Newsletter XXIII December 2001
Asset
Protection for the 21st Century – A
Lawyer’s Perspective
President’s
Message – Help Others This Season
SB 99 –
Nevada’s Prompt Payment Act; The Waiting Game May
Finally Be Over
Clark County
Health District Disease Statistics – October 2001
Robert L. Bolick, Esq., Bolick Boyer &
Fine, Attorneys at Law
As the son of a doctor, I grew up on a steady diet of how our income tax structure is regressive by penalizing the producers and subsidizing the indolent. Later, I got an earful on how Medicaid and HMOs were ruining the practice of medicine by pulling control from doctors and giving it to bureaucrats who were as clueless about medicine as they were about politics. When I began my practice 20 years ago, I decided that my focus should be on how to keep the bad guys (IRS) from bleeding the good guys (doctors) dry. I felt good about what I did. Now, much of the focus has shifted to asset protection. Even the IRS doesn’t take 100%, which is what today’s bad guys are trying to do.
The latest assault against physicians has been launched by personal injury attorneys chasing not only ambulances, but doctors’ malpractice policies as well. Outrageously high jury verdicts, and paralleling settlements, have led to astronomical increases in malpractice insurance premiums. Many physicians are considering reducing their professional liability insurance coverage limits just to be able to afford the premiums. Doing so will only increase their exposure. For example, if coverage is reduced from $1,000,000/3,000,000 to $250,000/750,000, a physician is personally liable for any money excess of $250,000 on a single claim. How many malpractice lawsuits or settlements are for less than $250,000? The physician’s assets are on the line to cover any overage.
Asset protection is one of the hottest topics for doctors today. The following is a checklist of various types of assets and ways to protect them.
· Home. A homestead offers protection of up to $125,000 in equity in your residence. However, a homestead is more of a deferral than it is an avoidance. A homestead prevents a creditor from foreclosing on your primary residence as long as your equity is less than $125,000. Your home can be liened against, thereby preventing you from (1) refinancing, (2) taking out a second mortgage, or (3) moving. As soon as the equity exceeds $125,000, your creditor can begin legal action to foreclose.
An allodial title exemption protects an unlimited value of your home. To obtain an allodial title, you must own your residence “free and clear” (unencumbered) and prepay estimated future property taxes calculated on the life expectancy of the youngest person on the title to the property. Your home may still be liened by the creditor. The creditor is merely precluded from foreclosing as long as any of the titleholders live in the residence. If the titleholders move or die, the creditor can foreclose on the lien.
A qualified personal residence trust (QPRT) affords a greater degree of protection than a homestead or allodial title exemption. Unlike those, a creditor cannot lien your home because under a QPRT, you no longer own your home, the trust does. You can stay in complete control as trustee of your QPRT trust. You retain all of the income tax benefits of home ownership, such interest and property tax deductions, and the $250,000 for singles or $500,000 for couples capital gain exclusion. As the trustee, you can sell your home at any time and the proceeds are protected. When you purchase another home, it can be held in your QPRT and will be similarly protected. The QPRT can hold a personal residence property in any state. In essence, you as trustee maintain all of the ownership, benefits and use of your home, but a creditor cannot attach it. At the end of the term of the trust, the title to the residence passes to the beneficiaries of the trust. There may be tax consequences to establishing the QPRT depending on the structure and flexibility one selects under the QPRT rules.
The asset protection benefits of the QPRT are effective immediately. However, a QPRT established within six months of an event resulting in a lawsuit, and subsequent award or settlement, will likely be viewed by the courts as a fraudulent transfer and be disallowed. Thus, to utilize the asset protection of a QPRT, it must be established before, in legal jargon, a cause of action accrues. The costs to create a QPRT range from $2,500 to $3,500. This is a one-time expense. There are no maintenance fees or future costs.
· IRA’s, 401(k)’s, Retirement Plans. Under Nevada Law, funds held in an IRA, SEP, 401(k), pension, profit sharing, or other retirement plan are exempt up to $500,000. Funds in excess of this amount are subject to attachment.
·
New
This distribution trustee may be a relative (but not a spouse), trusted friend, or a trust company, and, by law, has absolute discretion regarding distributions from the trust. The trust may be structured so that the distribution trustee may not distribute assets to anyone other than you, as beneficiary, or to someone you designate in the trust. The trust may be structured so that you, as creator of the trust, may have the ability to remove the distribution trustee, directly or indirectly, and appoint a new trustee with absolute discretion to make distributions.
The trust is effective against claimants beginning two years after the trust is created and assets are transferred. There are no limits as to the amount of assets that can be transferred into the trust. Because of the two year window of opportunity afforded creditors, one may use Family Limited Partnerships (FLPs) and/or Limited Liability Companies (LLCs) (which have no two year window) in conjunction with his or her asset protection trust (APT). The cost of creating a Nevada Spendthrift Trust ranges from $2,500 to $3,500.
· Stocks, Bonds, Mutual Funds, CDs. The first assets a judgment creditor will go after are liquid assets – cash and securities which are not held in an IRA or other qualified retirement plan. A family limited partnership (FLP) may be used to protect these assets. Assets held in a valid FLP are beyond the reach of creditors. No creditor can attach your assets, force you to distribute your assets or dissolve your FLP. You maintain 100% control and ownership of your FLP. Costs to create an FLP range from $1500 to $2500, plus initial filing fees of $360. The annual fees to the Secretary of State to maintain the FLP are currently $85.
· Rental Property. Rental property may be protected using a limited-liability company (LLC). By transferring your rental property into an LLC of which you are the sole shareholder, you are not personally liable for anything that may happen on the property. The LLC is. Conversely, no creditor of yours can lien the property because you do not own the property, the LLC does. The asset protection benefits are effective immediately. The costs to create an LLC range from $1,500 to $2,000, plus initial filing fees and costs of $420. The annual fees for the Secretary of State to maintain the entity are currently $85.
· Medical Equipment. An LLC can also hold medical equipment which you use in your practice. Your LLC can lease the medical equipment to your professional corporation. This removes the equipment as a personal asset to be attached in a malpractice claim.
· Life Insurance. A creditor can attach any cash value in a whole life or universal life insurance policy. Life insurance cash values can be protected in an irrevocable life insurance trust (ILIT). Holding insurance in an ILIT not only places the cash values beyond the reach of creditors, but also removes the proceeds from your taxable estate. Most people are aware that life insurance proceeds are income tax free. Many do not realize that the proceeds are not estate tax free unless held in an ILIT. It really doesn’t make much sense to own insurance with cash values individually where it thereby is exposed to attachment by creditors and will be included in your taxable estate when an ILIT will address both problems. The costs of creating an ILIT range from $1,500 to $2,500. It is a one-time expense. There are no annual maintenance fees or expenses other than perhaps paying a trustee to make payments on the insurance policy annually.
· A Living Trust Will Not Protect Assets. A common misconception is that living trusts provide asset protection during your life. This simply is not the case. A living trust can avoid probate, can minimize or eliminate estate taxes and can protect one-half of the estate after the death of a spouse. While these certainly are desirable objectives, they do not offer any asset protection benefits to a practicing physician during his or her life. The costs of creating what are know as A/B or A/B QTIP living trusts, which do provide asset protection, range from $1,500 to $2,000. The costs of creating a “generation-skipping” or “dynasty” type of family trust range from $3,000 to $3,500.
· Getting it All in Place. Attorneys typically offer a no cost, no obligation appointment to discuss asset protection strategies with you. Use an attorney who practices in this area as a significant part of his or her practice. Remember, the time to avail yourself of these legal protections is well before a problem arises.
· In 1971, Joel F. Bower, M.D., joined the staff of St. Rose Dominican Hospital. Now, thirty years later, he will retire after a distinguished career of providing quality, compassionate care to his patients. He now plans to dedicate much of his time working with programs that help uninsured children. In addition to his many contributions to the hospital, Dr. Bower has been very active in the community. He served as the Chairman of the state’s Maternal Child Health Advisory Board as well as the president of the Clark County Medical Society.
·
Alan Weissman, M.D., has been named as Desert Radiologists’
Director of PET (Positron Emission Tomography). Dr. Weissman is a double board certified physician, in both
diagnostic radiology and nuclear medicine.
“When I came to
·
The Clark County Medical Society raised nearly
$4,000 for local and national charities at a fundraising dinner on November 1.
We would like to thank the Clark County Health District for providing an excellent
speaker on Bioterrorism Preparedness and
Raj Chanderraj, M.D.,
2001-2002 CCMS President
The fallout from the events of September has affected the whole nation. We joined the rest of the nation by contributing thousands of workers to the unemployment pool. The crisis in caring for these unemployed people has evoked a community where everyone is coming up with innovative ways to help. The Medical community with very few exceptions like Dr. Villaflor has done very little to become part of this community effort.
The present crisis, in a way,
brought into focus the needs of unemployed and uninsured people. This problem
is growing exponentially as the valley’s population grows. Today there are
nearly 200,000 uninsured people in
As physicians, we should play a vital role in contributing to the welfare of the society. We need to do our share of caring for the uninsured. Many physicians are under the belief that they are doing this by writing off the unpaid balances of the patients unable to pay. Unfortunately this is a business risk and not an act of charity or goodwill. Charity is when you see patients without expecting to be paid for the services you render.
When we physicians step up to the plate in times of need, our efforts will be recognized by the community and the law makers. This will help portray a positive picture of the physician community. They will come to understand that we do care for people and in due time may be inclined to favor us in protecting our ways of practicing medicine.
There are several ways you can be
of help. If you need information and are inclined to participate, please call
me and I will steer you in the right direction. Have a wonderful holiday season.
Artemus Ham IV, Esq.
Physicians and their patients have traditionally been forced to endure a “waiting game” when submitting a claim to an insurer. Insurers would take long periods of time before informing a physician as to whether the claim would be approved, and then take even longer before actually paying it. This trend has caused great frustration for doctors and their patients alike. In response to these unreasonable delays, the Nevada Legislature has enacted Senate Bill 99 (hereinafter “SB 99”) to place restrictions on the way an insurer must process a claim. Not only does SB 99 contain strict guidelines regulating payors, but it also contains a provision for calculating damages if these guidelines are ignored. Therefore, it is imperative that physicians not only become versed in the meaning of this new law, but also that they understand ways to protect against an insurer’s avoidance of the law’s application.
SB 99, codified in Nevada Revised
Statutes at Chapter 600, became effective
The intentions behind SB 99 are evident, yet they would be unenforceable without a provision to punish insurers who chose to ignore it. NSMA convinced the legislature to include a provision in SB 99 which mandates that if the insurer fails to pay in the 30 day period after approval, the insurer shall pay interest on the claim at a rate of interest equal to the prime rate at the largest bank in Nevada immediately proceeding the date on which the payment is due, plus 6%. In other words, the interest must be calculated from 30 days after the date on which the claim is approved until the date on which the claim is paid.
This is a monumental victory for
physicians in
Recently, some insurers have contended they never received the claim(s), or that the claims are incomplete and that more information is necessary. Because the clock does not begin to run until the insurer has received a complete (clean) claim, physicians need to be aware of some simple measures that can ensure their protection if litigation does in fact result from an insurers failure to timely pay clean claims as contemplated by SB 99.
The most reliable method to defeat an insurer’s avoidance of SB 99 is to send a claim by “certified mail with return receipt.” This requires the insurer’s signature before a claim is received, and would serve as proof of service. Physicians would then have a record of exactly when an insurer received the claim(s). The cost of this method of protection is minimal, and Judges are accustomed to seeing certified mail receipts as proof that the item was received.
Another method of protection would be to include a “certificate of mailing” along with the claim. This would simply require an individual in the physician’s office to sign and date a certificate indicating the claim(s) sent, and send a copy of this certificate along with the claim(s) to the insurer. The original certificate should be kept by the physician as proof that the claims were sent on a date certain via depositing then in U.S. Postal mail. Judges are also accustomed to seeing certificate’s of mailing, as they are accepted methods of service in the legal community. The expense associated with this method is also minimal, and insurers would have a difficult burden of trying to establish that a certificate of mailing is invalid.
A physician may also choose to include a “notarized affidavit” along with a listing of each individual claim mailed as another method of protection. In other words, a physician would prepare an affidavit (a statement under oath, signed by a notary public) stating that the claim was indeed mailed on a given date. After this affidavit is notarized, a copy would be mailed along with the claim, and the original would be kept by the physician as proof of mailing. While the expense and burden associated with this method might be unnecessary at the present time, a Judge will likely, consistent with the Nevada Rules of Civil Procedure, deem the mailing received three full days after the affidavit indicates the package was placed in U.S. Postal mail. Should insurers be so recalcitrant as to push the “received” issue, this method maximally protects the physician’s rights as to proving receipt of the claim(s) by the insurer. The Clark County Medical Society maintains several Notary Publics on staff to serve the needs of members to assist in this process.
Even if a physician follows the
precautionary measures mentioned above, an insurer may still refuse to follow
the requirements of SB 99. Therefore,
physicians may be required to file a lawsuit in order to recover damages for an
insurer’s wrongful behavior. However,
before filing a lawsuit, physicians need to first be aware of the
jurisdictional requirements of
All cases excluded by law from the
jurisdiction of
The thought of initiating
litigation is undesirable to most physicians.
However, the Nevada Revised Statutes do permit reimbursement of all attorney’s fees when the amount of recovery is less than
$20,000. (In some cases,
Despite a few minor problems
associated with SB 99, its enactment must be seen as a significant victory for
Artemus Ham IV, Esq. is a Former Law Clerk to the Honorable Michael A. Cherry,
District Court Judge and is currently an Associate Attorney for Harrison, Kemp
& Jones Chartered.
Weldon (Don) Havins,
M.D., J.D., CCMS Executive Director and Special Counsel
·
This issue of
·
Attorney Artemus Ham,
IV’s article addresses SB 99 from a strictly legal perspective. Payors subject to
the jurisdiction of the Division of Insurance clearly may not charge a fee for
“listing” the physician on a panel provider list. We believe the Division of Insurance
understands that to be listed on provider panesl, the physician must be credentialed or re-credentialed. Thus, the fee for credentialing should be
subsumed in the prohibition against charging a “listing” fee. A problem arises in certain entities not
under the jurisdiction of the Division of Insurance such as the entities known
as “stand alone networks.” These include
Mediversal, NPP, MCC, and Prime Health. Physicians having contracts with these
entities and who have been billed for credentialing or administrative fees
since
· As provided in Nevada Revised Statutes (NRS 41A), the County Medical Society receives from the Division of Insurance the findings of all Medical Dental Screening Panels held in “south” Nevada. Summaries of these findings are reproduced here for your edification. From 1998 – 2001 (to date) individual physicians were found to have committed “probable malpractice” in 131 instances, “no probable malpractice” in 296, and the MDSP was “unable to decide” the issue in 137. Everyone expects findings of “probable malpractice” and “unable to decide” to proceed to a filing for medical malpractice in District Court. However, surprisingly, when the MDSP finding was “no probable malpractice” the plaintiff filed against the physician in District Court 65% of the time. Some attorneys were much more likely to file in this situation than others. A chart of those attorneys, de-identified, with 3 or more MDSP allegations against physicians during this period, along with the rate of filing in District Court, is included.
In summary, of 564 physicians alleged to have committed malpractice in cases before the MDSP, 459 we filed against for medical malpractice in District Court. If one assumes a finding of “no probable malpractice” screens out non-meritorious cases, 65% of the time that assumption is not sustained by the plaintiff’s action.
PANEL FOUND PROBABLE
MALPRACTICE
|
SPECIALTY |
# MDSP Cases |
|
Anesthesiology |
2 |
|
Cardiovascular Diseases |
2 |
|
Cardiovascular Surgery |
2 |
|
Dermatology |
5 |
|
Diagnostic Radiology |
2 |
|
Emergency Medicine |
5 |
|
Endocrinology |
1 |
|
Family Practice |
9 |
|
Gastroenterology |
1 |
|
General Surgery |
13 |
|
Internal Medicine |
12 |
|
Neurology |
3 |
|
No Longer Licensed/Unknown |
19 |
|
Ob-Gyn |
16 |
|
Ophthalmology |
2 |
|
Orthopaedic Surgery |
8 |
|
Otolaryngology |
6 |
|
Pain Management |
1 |
|
Pathology |
1 |
|
Pediatric Surgery |
2 |
|
Pediatrics |
5 |
|
Plastic Surgery |
4 |
|
Pulmonary Diseases |
2 |
|
Sports Medicine |
3 |
|
Thoracic Surgery |
1 |
|
Urology |
4 |
|
TOTAL |
131 |
PANEL FOUND NOT
PROBABLE MALPRACTICE
|
SPECIALTY |
TOTAL |
# FILED |
# NOT FILED |
% |
|
Addiction Medicine |
1 |
0 |
1 |
0% |
|
Anesthesiology |
20 |
13 |
7 |
65% |
|
Cardio. Surgery |
8 |
7 |
1 |
88% |
|
Cardio. Disease |
11 |
5 |
6 |
45% |
|
Critical Care - Ped. |
2 |
1 |
1 |
50% |
|
Dermatology |
2 |
2 |
0 |
100% |
|
Diagnostic Radiology |
13 |
5 |
8 |
38% |
|
Emergency Medicine |
20 |
13 |
7 |
65% |
|
Emergency Med. - Ped. |
1 |
0 |
1 |
0% |
|
Family Practice |
29 |
20 |
9 |
69% |
|
Gastroenterology |
6 |
5 |
1 |
83% |
|
General Surgery |
15 |
11 |
4 |
73% |
|
Hematology/Oncology |
1 |
0 |
1 |
0% |
|
Internal Medicine |
26 |
20 |
6 |
77% |
|
Interventional Radiology |
1 |
0 |
1 |
0% |
|
Maternal Fetal Med. |
1 |
1 |
0 |
100% |
|
Maxillofacial Surgery |
2 |
0 |
2 |
0% |
|
Neonatology |
1 |
1 |
0 |
100% |
|
Nephrology |
3 |
3 |
0 |
100% |
|
Neurology |
8 |
3 |
5 |
38% |
|
No Longer Licensed |
28 |
15 |
13 |
54% |
|
Ob-Gyn |
22 |
15 |
7 |
68% |
|
Ophthalmology |
3 |
2 |
1 |
67% |
|
Orthopaedic Surgery |
17 |
15 |
2 |
88% |
|
Otolaryngology |
4 |
3 |