there are legal issues to consider. Many IPAs are vulnerable to antitrust charges because they include competing health care providers. You should check with legal counsel before signing on to an IPA, to make sure that it abides by antitrust and price fixing laws. IPAs have also been known to fail, particularly in states where they are not adequately regulated.

A possible successor to IPAs is the accountable care organization (ACO), an entity born as a component of the Affordable Care Act. While the official definition remains nebulous, an ACO is basically a network of doctors and hospitals that shares financial and medical responsibility for providing coordinated and efficient care to patients. The goal of ACO participants is to limit unnecessary spending, both individually and collectively, according to criteria established by the Centers for Medicare & Medicaid Services, without compromising quality of care in the process. More than 600 ACOs had been approved by the CMS as of the beginning of 2014.

It is important to remember that the ACO model remains very much a work in progress. ACOs make providers jointly accountable for the health of their patients. They offer financial incentives to cooperate, and to save money by avoiding unnecessary tests and procedures. A key component is the sharing of information. Providers who save money while also meeting quality targets are theoretically entitled to a portion of the savings.

As with IPAs, ACO ventures involve a measure of risk. ACOs that fail to meet the CMS performance and savings benchmarks can be stuck with the bill for investments made to improve care, such as equipment and computer purchases and the hiring of mid-level providers and managers, and they may be assessed monetary penalties as well. ACOs sponsored by physicians or rural providers, however, can apply to receive payments in advance to help finance infrastructure investments – a concession the Obama administration made after receiving complaints from rural hospitals.

Clearly, the price of remaining autonomous will be significant, and many private practitioners will be unwilling to pay it: Only 36% of physicians remained in independent practice at the end of the 2013, according to data from the American Medical Association – down from 57% in 2000 – but those of us who remain committed to independence will find ways to preserve it. In medicine, as in life, those most responsive to change will survive and flourish.

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 Dermatology News.

Tough economic times and the unpredictable consequences of health care reform are making a growing number of solo practitioners and small private groups very nervous. I’ve received many inquiries about protective options, such as joining a multispecialty group, or merging two or more small practices into larger entities.

If becoming an employee of a large corporation does not appeal to you, a merger can offer significant advantages in stabilization of income and expenses; but careful planning, and a written agreement, are essential.

If you are considering this option, here are some things to think about:

What is the compensation formula? Will everyone be paid only for what they do individually, or will revenue be shared equally? I favor a combination; productivity is rewarded, but your income doesn’t drop to zero when you take time off.

Who will be in charge, and what percentage vote will be needed to approve important decisions? Typically, the majority rules, but you may wish to create a list of pivotal moves that will require unanimous approval, such as purchasing expensive equipment, borrowing money, or adding new partners.

Will you keep your retirement plans separate, or combine them? If the latter, you will have to agree on the terms of the new plan, which can be the same or different from any of the existing plans. You’ll probably need some legal guidance to ensure that assets from existing plans can be transferred into a new plan without tax issues.

Since most private practices are incorporated, there are two basic options for combining them: Corporation A can simply absorb corporation B; the latter ceases to exist, and corporation A, the so-called “surviving entity,” assumes all assets and liabilities of both old corporations. Corporation B shareholders exchange shares of its stock for shares of corporation A, with adjustments for any inequalities in stock value.

The second option is to start a completely new corporation. Both separate entities dissolve and distribute their equipment and charts to their shareholders, who then transfer the assets to the new corporation.

Option 2 is popular, but I am not a fan. It is billed as an opportunity to start fresh, shielding everyone from exposure to malpractice suits and other liabilities. However, the reality is that anyone looking to sue either old corporation will simply sue the new entity as the so-called “successor” corporation, on the grounds that it has assumed responsibility for its predecessors’ liabilities. You also will need new provider numbers, which may impede cash flow for months. Plus, the IRS treats corporate liquidations, even for merger purposes, as sales of assets, and taxes them.

In general, most experts that I’ve talked with favor outright merger of the corporations. This option is tax neutral, and while it may theoretically be less satisfactory liability-wise, you can minimize risk by examining financial and legal records, and by identifying any glaring flaws in charting or coding. Your lawyers can add “hold harmless” clauses to the merger agreement, indemnifying each party against the others’ liabilities. This area in particular is where you need experienced, competent legal advice.

Another common sticking point is known as “equalization.” Ideally, each party brings an equal amount of assets to the table, but in the real world that is rarely the case. One party may contribute more equipment, for example, and the others are often asked to make up the difference (“equalize”) with something else, usually cash.

An alternative is to agree that any inequalities will be compensated at the other end, in the form of buyout value; that is, physicians contributing more assets will receive larger buyouts when they leave or retire than those contributing less.

Non-compete provisions are always a difficult issue, mostly because they are so hard (and expensive) to enforce. An increasingly popular alternative is, once again, to deal with it at the other end, with a buyout penalty. An unhappy partner can leave, and compete, but at the cost of a substantially reduced buyout. This permits competition, but discourages it; and it compensates the remaining partners.

These are only some of the pivotal business and legal issues that must be settled in advance. A little planning and negotiation can prevent a lot of grief, regret, and legal expenses in the future. I’ll mention some other, more complicated merger options in a future column.

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.

Tough economic times and the unpredictable consequences of health care reform are making a growing number of solo practitioners and small private groups very nervous. I’ve received many inquiries about protective options, such as joining a multispecialty group, or merging two or more small practices into larger entities.

If becoming an employee of a large corporation does not appeal to you, a merger can offer significant advantages in stabilization of income and expenses; but careful planning, and a written agreement, are essential.

If you are considering this option, here are some things to think about:

What is the compensation formula? Will everyone be paid only for what they do individually, or will revenue be shared equally? I favor a combination; productivity is rewarded, but your income doesn’t drop to zero when you take time off.

Who will be in charge, and what percentage vote will be needed to approve important decisions? Typically, the majority rules, but you may wish to create a list of pivotal moves that will require unanimous approval, such as purchasing expensive equipment, borrowing money, or adding new partners.

Will you keep your retirement plans separate, or combine them? If the latter, you will have to agree on the terms of the new plan, which can be the same or different from any of the existing plans. You’ll probably need some legal guidance to ensure that assets from existing plans can be transferred into a new plan without tax issues.

Since most private practices are incorporated, there are two basic options for combining them: Corporation A can simply absorb corporation B; the latter ceases to exist, and corporation A, the so-called “surviving entity,” assumes all assets and liabilities of both old corporations. Corporation B shareholders exchange shares of its stock for shares of corporation A, with adjustments for any inequalities in stock value.

The second option is to start a completely new corporation. Both separate entities dissolve and distribute their equipment and charts to their shareholders, who then transfer the assets to the new corporation.

Option 2 is popular, but I am not a fan. It is billed as an opportunity to start fresh, shielding everyone from exposure to malpractice suits and other liabilities. However, the reality is that anyone looking to sue either old corporation will simply sue the new entity as the so-called “successor” corporation, on the grounds that it has assumed responsibility for its predecessors’ liabilities. You also will need new provider numbers, which may impede cash flow for months. Plus, the IRS treats corporate liquidations, even for merger purposes, as sales of assets, and taxes them.

In general, most experts that I’ve talked with favor outright merger of the corporations. This option is tax neutral, and while it may theoretically be less satisfactory liability-wise, you can minimize risk by examining financial and legal records, and by identifying any glaring flaws in charting or coding. Your lawyers can add “hold harmless” clauses to the merger agreement, indemnifying each party against the others’ liabilities. This area in particular is where you need experienced, competent legal advice.

Another common sticking point is known as “equalization.” Ideally, each party brings an equal amount of assets to the table, but in the real world that is rarely the case. One party may contribute more equipment, for example, and the others are often asked to make up the difference (“equalize”) with something else, usually cash.

An alternative is to agree that any inequalities will be compensated at the other end, in the form of buyout value; that is, physicians contributing more assets will receive larger buyouts when they leave or retire than those contributing less.

Non-compete provisions are always a difficult issue, mostly because they are so hard (and expensive) to enforce. An increasingly popular alternative is, once again, to deal with it at the other end, with a buyout penalty. An unhappy partner can leave, and compete, but at the cost of a substantially reduced buyout. This permits competition, but discourages it; and it compensates the remaining partners.

These are only some of the pivotal business and legal issues that must be settled in advance. A little planning and negotiation can prevent a lot of grief, regret, and legal expenses in the future. I’ll mention some other, more complicated merger options in a future column.

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.

Tough economic times and the unpredictable consequences of health care reform are making a growing number of solo practitioners and small private groups very nervous. I’ve received many inquiries about protective options, such as joining a multispecialty group, or merging two or more small practices into larger entities.

If becoming an employee of a large corporation does not appeal to you, a merger can offer significant advantages in stabilization of income and expenses; but careful planning, and a written agreement, are essential.

If you are considering this option, here are some things to think about:

What is the compensation formula? Will everyone be paid only for what they do individually, or will revenue be shared equally? I favor a combination; productivity is rewarded, but your income doesn’t drop to zero when you take time off.

Who will be in charge, and what percentage vote will be needed to approve important decisions? Typically, the majority rules, but you may wish to create a list of pivotal moves that will require unanimous approval, such as purchasing expensive equipment, borrowing money, or adding new partners.

Will you keep your retirement plans separate, or combine them? If the latter, you will have to agree on the terms of the new plan, which can be the same or different from any of the existing plans. You’ll probably need some legal guidance to ensure that assets from existing plans can be transferred into a new plan without tax issues.

Since most private practices are incorporated, there are two basic options for combining them: Corporation A can simply absorb corporation B; the latter ceases to exist, and corporation A, the so-called “surviving entity,” assumes all assets and liabilities of both old corporations. Corporation B shareholders exchange shares of its stock for shares of corporation A, with adjustments for any inequalities in stock value.

The second option is to start a completely new corporation. Both separate entities dissolve and distribute their equipment and charts to their shareholders, who then transfer the assets to the new corporation.

Option 2 is popular, but I am not a fan. It is billed as an opportunity to start fresh, shielding everyone from exposure to malpractice suits and other liabilities. However, the reality is that anyone looking to sue either old corporation will simply sue the new entity as the so-called “successor” corporation, on the grounds that it has assumed responsibility for its predecessors’ liabilities. You also will need new provider numbers, which may impede cash flow for months. Plus, the IRS treats corporate liquidations, even for merger purposes, as sales of assets, and taxes them.

In general, most experts that I’ve talked with favor outright merger of the corporations. This option is tax neutral, and while it may theoretically be less satisfactory liability-wise, you can minimize risk by examining financial and legal records, and by identifying any glaring flaws in charting or coding. Your lawyers can add “hold harmless” clauses to the merger agreement, indemnifying each party against the others’ liabilities. This area in particular is where you need experienced, competent legal advice.

Another common sticking point is known as “equalization.” Ideally, each party brings an equal amount of assets to the table, but in the real world that is rarely the case. One party may contribute more equipment, for example, and the others are often asked to make up the difference (“equalize”) with something else, usually cash.

An alternative is to agree that any inequalities will be compensated at the other end, in the form of buyout value; that is, physicians contributing more assets will receive larger buyouts when they leave or retire than those contributing less.

Non-compete provisions are always a difficult issue, mostly because they are so hard (and expensive) to enforce. An increasingly popular alternative is, once again, to deal with it at the other end, with a buyout penalty. An unhappy partner can leave, and compete, but at the cost of a substantially reduced buyout. This permits competition, but discourages it; and it compensates the remaining partners.

These are only some of the pivotal business and legal issues that must be settled in advance. A little planning and negotiation can prevent a lot of grief, regret, and legal expenses in the future. I’ll mention some other, more complicated merger options in a future column.

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.

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.

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.