Newsletter XXV February 2002
Local Professor
Comments On US Health Care Financing System
Asset Protection: Family Limited Partnerships
Applicants To
Go Before Credentialing Committee
Clark County Health District
Disease Statistics December 2001
By Ole J. Thienhaus, M.D., M.B.A.
Professor and Chairman, Department of Psychiatry
University of
Other recent reforms, such as the Kassebaum-Kennedy Health Insurance Portability Act, seek to remedy some part of the system at a time. This approach, politely called “incremental reform,” has a fatal flaw: The bubble phenomenon. Repairing one deficiency in the system only opens a gap elsewhere: For example, if Medicaid is mandated to cover more of the working poor, then more employers will discontinue providing health insurance as a fringe benefit. If the government forces HMOs to pay for two full hospital days after delivery of a baby, then HMO premiums rise. The problem is not that there are flaws in our current health care financing system. Rather, the system itself is a failure.
No one will deny a bleeding patient emergency care for lack of insurance coverage: Society implicitly acknowledges that access to basic health care is a fundamental right. Once agreed on that, we must conclude, first, that the market is an inadequate instrument to manage distribution of health care services, and second, that tying health care cost coverage to employment is irrational.
The past ten years of our hopelessly fragmented system should have made the point convincingly. Access has declined, costs are on an upswing again, quality of care has, at best, remained stagnant, and satisfaction of patients and clinicians has gone south.
The inefficiency of the health insurance industry defies description. The only way to fix the system is to get this industry and the associated employer mandates out of the way. Health care reimbursement needs to be publicly managed. Let doctors compete for patients on the basis of the service quality they have to offer. That is a great deal better than doctors competing for managed care contracts on the basis of their cost-cutting skills.
Health care, if you need it, is usually too expensive to pay for out of pocket. Only a very large insurance pool, including the young and healthy along with the sick and frail, can distribute risk — and therefore cost — in a way that is affordable to all subscribers. A single payer system is the only solution. It allows no one to opt out, it sets annual global budgets to cap overall expenditures, and it reimburses clinicians for services rendered — not for services withheld.
A single payer structure is the only way to return to fee-for-service medicine and free choice of doctor. Basic medical services would be fairly stringently defined, excluding, for instance, liposuction or psychoanalysis, but including treatments proven effective and necessary in terms of evidence-based medicine. Excluded services could always be purchasable outside the national health insurance system.
One health insurance sector that
operates as a single payer system is Medicare.
Certainly, Medicare has its problems.
Its regulations cover more pages than the Internal Revenue Code. Its coverage has a number of painful gaps:
Patients still have to pay for prescription drugs, eyeglasses and hearing aids.
But by and large, it is good enough so that no one wants to get rid of it. Politicians know that if they try to tamper
with
What is wrong with a gradual expansion of Medicare? Many employers are tired of haggling, year after year, over prices and benefits with the fiscal officers of managed care outfits. Instead, they could purchase coverage of their workforce through Medicare. Medicare only has a 3 to 4 percent overhead rate (compared to 40 percent and more for private insurers) and its premiums would be quite competitive — as would be its benefits. Employees could still get “MediGap” insurance in the private market, if they so desire, to hedge against co-payments, deductibles and insure for non-covered benefits.
What is the up-side? Employers’ options for benefit packages would be broadened. The managed care industry would get a powerful competitor. Competition, as we know, enhances performance. The playing field would be more even: As it stands now, private insurance companies can enroll Medicare-eligible persons in their plans, but Medicare cannot compete for enrollment of the lower-risk, young working population. Most importantly, the broadening of the risk pool would help a great deal to contain cost increases in the Medicare system. Reducing cost overruns in Medicare may even rein in health care cost inflation nationwide.
Politically, such a reform would be feasible because it does not propose to radically upset the current system. But it also avoids the dangers of incrementalism alluded to above. We are currently in a recession. The recent history of budget surpluses would have made introduction of the changes proposed fiscally easier. But a recession offers a more compelling political rationale as we see the numbers of uninsured increase and the Medicaid appropriations squeezed.
Obviously, a single payer system, whether created de novo or by gradual extension of Medicare, has problems, too. But it offers a fair way to increase access and keep costs under control. If there is a better way to achieve these goals, no one has mentioned it yet.
·
Nevadans with inherited bleeding disorders now
have access to state-of-the-art comprehensive hemophelia
care in a federally designated center. Under the direction of Dr. Jonathan
Bernstein, a pediatric hematologist/oncologist, and Dr. Heather Allen, an adult
hematologist/oncologist, at
·
Maintaining a healthy heart will be the focus of
two seminars in February at
·
·
·
The Nevada Medical Group Management Association,
Southern Chapter, will hold its next monthly meeting Thursday, February 14 from
The January County Line article “
I hope the New Year will help us achieve some of our objectives. The main issue that we are all trying to focus on is the Malpractice coverage crisis. By uniting and developing a coalition of sorts, I hope we can succeed this year. There are a lot of individuals, because of the uncertainties involved, who are exploring their own ideas. It is my hope that we can bring all of this creative energy together to develop strategies to find solutions for the crisis that will provide answers for everyone, as was addressed at our Symposium on January 23rd.
In addition to bringing together people to find malpractice insurance solutions, the Medical Society can be an advocate for its members in helping them deal with their contracts with managed care companies. It cannot collectively negotiate anything but, on an individual basis, can guide members to what would be in their best interests. For instance, we have become aware of a particular insurance company to reduce their reimbursements in proportion to the 5.4% reduction proposed by Medicare. What this in fact would do (taking into consideration their already reduced fees) is pay you 80% of Medicare rate. This, we feel, is inappropriate but we can only educate the members about it, but cannot negotiate this for you with the managed care company, lest we violate antitrust laws.
The Medical Society is also working on your behalf to make all managed care companies to abide by the SB99 law prohibiting credentialing fees. There are 2 companies claiming exemption from this law. The State Medical Association has requested the Attorney General's opinion on this issue. While the AG's opinion is pending, you have 2 choices. Either you pay the fees in protest or simply refuse to pay citing the new law. By choosing the second option, you run the risk of being removed from their provider list. The medical society cannot and will not advocate any collective action by its members because of antitrust violation.
I would like to thank all of you
who participated in the Malpractice Insurance Crisis Symposium on January 23rd.
This event marked a milestone
in the history of
Managed Care Entity
Formation Seminar
CCMS has arranged for Mr. Kelly Testolin, Esq., of the firm Hale, Lane, Peek, Denison,
(etc.), to present a program on Forming, Marketing, and Managing an IPA, a PPO,
or an HMO-type organization. This
seminar will be given on Saturday, March 2, from
Professional
Liability Insurance Availability
Doubtless you've heard the St. Paul
Insurance Company has decided to curtail its Professional Medical Liability
Insurance (PLI) business.
The remaining PLI insurers do not
appear enthusiastic about accumulating new business except in those physicians
who have never had claims or several incidents reported. General Electric's Medical Protective
Insurance Company has recently entered the PLI market in
However, several CCMS member physicians with no history of claims paid have reported being denied PLI renewal because they have reported "incidents" in their practice. One group of surgical sub-specialist physicians with three reported incidences, but no claims, has been denied renewal of their PLI policy by their current carrier. Once denied renewal, physicians are finding it difficult to secure another carrier in the primary PLI insurance market. Secondary PLI insurance is generally available, but because secondary insurance markets are not regulated by the Division of Insurance, the costs of such insurance may well be prohibitively high. Physician groups have been forced to drop a colleague due to the claims experience of that physician.
Insurers encourage physicians to report "incidents" in their practice which might give rise to an action for malpractice. The insurer then sets aside monies, known as placing funds in "reserve," in anticipation of the lawsuit. Reserve funds are not recognized as profit in the insurer's corporate accounting. Insurers often use their "reduced" earnings to base a request for premium increases with the Commissioner of Insurance. While setting aside reserve funds in this manner is an established and accepted practice, using the reporting of these "incidents" as a rationale for non-renewal of physicians' PLI policies appears to be a recent phenomenon.
PLI insurance policies almost all require physicians to report incidents likely to lead to a lawsuit for malpractice. The judgment, then, is when does an "incident" rise to such a level as to be likely to base a lawsuit for malpractice. Clearly, when a poor result occurs and the patient or a legal representative of the patient threatens or otherwise indicates an intent to file a lawsuit, the incident must be reported to the PLI insurer. A poor result alone, without such indications of an intent to file a lawsuit, may well have been reported in the past. Now, however, prudent physicians may wish to reevaluate the consequences of reporting such incidents having incomplete indicia of lawsuit potential. The prudent physician may consider a careful review of his or her PLI insurance contracts with the physician's attorney to determine the exact criteria mandating reporting an incident.
Joint and Several
Liability in Physician Negligence Awards
In most states (and in the law as taught to law students) the "several" part of joint and several liability means that the plaintiff can collect all the award from any of the defendants regardless of the percent of fault of a defendant. That defendant then has a "right of contribution" cause of action against the other defendants to collect the portion of the award for which they are responsible. The public policy behind this method of a plaintiff collecting his or her award is that the plaintiff is the "innocent" party's (or lesser at fault party) rights should prevail over those of a defendant found at fault.
This may be a significant consideration for those physicians considering reducing their insurance coverage. For instance, UMC has now reduced their PLI requirements for medical staff membership from $1million/$3 million to $50,000/$150,000. Annual PLI premium for the lesser amount of insurance may be affordable where the PLI premium for the higher coverage may not be affordable for a given physician. Should physician "A," with the lower coverage, be found liable for medical malpractice along with co-defendants physicians "B" and "C," physician "A" would only be liable for that portion of the judgment award representing the percentage of negligence attributable to physician "A". Without NRS 41.141 (and NRS 17.225), the plaintiff could demand full payment from physician "A," leaving physician "A" to demand a right of contribution from physicians "B" and "C" according to their proportion of fault. Assuming a jury award of $500,000 and an apportioned fault of 10% to physician "A," physician "A" would be liable only for $50,000 regardless of the solvency or financial status of physicians "B" or "C."
Physicians should not reduce their PLI coverage unless that coverage is simply not affordable. However, if the question is one of being able to practice medicine or involuntary retirement, reducing coverage may be a consideration. Of course, any physician contemplating such a move should consult with his or her attorney for the full implications and risks associated with that decision.
Congress
"Extends" Compliance Date for Electronic Transaction Standards
President Bush signed HR 3323 into
law in January. This bill passed both
houses of Congress unanimously. If you
think such a bill would do little or nothing, you'd be correct. [HR 3323 extends the mandatory data transaction
standards compliance date one year if the covered entity (health care
providers, including medical practices) meet certain conditions.] The "old" date for mandatory
compliance was (is)
In order to receive this one year extension, the health care provider must submit a request to the Secretary of Health and Human Services which must include all of the following items:
The Department of HHS states they
will provide a form for making such requests.
The form should be available soon at:
www.hhs.gov/ocr/hipaa Health care providers who fail to submit
this request form prior to
Lastly, HR 3323 specifically provides that the
Non-Economic Damages
Windfall
An article in the CCMS County Line
newsletter of November 2001 discussed
A recent medical malpractice jury award exemplifies the significance of an absence of a limitation on pain and suffering (non-economic) damages. In Martin Kay v. Mohamed Eftaiha, M.D., (conducted in Department III of our District Court, Case No. A-385204), Mr. Kay, age 71, underwent abdominal surgery for cancer of the colon in 1994. Following the surgery, the patient became incontinent. This incontinence requires the patient to wear a diaper. The patient did not elect to proceed with a colostomy which would have ended his diaper requirement. The medical malpractice trial took four days; the jury deliberated for less than two hours. The jury awarded the patient $1,520,000. The award included $20,000 for future medical costs, $1,000,000 for past pain and suffering, and $500,000 for future pain and suffering. Absent the pain and suffering awards, this was a $20,000 case.
In
By Gregory J. Morris, Esq.
This article will briefly outline some of the aspects of a family limited partnership, including the purposes for formation, estate tax benefits, asset protection benefits, the tax effects, and other matters affecting the management and operation of the partnership.
FORMATION
A Family Limited Partnership (hereafter referred to as an "FLP") is essentially a limited partnership owned by members of a family. A Limited Partnership generally consists of two classes of partnership interests, general and limited. The general partner retains full control of the partnership operations. The general partner has the power to make and implement decisions regarding the purchase, sale, development and investment of partnership assets, as well as the power to determine the amounts and timing of distributions of partnership assets to the limited partners.
The general partner is personally obligated for all debts of the partnership, and conversely, the limited partner's liability is limited to the extent of their partnership investments. Thus, if the partnership becomes obligated for debts in excess of what the partnership can pay, the general partners will be jointly and severally liable for such excess debt obligations.
Many different types property can be contributed to an FLP. For example, FLPs have been formed to hold mobile home parks, warehouses, businesses, rental real property, and in some cases marketable securities. The partnership agreement will govern how partnership income is divided among the partners. Generally, both general and limited partners share income and cash flow based on their percentage of interest in the partnership.
It is important to realize that although income tax liability passes through to partners automatically, cash is not distributed to partners until the general partners determine to make a distribution. In this way, the general partners retain control over the assets in the FLP, whereas limited partners are granted very limited rights. Limited partners also have restrictions on their ability to transfer their partnership units to others, so that the general partners can prevent the units from being transferred outside the family.
Typically, a limited partnership is formed by the older generation family members (e.g., the parents), who contribute assets to the partnership in return for general partnership units and limited partnership units. The parents can then embark on a plan of giving limited partnership units to their children and grandchildren, while retaining the general partnership units that control the partnership.
ESTATE PLANNING
Lifetime gifts of limited partnership interests are an excellent way to reduce the size of your taxable estate, while at the same time keeping certain properties intact and under your continued control. As a general rule, lifetime gifts of interests in property are subject to the gift tax. However, through utilization of the annual gift exclusions and the unified credit, substantial lifetime gifts may be made without incurring this tax. The annual exclusion allows you and your spouse to each gift up to $10,000 in value of property annually to as many individuals as you choose without incurring any gift tax.
For example, if you have three children, you and your spouse could each gift to each of your children $10,000 every year, or a total of $60,000 per year. In addition, you and your spouse may each gift property valued at $1,000,000.00 during your lifetimes (not including the $10,000 per donee annual gifts); without incurring a gift tax.
Estate tax rates run as high as fifty-five percent of the taxable estate; therefore, reducing your taxable estate through lifetime giving will result in substantial tax savings. By making lifetime gifts of partnership interests, the taxable estate is reduced not only by the amount of the gifts, but also by the income and appreciation of the gifted assets, which, if retained in your estate, would be taxed at the very high estate tax rates. For example: Parents contributed $1,000,000.00 of real estate to an FLP. Parents make annual exclusion gifts to their three children and three grandchildren each year for five years; 6 x $20,000.00 = $120,000 x 5 years = $600, 000.00 or 60% of the FLP. At the end of 10 years, this real estate is worth $2,000,000.00 due to appreciation. By making these gifts, parents have reduced their estate by $1,200,000.00 (60% x $2,000,000. 00 = $1,200,000.00), not just the $600,000.00 that was initially gifted.
The tax savings achieved through lifetime gifting can be further compounded through the use of valuation discounts. There are two types of valuation discounts available. First, a minority discount is applicable where a gift of a minority interest in a closely held business is transferred. The minority discount is based upon the fact that the lack of control in a closely held business is a severe limitation on the value of the minority interest and should, therefore, be taken into account in valuing that interest. Minority discounts of twenty to forty percent of fair market value are commonly allowed.
The second discount is the discount for lack of marketability. Since the partnership interests are not freely marketable on a securities exchange, there is no ready market for the partnership interest. Obviously, if there is no available market, a seller of the partnership interest would encounter difficulty in finding a buyer willing to pay full market price, especially when the sale of that interest is restricted by the partnership agreement. Marketability discounts of up to forty percent have been found acceptable by the courts (although the IRS may challenge them). By combining the minority and marketability discounts, a combined discount of thirty to fifty percent can be achieved.
For example: Parents transfer assets worth $2,000,000.00 to an FLP in return for 2 general partnership units and 98 limited partnership units. They then gift 50 limited partnership units to their children, valued as follows: $2,000,000.00 x 50% = $1,000,000.00 - 45% valuation discount = $550,000.00 (value of gift). Parents use $550,000. 00 of their united credit, but have removed $1,000,000.00 of value from their estate.
ASSET PROTECTION
It is the position of many legal
commentators and practitioners that a properly drafted family limited
partnership may be a highly effective tool for protecting assets against the
claims of unsecured creditors.
So, where the general partner may withhold distributions (as should be provided for in the limited partnership agreement), the creditor may be effectively foreclosed from receiving any benefit from the assets held in the family limited partnership. Furthermore, because income tax liability flows through to the partners, a creditor who might attach a partnership interest would be obligated to pay its share of the tax, but partnership distributions would not be made to provide for payment of taxes, so creditors would actually lose money by attaching a limited partnership interest.
Another deterrent to creditors
attaching an interest in an FLP is the general partners' ability to create
unfavorable tax consequences to the creditor; for example, if the general
partners decide to sell appreciated partnership assets. This sale triggers a capital gains tax, and
rather than distribute the assets, the general partner decides to reinvest the
proceeds. The result is the creditor may
have to pay the capital gains tax without receiving any money from the
FLP. I should point out that, although
this is a reasonable interpretation of
INCOME TAX BENEFIT
The primary income tax benefit produced by an FLP results from shifting income between different taxpayers by means of gifts of limited partnership units. If all tax law requirements are met, each partner is liable for tax on his or her distributive share of partnership income, whether or not that income is distributed. Over several years, the allocation of taxable income to family members in lower tax brackets can substantially reduce overall family income taxes.
SUMMARY
In summary, the following are some of the advantages of creating a Family Limited Partnership:
CAREFUL PLANNING
REQUIRED
Using an FLP in one's estate planning requires careful analysis and strict compliance with IRS requirements, as well as professional assistance. If the transferred property includes real property, art work or a business, the transferor must obtain an appraisal to establish the value of the property. It is also essential to have a qualified appraisal to establish the discounted value of the partnership interests.
Family limited partnerships are effective estate planning tools, with the added benefit of asset protection. However, a limited partnership is not for every person or for every situation. Family partnerships should only be utilized after careful planning with a qualified accountant and attorney.
Congratulations and Welcome to the
Alan Blumenthal, MD, General
Surgery,
Lisa Glasser, MD,
Pediatrics,
Lisa Nelson, MD, Diagnostic Radiology,
Will Scamman, MD, Pathology,
Timothy Tolan,
MD, Ear, Nose & Throat,
If you have any pertinent information about the following
membership candidates, please contact: Clark County Medical Society,
Tammy Kelly-Layton, MD, Ob-Gyn
Kenneth Osgood, MD, Pediatrics
Gary Mayan, MD, Pediatric Cardiology
Mona Sinno, MD, Family Practice
Cornell Clark, MD, Family Practice
Happy New Year! Hopefully everyone had a joyous and safe holiday. Our holiday luncheon was a little different this year in that we were at a restaurant, Piero’s Trattoria, instead of a member’s home, but it was very nice and well-attended. Pat Robbins, the Greating Card Project Chair Person, announced that the endeavor had raised over $10,000. After expenses, we were able to donate $1500 to each of the four charities selected by Community Chair Person, Claire Kurlinski.
The remainder of the funds will go towards the nursing scholarships that will be presented in April. (A special thank you to everyone who donated to the Holiday Greating Card Project this year to ensure its continued success! It really is a great way to serve the needs of our community in a variety of ways. Next year we will start the project a little earlier to avoid the last minute crunch.) We had several past presidents in attendance at the holiday luncheon that we introduced and acknowledged. New toys were collected and taken to Channel 8 for their Toys for Tots program. Thank you to everyone who participated.
Our next luncheon will be February 19th, at Liana Eftaiha’s home. We will finalize the plans for our upcoming collaberation with Candlelighters and Neiman Marcus to host a fashion show at the Las Vegas Country Club. This event will be March 19th and will be open to everyone who would like to attend. All proceeds raised will be donated to Candlelighters, an organization that supports children with cancer and their families. Hope to see you all there!!!
·
Cardiovascular
Consultants, 691-9154
·
Courses also approved for nursing CEUs. Preregistration required.
2/9 - “Developing a Compliance Program to Avoid Inadvertent
Incidents of Healthcare Fraud and Abuse in the Medical Practice,”
·
Southwest
Medical Associates, 242-7731
Some courses also approved for nursing CEUs.
2/14 - “Endemic and Emerging Infections of the Desert and
Intermountain West,”
3/14 - “Alternative Medicine: Treatment of Cardiovascular
Disease with Nutritional Medicine,”
·
2/1 - “Venous Thromboembolic (VTE)
Disorder,”
2/8 - Pediatric Pathology Conference,
·
UMC, 383-2604
·
2/12 - “Community Acquired Pneumonias,”
2/26 - “Cancer of the Prostrate for the Primary Care
Physician,”
3/7 - Family Practice Department Meeting,
3/12 - “Pseudomonal Infections and
Their Prevention,”
3/26 - “Treatment of Systemic Fungal Infections,”
4/9 - To Be Announced
4/23 - “Reduction of Adverse Cardiac Events - The HOPE
Trial,”
5/14 - “Hodgkins Disease: An
Overview,”
5/28 - “Venous Thromboembolic
Disorders,”
6/11 - “The Use of Intravenous PPI’s,”
6/25 - “Update on Asthma,”
7/9 - “Vaginal Births After Cesarean Sections(V-Bacs),”
7/23 - “Making the Valley Hospital Website Work For You and Your Patients,”
*Special Note: CCMS members can receive free CME courses on the internet with World Medical Leaders.
|
DISEASE |
CASES REPORTED |
YEAR TO DATE |
||
|
|
Dec. 2000 |
Dec. 2001 |
2000 |
2001 |
|
VACCINE PREVENTABLE DISEASES |
||||
|
DIPTHERIA |
0 |
0 |
0 |
0 |
|
HAEMOPHILUS INFLUENZA (invasive) |
0 |
1 |
3 |
4 |
|
HEPATITIS A |
10 |
4 |
71 |
48 |
|
HEPATITIS B |
4 |
8 |
41 |
40 |
|
INFLUENZA |
3 |
1 |
18 |
29 |
|
MEASLES |
0 |
0 |
5 |
1 |
|
MUMPS |
0 |
0 |
4 |
3 |
|
PERTUSSIS |
0 |
2 |
3 |
6 |
|
POLIOMYELITIS |
0 |
0 |
0 |
0 |
|
RUBELLA |
0 |
0 |
0 |
0 |
|
TETANUS |
0 |
0 |
0 |
0 |
|
SEXUALLY TRANSMITTED DISEASES |
||||
|
AIDS |
32 |
28 |
240 |
187 |
|
CHLAMYDIA |
392 |
314 |
2781 |
4074 |
|
GONORRHEA |
162 |
145 |
1374 |
1831 |
|
HIV |
25 |
19 |
234 |
159 |
|
SYPHILIS (Early Latent) |
0 |
1 |
3 |
6 |
|
SYPHILIS (Primary & Secondary) |
1 |
1 |
9 |
4 |
|
ENTERICS |
||||
|
AMEBIASIS |
1 |
0 |
3 |
4 |
|
BOTULISM-INTESTINAL |
0 |
0 |
1 |
0 |
|
CAMPYLOBACTERIOSIS |
8 |
9 |
108 |
135 |
|
CHOLERA |
0 |
0 |
0 |
0 |
|
CRYPTOSPORIDIOSIS |
0 |
0 |
3 |
4 |
|
E. COLI O157:H7 |
0 |
2 |
9 |
8 |
|
GIARDIASIS |
7 |
19 |
147 |
141 |
|
ROTAVIRUS |
173 |
84 |
529 |
567 |
|
| ||||