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August 2013


by Andrew D. Schwartz, CPA

(Tired of just reading useful articles like this one?  If so, watch our six minute multi-media presentation of this valuable information instead.)

“Are You a Doctorpreneur?" That's generally the first question I ask to new clients who own medical and dental practices. While doctors help their patients with some aspect of their health, entrepreneurs run businesses, trying to maximize the long-term profitability of that business. 

Whether you own a practice, work at someone else’s practice, or work at a hospital, you need to remember that every healthcare office is a small business that needs to be managed as a business.  Nothing that happens within your office should happen by accident.  If any aspect of the practice isn’t the absolute best that it can be, you should have a plan in place to address and improve that part of the practice.

One recommendation we routinely make to our practice owner clients is to implement a Simple Incentive Bonus System.  For short, we call this SIBS.

For a bonus system to work, it needs to be:

  • Easy to understand.

  • Attainable, but not automatic.

  • Something that the staff members feel they can impact

As an example, SIBS works well with dentists.  Most dental practices are staffed by a relatively small team that must work well together for the practice to routinely hit its goals.

  • Front desk person – Fills the doctors’ and hygienists’ schedules and collects money from patients and insurance companies

  •  Hygienists – Validate treatment planning presented to patients. and can also provide additional services which add top line revenue and profits

  • Assistants – Help improve patient flow efficiency

Implementing SIBS

Implementing SIBS is pretty easy.  Simply figure out your annual goal, divide that figure by twelve, and that’s the monthly goal.  (Obviously this will only work if your practice doesn’t have seasonal fluctuations.)

Any month that you hit the goal, give each team member a $100 bonus.  Hit 110% of the goal, and increase the bonus to $200 or $250.

Don’t worry about sharing the practice’s financial information with the staff.  If the goal is based on monthly collections, make sure to remind your staff that even though the monthly collection goal seems high, the practice overhead is high as well. Remember, there are staff expenses, occupancy costs, lab fees, dental supplies, debt payments, equipment to buy and maintain, insurance, computer hardware and software, and all sorts of other costs, and then the practice still needs to pay your salary.

You should also periodically adjust the threshold used to calculate the monthly bonus.  A good time to adjust the goal is around the time you hand out raises

SIBS Examples

Here is an example of SIBS. Let’s say that you set your annual collections goal at $900k, so the monthly goal is $75k.  You have a meeting, and explain to your staff that any month the practice collects $75k, each team member gets a $100 bonus.  And if the practice collects 110% of that goal, or $82.5k, everyone gets $250

You then remind the staff that while the monthly collections seems high, you have a ton of expenses to pay each month, and after paying your salary, there is not a lot of money left over.  Trust me, after a few times of telling them this spiel; they will start saying it to you whenever you bring up the monthly collection goal.  That's what happens at my office anyway.

Improve SIBS

Here are a few suggestions to make SIBS even more effective:

  • Don’t lump the bonus check in with the regular payroll that gets directly deposited into each staff member's bank account.

  • Instead, issue a printed check from this bonus, and personally hand this check to each employee.  (This will also allow your employee to cash this check and use the money for something special such as going out to dinner and to a movie or shopping for something they've been waiting to buy.)

  • At that time, thank each team member for their hard work in helping the practice achieve the monthly goal.

Just think how powerful a statement you are making to your staff if you hand them a check for their bonus payment, and personally thank them for helping the practice reach its goal. 

As a reminder, you then do need to call this manual check into your payroll service since the income belongs on each employees’ W-2.

Caveat Owner

Like everything else these days, there are a few pitfall of SIBS.  For starters, this bonus plan can lose it’s luster over time. So, keep it fresh by changing the focus of the bonus over time.  Maybe switch from monthly collections to new patients brought in to re-care efficiency, and then go back to collections.  However, no matter what practice variable you use, always make sure to align the goals set within SIBS to the long-term goals of your practice.

You also need to be careful that your staff doesn’t game the system.  I saw this at one client where the front desk person stopped depositing checks once the maximum goal was met, and held those checks to deposit the following month.  Make sure to tell your staff the bonus will end immediately if anyone tries to beat the system by pulling a stunt like this.

Win-Win With SIBS

We’ve had a lot of practice owner clients implement SIBS, and they often see an immediate increase in collections  Plus, the staff at these practices end up making a little extra money too, which keeps them focused on reaching the stated goal each month.  Hopefully you’ll realize similar results.

Listen Live About SIBS

Do you want to review the useful information in this article without just reading it a second time?  If so, watch our six minute multi-media presentation of this valuable information instead.



by Lawrence B. Keller, CLU, ChFC, CFP

As the owner of a medical practice, you are the key to its success.  Your patients and staff rely on you.  If you become disabled, you may be unable to provide the services your patients expect or the leadership that your employees need.

Overhead Expense disability insurance is a cost effective way to ensure that your practice can meet its ongoing expenses during a period of disability.  Protecting your practice from financial loss is important whether you eventually return to work or decide to sell your practice.  Just as individual disability income insurance can help you pay your living expenses while you recover from a serious injury or illness, Overhead Expense disability insurance can help you to keep your medical  practice healthy.

Business Overhead Expense insurance is a cost effective way to ensure that your business can meet its ongoing expenses during a period of disability by reimbursing the owner(s) of a practice up to 100% of the normal ongoing business expenses incurred during a disability, including items such as:

  • Rent

  • Electricity

  • Telephone

  • Heat

  • Water

  • Laundry, janitorial and maintenance services

  • Employee salaries

  • Employee benefits

  • Real estate taxes

  • Property, liability and malpractice insurance

  • Interest on debt

  • Depreciation

  • Rent or lease expense of furniture or equipment

  • Legal and professional services

  • Professional, trade, and association dues

  • Licensing fees

  • Billing and collection fees

  • Other tax-deductible business expenses

  • Salary for your replacement (depending upon insurance carrier)

Typically, monthly benefits up to $50,000 are available with benefit periods up to 30 months.  While this may seem to be a substantial amount of coverage, it is not uncommon to find healthcare practices with overhead expenses that far exceed this limit.  As a result, special risk insurers, like Lloyd’s of London, are able to supplement the traditional market with monthly benefits in excess of $250,000.

Premium payments for Overhead Expense insurance are tax-deductible as a reasonable and necessary business expense (Rev. Rul 55-264, 1955-1 C.B. 11).  As such, benefits received during disability, while taxable upon receipt, are used to pay practice related expenses, which are tax-deductible.  The net tax result is a “wash” so the net tax impact is neutral.


While most doctors are keenly aware of the need to purchase individual disability insurance coverage, few are aware of the importance of Disability Business Overhead Expense insurance. 

Lawrence B. Keller, CLU, ChFC, CFP is the founder of Physician Financial Services, a New York- based firm specializing in income protection and wealth accumulation strategies for physicians.  He can be reached at (516) 677-6211 or by email to with comments or questions.



To have Larry Keller prepare a complimentary analysis of your current disability insurance needs, please complete this form, and he will contact you shortly.

Your name
City and State
e-mail address
Phone number
Your age
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Interested in Business Overhead Insurance? No Yes
Member of Armed Forces or Government Employee? No Yes
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Desired Monthly Benefit



by Bob Cahill

Of course no one really knows, but the answer depends on factors that are worth watching in the coming months, especially if you’re in the market to purchase a home.

First of all, positive economic conditions and improved employment have resulted in the Fed forecasting that their Bond Purchase exit strategy will likely begin soon and complete some time in 2014; provided economic, employment and inflation conditions meet expectations that the Fed has outlined. The mere mention of this exit strategy by the Fed has resulted in a major sell-off in mortgage bonds and treasuries, causing  rates on conventional 30 year fixed rate mortgages to jump by approximately 1%. 

Second, home sales and values may actually see some near term additional increase due to buyers that are in the market now looking to move more quickly to lock in rates in anticipation that rates will continue to rise.  However, the impact on future values and sales is the concern that we’re all apprehensive about especially considering how important a strong housing market is to the broader economy, consumer confidence and our own personal home ownership dreams.

To attempt to quantify a 1% rate increase for a family earning $100,000/yr and purchasing a home with a $400,000 mortgage, I’ve calculated the increased monthly cost and impact on total monthly debt.  This results in an increased housing expense of ~$230/m or ~3% in terms of total debt from maybe 34% to 37%.  The impact to higher net worth families will of course be less significant.  It’s my opinion that the current demand in the housing market will be able to absorb such an increase and 30 year rates in the 4.50% to 5% range, but the markets will be the only one to determine what can and will be tolerated.

Considerations if you’re in the market to purchase:

  • Recognize that interest rate swings on a daily and weekly basis during the current market have been significant.

  • Budget total housing payment based on current interest rates at time of loan pre-approval.

  • Obtain interest rate quotes at the time you’re presenting an offer so you know what your payments will be.

  • Be prepared to lock your interest rate once your offer has been accepted especially during current volatile times.

  • Consider floating your rate and locking later, but realize that this should be managed closely.

  • Be aware that higher rates which lead to higher monthly costs typically impact first time buyers more significantly.

  • Stay in close contact with your mortgage professional when purchasing your home.

Bob Cahill
Sr. Mortgage Banker
Leader Bank N.A.
(NMLS # 449250)
(NMLS LO# 485042)




Income Taxes

Saving and Investing





  • Returns on extension are no longer due 8/15.  For 2013, you have until 10/15 to file returns that have been put on extension.


  • Consider rolling your old retirement accounts  held at a previous employer into your current employer's 401(k) or 403(b) plan to consolidate your finances
  • If your income will be too high for 2013 to contribute to a Roth IRA this year, consider making a non-deductible contribution to an IRA to convert to a Roth before December 31st.


2012 & 2013 TAX FACTS

  • For 2012, the standard deduction for a single individual is $5,950 and for a married couple is $11,900. A person will benefit by itemizing once allowable deductions exceed the applicable standard deduction. Itemized deductions include state and local income taxes (or sales taxes), real estate taxes, mortgage interest, charitable contributions, and unreimbursed employee business expenses.
  • For 2012, the personal exemption is $3,800. Individuals will claim a personal deduction for themselves, their spouse, and their dependents. 
  • The maximum earnings subject to social security taxes is $113,700 for 2013, up from $110,100 for 2012.
  • The standard mileage rate is $.565 per business mile as of January 1, 2012, up one cent from $.555 per mile since July 1, 2011.
  • The maximum annual salary deferral into a 401(k) plan or a 403(b) plan is $17,500 in 2013, up from $17,000 in 2012.  And if you'll be 50 or older by December 31st, you can contribute an extra $5,500 into your 401(k) or 403(b) account that year.
  • The maximum annual contribution to your IRA is $5,500 for 2013, up from $5,000 in 2012.  And if you turn 50 by December 31st, you can contribute an extra $1,000 that year.  You have until April 15, 2014 to make your 2013 IRA contributions. 


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This Month's Topics

Increase Practice Revenue And Profits By Implementing S.I.B.S.

Disability Business Overhead Expense (BOE) Insurance

Will The Significant Recent Increase In Mortgage Rates Cool A Hot Housing Market?

The FICA Refund for Medical Residents 

2012 & 2013 Tax Facts

Tax and Financial Planning Calendar for August 2013


Browse our index of previous months' newsletter topics

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In a shocking development, the IRS recently announced that they will be honoring the FICA tax refunds submitted by residency programs and individual doctors.  The catch is that only FICA taxes paid prior to 4/1/05 qualify.

For more information, go to our April 2010 Newsletter, our January 2009 Newsletter, or our February 2001 Newsletter or read through the IRS' Chief Counsel Advice Memorandum on this issue.

Let's work together to keep current on this hugely valuable tax break.  Please post whatever you read or hear regarding this FICA issue on our new Message Board we set up just for this topic.

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