Tuesday, April 30, 2013

Accountable Care Organizations

Since the implementation of the Affordable Care Act (ACA), the healthcare world has been inundated with new ideas, new laws, and a lot of change. One interesting part of the ACA that is not getting much attention is the formation of Accountable Care Organizations (ACOs) nationwide.  The objective of the formation of an ACO is to combine different areas of medical care into one functioning organization that allows providers to work together to treat patients in the most efficient and cost effective way and rewards the providers for their teamwork.  

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The ACA includes incentives to form ACOs in an effort to cut costs to Medicare. Centers for Medicare and Medicaid Services (CMS) estimates that patients taking advantage of an ACO will accrue approximately $960 million in savings for Medicare over three years. The savings comes from patients seeing doctors who are members of the same ACO and work together to streamline care. Duplicate testing and unnecessary procedures are avoided, and patients are well taken care of by doctors who are in constant communication. Two out of three Americans over 65 have multiple chronic conditions. These patients benefit the most from care provided by an ACO. Coordinated care leads to fewer mistakes, better coordination of care, and less hospital readmissions due to poor follow up care.

The ACA is attempting to turn the healthcare industry away from a purely fee-for-service system to a system that operates with more efficiency and less redundancy of work. In an ACO structure, physicians are rewarded for value and meeting pre-set standards in quality instead of being rewarded solely for volume of medical care. ACOs combine fee-for-service, care management, and performance incentives.

Opponents of ACOs are concerned that they too closely resemble the HMOs of yesterday. The biggest difference between the two is the lack of network in the former. ACO patients are not required to visit doctors that are in their ACO. They are free to visit any doctor that accepts their insurance. However, staying in the ACO network benefits patients because all of their doctors are working cohesively for the best possible healthcare outcome.

Providers are seeing numerous benefits for forming an ACO or joining an already existing one. The foremost advantage is the shared savings. When an ACO meets quality benchmarks and the cost-of-care falls below the established threshold, the entity then gets a portion of the savings. There are 33 measures in 4 domains that an ACO must hit. In the first year, an ACO is paid for reporting, and in the second and third years they receive incentives for reporting and performance.

While ACOs are still in the early stages of growth, the number is steadily climbing. Currently there are a total of 428 ACOs in 49 states. They still serve mostly Medicare patients, but the numbers of those for privately insured patients are growing as well. Unlike Medicare ACOs, private ACOs have a good bit more flexibility. However, they do serve the same purpose—sharing savings by joining together to provide coordinated quality care.

There is concern that ACOs that dominate the healthcare landscape in any particular area, especially rural areas where there are few healthcare choices, can be considered a monopoly. This was taken into consideration, and the same day that CMS established the rules for ACOs, the Justice Department and Federal Trade Commission also issued rules that allow a certain amount of consolidation for health care groups. If you are a physician looking for more information on establishing an ACO, refer to the CMS website for rules and regulations and contact your healthcare attorney.

Accountable Care Organizations (ACO). (March 22, 2013.) Centers for Medicare and Medicaid Services. Retrieved April 18, 2013 from http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ACO/index.html?redirect=/aco/
Accountable Care Organizations: Improving Care Coordination for People with Medicare. (March 12, 2012). Health Care.gov. Retrieved April 18, 2013 from http://www.healthcare.gov/news/factsheets/2011/03/accountablecare03312011a.html
Bouchard, Stephanie. (November 22, 2011.) NCQA Releases ACO Guidelines. Healthcare IT News. Retrieved April 18, 2013 from http://www.healthcareitnews.com/news/ncqa-releases-aco-guidelines
Muhlestein, David. (February 19, 2013) Continues Growth of Public and Private Accountable Care Organizations. Health Affairs Blog. Retrieved April 18, 2013 from http://healthaffairs.org/blog/2013/02/19/continued-growth-of-public-and-private-accountable-care-organizations/

Wednesday, April 24, 2013

Freelance Part 3: Working as an Independent Contractor

In the last two posts Pros and Cons of Hiring Independent Contractors and The Legal Aspects of Independent Contractors we have looked at the pros and cons and the legal aspects of hiring freelancers. This post will address the issues that face individuals working as independent contractors.

The number of freelancers in the United States is rapidly rising. With the economy still shaky and layoffs still a concern for many, the idea of being an independent contractor is extremely appealing. While there are benefits, there are also drawbacks. It is important to explore all facets of being an independent worker before taking the plunge into self-employment.

The biggest drawback that prevents people from becoming a freelancer is the lack of benefits. When an employee is hired by a company, they normally receive benefits like health insurance, a 401K, and paid vacation days. Independent contractors are not allowed any of those perks. Employees often do not realize how much their employers pay in insurance, retirement and time-off. For many it is impossible to afford private health insurance and they do without.

Instability is another major concern for independent contractors. Working on a project-by-project basis can be extremely stressful. It is helpful to have a network of contacts, as well as an understanding of  the importance of self-promoting. In order to maintain a constant workload, freelancers often have to work hard to find clients. The money also comes in much more sporadically, and it can be difficult for someone who does not save and budget. There is also the issue with not getting paid at all.

The nature of the client/independent contractor relationship is inherently different than the employee/employer relationship. There is much less supervision and training, and if there is no work, there is no payment. There is also no recourse for discrimination in the workplace, since an independent contractor is a business, not an employee. Freelancers must also pay their own professional fees and keep up any licensures with no help from an employer.

Having a good attorney and a good accountant are important for any independent contractor. The attorney can assist in creating contracts, as well as provide guidance for intellectual property issues. They can also assist in recouping any outstanding debts owed from clients. They will provide guidance in determining the structure of your business. It is possible that being an LLC, or PLLC, is a good idea. The accountant is vital in helping to understand the taxes and paperwork involved in being an independent contractor. They will help to determine what can and cannot be used as deductions, and hopefully help to avoid an audit.

Most freelancers will admit they work much harder than they ever did as an employee. However, for many the benefits outweigh the risks. Having more control over scheduling and projects, as well as being your own boss, is the perfect solution for many. It is important to do research to determine if it is the right move. Carefully weigh the costs, benefits, and your own motivation. With a good accountant and lawyer helping guide the way, working as a freelancer can be very satisfying and profitable.

Beesley, Caron. Starting a Freelance Business—How to Take Care of Legal, Tax and Contractual Paperwork.(July 18, 2012). SBA.GOV. Retrieved March 31, 2013 from http://www.sba.gov/community/blogs/starting-freelance-business-%E2%80%93-how-take-care-legal-tax-and-contractual-paperwork

Branch, Allan. (January 18, 2012) 6 Tips to Avoid IRS Audits for Freelancers. Freelance Switch.  Retrieved on March 31, 2013 from http://freelanceswitch.com/the-business-of-freelancing/avoid-irs-audits/

Independent Contractor (Self Employed) or Employee? (January 10, 2013) IRS.  Retrieved on March 31, 2013 from http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-(Self-Employed)-or-Employee%3F

Friday, April 19, 2013

Freelance Part 2: The Legal Aspects of Independent Contractors

The pros and cons of hiring independent contractors were discussed in the Pros and Cons of Hiring Freelancers. Today we will look at the legal aspects of employing this type of worker.

The biggest issue with using freelancers is that it puts the government and the employer at odds. Both are looking for ways to impact their bottom line. The government wants the taxes associated with traditional employees and the company wants to avoid paying those taxes. In this case, more money in the employer’s pocket means less in Uncle Sam’s. It is important to be aware of how the government classifies independent workers.

Different agencies give varying verbiage outlining the definition of an independent contractor, but they all provide the same basic guidelines. It is important to avoid giving the IRS, or any other agency, any reason to conduct an audit. Understanding the following guidelines is key in ensuring that all freelancers remain classified that way.

An Independent Contractor…
--May earn either a profit or a loss from a job
--Uses their own tools and/or materials
--Is paid by the job or project
--Is hired to do a specific job or project
--Has multiple employers, or clients
--Pays their own expenses
--Sets their own hours
--Works on their own, with little training or management
--Completes jobs by their own means to achieve the desired end result
--Maintains their own work space
--Has a contract with the client

An Employee…
--Can be fired at any time and has the right to quit without liability
--Is paid by the hour or receives a salary
--Receives instruction and training
--Works full time
--Is managed closely and has a set way to complete the job
--Receives benefits such as worker’s compensation, health benefits, and   unemployment.

Again, there is not a strict set of rules that separates independent contractors from traditional employees. The Department of Labor states that it “depends upon circumstances of the whole activity.”

Being audited and found to have misclassified workers can cripple a company financially. The IRS assesses for payroll taxes plus interest, but can also recoup for the employee’s portion of the income taxes plus interest. The employee that was misclassified can also file paperwork for Uncollected Social Security and Medicare Tax on Wages.” Add in all the fees, lost time, and loss of productivity resulting from the audit, and the total bill will be in the thousands.

Red flags that the IRS watch  for include an independent contractor that tries to collect unemployment, file worker’s compensation, or files their own taxes wrong. Obtaining a 1099 from the freelancer for tax purposes and being very clear that they are not eligible for any employee benefits is important.

The classification of any independent contractor should be discussed with your attorney. Assigning the proper designation at the onset of employment, while perhaps slightly more costly in wages or benefits, is imperative for the health of the company.

Independent Contractor (Self Employed) or Employee? (January 10, 2013) IRS.  Retrieved on March 31, 2013 from http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-(Self-Employed)-or-Employee%3F

Small Business/Self Employed: When IRS Trouble Comes. (n.d.) Tax Law. Retrieved on March 31, 2013 from http://www.taxattorneydaily.com/topics/ch-11-small-business-self-employed.php

Tuesday, April 16, 2013

Freelance Part 1: Pros and Cons of Hiring Independent Contractors

In the next three posts, all aspects of freelancers, also known as independent contractors and contract workers, will be explored. From the pros and cons of hiring them, to the legal aspects, as well as what a freelancer should understand about their own employment.

According to Freelancers Union, one third of those employed are independent contractors. That is an estimated 42 million, and the number is steadily growing. While the obvious positions exist, such as writers and graphic designers, the options for contract jobs are endless: coding, computer programming, HR, even practicing law. Employers are moving toward hiring contract employees as a way to solve several problems. However, it is important to understand that there are pros and cons to hiring freelance workers.

At a time when companies are looking to get as much out of each dollar as possible, hiring freelance workers can be the answer. While contract workers often make more per hour than normal employees, there are less additional expenses. No Medicare taxes, social security, unemployment insurance, or worker’s compensation apply.  Also, there is normally less training needed when hiring a freelancer because they are already well versed in their field. They start doing actual work much quicker, and therefore start adding to the bottom line quicker.

When hiring a traditional employee, a company is limited geographically. When hiring a freelancer, the applicant pool is unlimited. Employers have access to candidates not just all over the country, but all over the world. For a company located in a remote area, hiring an employee online to telecommute can be more cost effective than moving a qualified individual to the area.

Using contract employees has flexibility that is not possible with full time employees. They can be hired on a project-by-project basis, and it is possible to afford different people for different projects. There are also no concerns over layoffs and terminations.

The Human Resource aspects of independent contractors are simple. Because they are considered business entities instead of employees, they do not have the same rights. There is no minimum wage or overtime. Instead there is an agreed upon fee for service. Freelancers do not receive protection from workplace discrimination. They are not eligible for typical benefits available to employees such as FMLA, workman’s compensation, 401 K, or health insurance. While there is a contract between the employer and the freelancer for payment, the freelancer cannot sue for wrongful termination.

Before deciding to abandon the notion of ever hiring another traditional employee again, it is important to realize that there are drawbacks to employing freelance workers.
The nature of hiring independent contractors is that they need minimal supervision. That also means that the employer has less control. To be considered a freelancer by the government, there must be limited management. Therefore, the worker has much more latitude to complete the job in the way that they choose, which may differ from the way the employer would prefer.

In many companies, the concept of “team” is important. It binds the employees together and creates a collaborative atmosphere. When using freelance workers, it can be much harder to achieve this environment. If there is a mix of both types of employees, there can be resentment from both sides. These issues may arise quickly when there is a continual in-and-out of new contractors.

While the use of freelancers provides a large pool of workers to choose from, it also means that the actual level of workmanship can vary greatly. One person may turn out work quickly and efficiently with few mistakes, while another may show less professionalism, drag their feet turning in projects, and produce sloppy work. Because of this, many companies work hard to find a few good contractors they can count on to meet their needs. Unfortunately, weeding out the ones that are not a good fit can cost time and money.

Using freelancers is often a quick way to get flagged for an audit from various government agencies. Different agencies have different rules. In the following post the legal aspects of who is considered an employee and who is considered an independent contractor will be surveyed.

Global Business Survey 2012. (n.d.) Elance. Retrieved March 31, 2013 from https://www.elance.com/q/global-business-survey

Fishman, J.D. Stephen. (n.d.) Pros and Cons of Hiring Independent Contractors. NOLO Law for All.  Retrieved March 31, 2013 from http://www.nolo.com/legal-encyclopedia/pros-cons-hiring-independent-contractors-30053.html

Independent Contractor or Employee: How Government Agencies Make the Call. (n.d.) NOLO Law for All.  Retrieved March 31, 2013 from http://www.nolo.com/legal-encyclopedia/independent-contractor-or-employee-government-decision-29681.html
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