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Archive for May, 2007

Doctors Orders: Know your Shareholder Agreement

Tuesday, May 8th, 2007

May 2007

I recently presented a lecture entitled “Doctors Orders: Know your Shareholder Agreement” to a group at Piedmont hospital. This article summarizes some of the questions after the presentation ended and my answers. I hope the questions and answers give you some insight into the legal issues that arise now that physician’s move from practice to practice with much greater frequency.

Q: Is there any difference in the enforceability of a non compete in an employment agreement versus a shareholder agreement?

A. Yes. A court reviewing a non-compete in an employment agreement will apply a higher level of scrutiny which makes it tougher for the practice to enforce the agreement against a physician employee. A non-compete in a shareholder agreement, on the other hand, has a lower level of scrutiny applied to it as Georgia Court’s view physician shareholders as having much more bargaining power than physician employees. When I represent practices whose shareholder physicians’ also have employment agreements, I recommend having a non-compete in both the employment and shareholder agreement. The basis for this is the difference in the scrutiny levels applied by Georgia courts.

Q: What is the typical time period for the enforcement of a restrictive covenant in a shareholder agreement?

A: Non-competes should never go past two years, although the shorter the time period the more enforceable the non-compete. Each situation is different as time period is only one component of the three part test a Georgia Court will apply when assessing the enforceability of a non-compete. The three element test consists of the: (1) non-compete time period; (2) geographic limitation of the non-compete; and (3) scope of the activities limited by the non-compete.

Q: What methods are typically used to calculate the buyout price when a shareholder physician retires or otherwise leaves the practice?

A: The methods I see used to calculate the purchase price vary but there are three common themes. One method is the board of directors setting a share price that will be used for the year until the board meets again to set the price for the following year. Another method is agreement on a purchase price formula based upon the Doctor’s collections during a period of time or book value of assets (although many practices have few assets other than accounts receivable) or other agreed upon measure. The third method is to hire an appraiser who will calculate the value of the practice at the time of the buyout. Each of these methods has benefits and drawbacks. Many boards do not meet regularly to discuss the buyout price so it can get stale over time. Purchase price formula’s often work well but I have seen disagreements that such formula’s do not accurately reflect non-monetary services that bring value to the practice such as community involvement or practice management. Appraisals are typically very accurate but are usually the most expensive method and if not drafted properly can lead to disputes over who pays the appraiser.

Q: My partners and I have been together 17 years without a shareholder agreement why is it that important now?

A: The medical landscape has changed dramatically as most physicians may change jobs many times over the course of their careers. Business divorces, unfortunately, remain a common feature of today’s medical landscape. I know an anesthesia practice that had no agreement in place for buying out a departing physician because no one had thought about it. One day a physician decided to leave and demanded to be bought out. With no agreement in place, the parties, as you probably guessed, got into a dispute over the value of the buyout of the shares. They spent many months arguing over the buyout before resolving their dispute. The dispute also led to many stressful contentious hours away from treating patients. It is still fairly common for me to see multi-physician practices that have no shareholder agreement. They typically only see the folly of this omission after being dragged through an expensive litigation that is time consuming and exhausting.

Q: When I become a shareholder at a practice what do I really care about in the Shareholder Agreement?

A: You should understand all aspects of your shareholder agreement but the following are three areas of particular concern: (1) the buy in and the buyout; (2) how management decisions are made; and (3) restrictive covenants. When you review the buy in and buyout you want to know how the price is calculated, but you also want to know if you will pay or receive the purchase price at once or over time. When it comes to management decisions, do certain fundamental decisions such as buying an office building, selling the practice or hiring a new shareholder physician require a mere majority or a supermajority. I have seen other shareholder agreements vest most management decisions with the board and curtail involvement by shareholders. Finally, it’s important that you understand the impact of restrictive covenants when you are a shareholder physician as Georgia Courts look upon their enforcement more favorably than they do with respect to physician’s who are merely employees.

I hope the answers to these frequently asked questions assist you when considering the legal issues that arise as physician’s frequently change practices in Atlanta.

Justin S. Daniels is a health care partner at the law firm Wagner Johnston & Rosenthal, P.C. in Sandy Springs, and can be reached at (404) 261-0500.

The information in this article is for informa¬tional purposes only and is not legal advice. Use of this article does not create an attorney-client relationship between you and Wagner Johnston & Rosenthal, P.C. You should not act upon the information in this article without seeking ad¬vice from a lawyer licensed in your own state or country. Please note that you should not send any confidential information pertaining to potential legal services to Wagner Johnston & Rosenthal, P.C., until you have received written agreement from Wagner Johnston & Rosenthal, P.C. to per¬form the legal services you requested. Unless you have received such written confirmation, the firm will not consider any correspondence you send it as confidential.

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Front Desk Errors No More!

Tuesday, May 8th, 2007

May 2007

By Christine Ingram, Senior Consultant

ingram.jpgErrors at the front desk can cause denied claims in your practice, but with a few simple exercises, many of these discrepancies can be avoided. Most of these errors are caused by putting incorrect information into the patient’s account, and many can be avoided, including incorrect demographic information and insurance information on the patient. For most office managers this is not earth-shattering news, as looking for ways to reduce front desk errors has been an ongoing challenge for many practices.

There are several steps you can take to avoid the front office errors and pitfalls that cause denials and other inefficiencies in the office.

Review of Processes
One of the first steps to reducing front desk errors is to review and understand your processes. Are they consistent, easy to manage, and not too labor intensive? This is important because the same process will be used for times of low patient volume and times of high patient volume. Talk to your employees about the current processes and work together to try and streamline the steps. Look for areas of redundancies in your processes and eliminate them. In your attempts to ensure that you have recorded everything, you are duplicating efforts and causing more work for front office staff.

Staff Training and Education
Next, make sure your front office staff is trained on your practice management system. When hiring new staff comes at a time when a practice is short staffed, and because we are short staffed when they are hired on, the tendency is to skimp the training the new hire, or to skip it altogether. This fragmented education can lead to increased errors when entering information into the data system. Make sure staff understand the importance of entering patient demographic and insurance information correctly. Many times, front office staff members are not aware of the billing process and how the claims are generated. Diagram the steps that the claim goes through from beginning to end. Understanding the revenue cycle and how claims can be denied when incorrect information is entered will help raise awareness of the importance of entering information correctly the first time.

Raising Patient Awareness
Educate your patients on their financial obligations up front. Having a strong financial policy in place that your patients understand can save your staff from having to collect over-the-counter payments at the front desk. Create tools for collecting over-the-counter payments, and offer several payment options. This will increase your overall revenue with less time and effort for your front desk.

Working with Insurance
Make sure staff is verifying insurance prior to the office visit. This will save time once the patient arrives and it will increase collections.

Use claim scrubbing software to help catch “unclean” claims and track the reasons claims were not able to be billed. Track these errors and review them weekly with staff. Set benchmarks for improvement and monitor and give frequent feedback on improvements.

Tracking Errors and Workflow
Assign tasks to staff and create personalized “task sheets” to be filled out daily. Front desk staff work in roles that require multi-tasking, but because these positions can be very multifaceted, it is easy for staff to forget to complete all daily tasks. A task-tracking system can be used as a tool for staff to ensure that all tasks are completed daily, and it will help hold individuals accountable for their work.

Once you have looked at your processes and identified changes for improvement, include your staff in the change process. Implement these changes as soon as possible and communicate them to everyone. Monitor the new processes and determine if they are making a difference.

Christine Ingram holds a Masters of Science in Healthcare Management from Troy State University, and has amassed over 10 years of expertise and experience in all areas of managing medical practices. As a Senior Consultant with The Coker Group’s Practice Management division, she assists medical practices across the country with solving operational and financial issues. You can email Christine at cingram@cokergroup.com.

For more information on The Coker Group call 678.832.2000 or visit www.cokergroup.com.

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Reducing Risk of Sudden Cardiac Arrest

Thursday, May 3rd, 2007

May 2007

Drs. Kanuru and Egoavil of Cardiovascular Medicine PC are reducing the risk of Sudden Cardiac Arrest by treating patients with irregular heart rhythms and implanting defibrillators.

To order a copy of this issue click here.

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