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Monthly Archives: September 2015

Leveraging Private Investments in the Healthcare Industry

Hospital syndications and ambulatory surgery centers are increasing in popularity since the implementation of healthcare reform. Outpatient surgery programs reflect the shift in healthcare away from a la carte pricing for medical treatments toward the bundled, value-based payments sought by insurers. Patients are also drawn to the convenience – and frequently lower prices – of the centers.

The best work environments establish principles that encourage responsibility, collaboration, continuous improvement and shared benefits. Vesting ownership derives from the belief that a broadly owned facility may enjoy greater utilization than a centrally-owned facility. Implementation of a plan to broaden physician ownership requires compliance with legal and regulatory guidelines, but vesting minority ownership in persons who can contribute to the entity and reap the profits has proven to be an effective business strategy.

Assessing the Opportunity

As a physician, your high net worth affords you the opportunity to consider investment options that are prohibited from being sold to the general public because they are considered to be too risky. Being an accredited investor isn’t always as advantageous as it sounds. However, your status as a credentialed physician (not your income) can often grant you access to investment opportunities such as surgery centers or other types of ancillary service centers.

Physician Practice Management

Ancillary services can generate additional revenue for physicians so that they are less reliant on seeing more patients to boost their income. The ancillary options available to you will depend on your specialty and how often you are referring patients elsewhere. When developing a strategy for which ancillary services to offer, you’ll want to assess what business you are referring out the door the most and make that the priority. Hospitals also consider physician practice ownership as a means of implementing a profit sharing plan among those with a direct effect on the outcome.

When considering ownership of ancillary services, these three questions should be evaluated during the decision making process:

  1. Does the opportunity have a business model that makes sense, and does the financial data support it?
  2. What is your exit strategy in the best-case and worst-case scenarios?
  3. Is the potential return worth the risk?

Weighing the Risks

To clarify the first issue, it is helpful to examine the historical income statements, balance sheets, cash-flow statements and any other historical financial records up front. Calculating the financial ratios for the service in question and comparing it to similar business will allow you to more accurately diagnose whether the physician practice management opportunity makes good business sense.

Your exit strategy is something to evaluate prior to entering any kind of business relationship. The best business opportunities are those that offer little risk in terms of how the exit strategy will impact you personally. For example, if you are selling your medical practice, will the buyer also want to acquire the ancillary business you have established? Taking this and other factors into consideration will allow you to determine how much flexibility you will have when the time comes to divest.

Finally, determine whether the potential reward is worth the risk. Generally, it is not worth the loss of liquidity on any of these services unless you expect 15% or more return on the investment. A surgery center that returns only 8% profit each year would probably not be worth the risk unless you have reason to believe that your group’s involvement would generate enough additional surgeries to increase the profit margin.

While the open market offers long-term opportunities to be rewarded for the risks that are taken, having direct access to additional revenue on the work you are already generating can also be profitable. Just like with any other investment, diversification remains paramount. As such, it is not recommended to tie up too much of your portfolio in any of these alternative investments. Every situation is unique, so it’s always a good idea to have the asset distribution of your investments reviewed by a qualified financial professional with knowledge of your individual circumstances.

Have Questions?

Information gathered from sources believed to be reliable but is not guaranteed. Any information or opinion contained herein should not be construed as an offer, recommendation or solicitation to invest. Information provided is not to be deemed tax or legal advice. Consult your legal, tax and investment professionals for personalized advice.

Advisory Services offered through Larson Financial Group, LLC, a Registered Investment Advisor. Securities offered through Larson Financial Securities, LLC, Member FINRA/SIPC.

Protect Your Assets and Retirement with an Umbrella Policy

Few things can derail a retirement plan like a liability lawsuit. Accidents on the road and in your home can and probably will happen at some point in time, and when accidents occur they have the potential to put your assets at risk. The base policies on your home and automobile can have gaps in coverage and limits on payments. Supplementing your existing insurance with an umbrella policy may reduce the risk posed to your assets during a lawsuit.

Asset Protection for Physicians

If you are found to be legally responsible for injuring someone or damaging their property without a personal umbrella liability insurance policy in place, anything beyond the limits of your standard liability insurance coverage will have to come out of your own pocket, including attorney fees and court costs. Standard liability insurance generally includes homeowners, renters, automobile and watercraft policies. It’s not uncommon for jury awards and out-of-court settlements to run into the millions, and if you don’t have that kind of cash on hand your assets can be legally seized and future earnings can also be garnished.

How Much Coverage is Needed?

There are close to six-million car accidents each year causing 30,000 fatalities, so it is no surprise that 75% of personal umbrella claims are auto-related. Another large percentage of claims come from issues inside one’s home or property when visitors are hurt during a social gathering. A deck collapse during a social gathering, food poisoning, even a family pet defending its family. In fact, 40% of American households own a dog, and five million people suffer from dog bites each year.1

Even doctors that rent need high liability coverage. A candlelight dinner can quickly turn into tragedy if it creates a multi-unit fire. Your hobbies could also put you at potential risk. Do you enjoy golf? If your golf ball goes astray and strikes somebody in the head, that can fall back under the coverage of your home or renters “Personal Liability” coverage.

Last Line of Defense

For high-value households, high liability coverage is essential. “Umbrella” coverage, and its less comprehensive cousin, the “Excess Liability Policy” are some of the least known and most underused types of insurance. Liability policies will not only pay the monetary damage costs, but often, just as important, the attorney fees and other court costs. Better yet, a $1 million umbrella policy typically costs about a dollar per day.

Consult with your property and casualty agent with regards to your particular situation and state laws. Be proactive with your asset protection coverage, because you never know when that next rainy day is around the corner.

Have Questions?

References:

  1. Jacquelyn Connelly, “Top 3 Ways to Sell a Personal Umbrella.” Independent Insurance Agents and Brokers of America, Inc, (September 2015). http://www.iamagazine.com/markets/read/2015/09/14/top-3-ways-to-sell-a-personal-umbrella

Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor. Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.

Insurance services offered through Larson Financial Group, LLC, an insurance agency.