Work “On” Your Practice, Not “In” Your Practice

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In medicine, patients come to physicians when their bodies are unable to heal themselves. Patients who delay seeking medical treatment are missing out on the power of modern medicine and failing to take advantage of an opportunity to dramatically improve their health. Similarly, the financial and legal ailments impacting your medical practice cannot be healed without professional care. Simply working harder and hoping that your practice’s problems will solve themselves is just as foolish as the patient who places hope on his body healing itself. In addition, you may not see any “problems” yourself, but you will not be working at maximum efficiency without consulting an expert.
In this Lesson, we will delve further into this concept. We will examine the concept of Leverage in an attempt to help you shift away from -just seeing more patients” as a cure-all for your practice and personal financial challenges.
We will also discuss the demographics of the Average American, the demographics of the American Doctor, and compare the planning challenges and financial goals of both groups. We will also discuss how Doctors who look for information in magazines and websites can be dangerously misled. We will conclude with a discussion of how the information in this book is unique for Doctors and can be used to help Doctors meet their asset protection and wealth accumulation goals.

post 2Be Different. Be Rich. Be Worry-Free.
When you were in medical school, residency, and first starting practice, you relied on a number of mentors to “teach” you valuable lessons about medicine. Undoubtedly, this training was invaluable to your development as a physician. Despite the valuable training you received, you were left inadequately prepared to practice medicine as your profession. While you have learned the “medical” part quite well, do you think you were trained how to “practice?” In other words, did your education and residency prepare you to build a “practice” into an optimal business?
The successful practice of medicine in the 21st century requires so much more than clinical expertise and good bedside manner. The days of simply seeing patients and waiting for substantial income to be deposited into your bank account are long gone. Successfully practicing medicine now requires expertise in disciplines that were never even mentioned, let alone taught, in medical school, residency or even in a fellowship. How are Doctors supposed to learn how to protect themselves from billing and coding errors, employee lawsuits, health insurance fraud, HIPAA violations, Medicare fraud, and OSHA issues? Where will Doctors find the time to learn and understand asset protection, business structuring, estate planning, insurance management, investments, benefits structuring, and tax planning? How can you do all this while continuing to stay abreast of important clinical developments and still find time to see patients and earn a living? This is what Doctors MUST know how to do if they want to successfully practice medicine in the 21st century.
Replicating the actions of the physicians who trained you will not replicate their levels of financial success. The environment has changed dramatically. If you do what most Doctors do and focus only on the clinical issues of medicine, you will expose yourself to unnecessary lawsuits and taxes, and will continue to struggle as reimbursements stagnate or decrease while overhead constantly increases. Do you want to follow this path and be the next helpless victim or do you want to learn how to be different?
The only way to achieve financial success and peace of mind is to break away from the pack—to be different and do things differently than your predecessors. Perhaps this seems counter-intuitive. While those who trained you no doubt provided priceless guidance in many areas of your practice, recognizing that today’s practices demand new perspectives couldn’t be a more valuable lesson. Let’s look at a practical example.

How Medicine Has Changed
One of the book’s authors, David Mandell, comes from a family of physicians. David’s brother is a cardiologist. His father is a radiologist close to retirement age, and his grandfather was a general practitioner from the 1930s to the 1970s. The grandfather worked only for cash—except during the Great Depression, when he accepted food from patients who were unable to pay. He made house calls and knew all of his patients by name. Not once did he utter the words “managed care,” “malpractice crisis,” or “HCFA audit.”
David’s father, Charlie, spent nearly 30 years in a lucrative radiology practice. He saw reimbursements increase for many years and enjoyed an over-funded pension. He took advantage of numerous tax laws (since legislated away) during his career that swelled his after-tax income beyond what he had ever expected to earn when he began his career in the 1960s. The idea of “going bare” (having no medical malpractice insurance) never occurred to him. Premiums were always reasonable and personal liability was never a major concern.
As you well know, the “business of medicine” has changed dramatically through these three generations. The young cardiologist—David’s brother Ken—began his career dealing with a medical malpractice crisis (in his state, many Doctors chose to go without medical malpractice coverage because of its outrageous costs), increased time demands for administration and paperwork, shrinking reimbursements, and increasing regulatory concerns. He thinks about terms like “practice buy-in,” “malpractice premiums,” and “debt repayment.” He wonders if he’ll ever reap the financial rewards his father did in medicine or if the landscape has just changed too much for him to ever be able to enjoy the fruits of his labor.
Where do you fit within these generations? Perhaps you are between the radiologist and the cardiologist and are in the prime of your career or you are in its second half. If so, the issues on your mind are likely retirement (not only when, but if), asset protection, tax reduction, and even partner buy-out. It is a lot to consider, by any measure.

Treat Your Practice Like A Business
Throughout this book, we will use the term “business of medicine.” This is not by accident; rather, it More

Asset Protection Myths

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Asset Protection For Doctors

Every day, we speak to Doctors about how they can achieve the protection they desire in order to maintain their wealth. In these conversations, we hear many common myths. Perhaps you too hold some of these false beliefs. Five common myths are:
· “My assets are owned jointly with my spouse, so I’m okay.”
· “My assets are owned by my spouse, so I’m okay.”
· “I am insured, so I’m covered.”
· “I can just give assets away if I get into trouble.”
· “My Living Trust (or Family Trust) provides asset protection.”
These myths are dangerous because they lull the individual or family into a false sense of financial security. This, in turn, may prevent the Doctor from taking necessary steps to truly protect the assets. Let’s examine each of these common myths and dispel them.

Myth #1: “My Assets Are Owned Jointly With My Spouse, So I’m Okay.”
Most Doctors hold their homes and other property in joint ownership. Unfortunately, this ownership structure provides little asset protection in both community and non-community property states.
In community property states, like California, community assets will be exposed to community debts regardless of title. Community debts include any debt that arises during marriage as the result of an act that helped the community. Certainly, any claims resulting from a medical practice, income-producing asset (rental real estate) or auto accident would be included.
Even in non-community property states, joint property is typically at least 50% vulnerable to the claims against either spouse. Therefore, in most states, at least 50% of such property will be vulnerable—and all of the other problems associated with joint property still exist in non-community property states.

Myth #2: “My Assets Are Owned By My Spouse, So I’m Okay.”
One of the most common misconceptions about asset protection is that assets in your spouse’s name cannot be touched. We cannot tell you how many Doctors have come to us with their assets in the name of one spouse and assumed that those assets were protected from claims against the other. This often happens when one spouse has significant exposure as a Doctor and one does not.
Unfortunately, simply transferring title of an asset to the non-vulnerable spouse does not protect the asset. The creditor is often able to seize assets owned by the spouse of the debtor by proving that the income or funds of the debtor were used to purchase the asset. To determine if the asset is reversible, three questions can be asked:
· Whose income was used to purchase the asset?
· Has the vulnerable spouse used the asset at any time?
· Does this spouse have any control over the asset?
If the answer is “yes” to any of these questions, then the creditor can be paid from these assets.
California allows a debt incurred during the marriage to be recovered from any community property. According to California Family Code §910(a), “the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt.”
Said another way, if assets constitute community property, it is irrelevant that community property assets are titled in the name of one spouse. The creditor can attach all of the community property, even if only one spouse is the debtor and even if the debt arose prior to marriage. Because each spouse has a coextensive ownership interest in community property, creditors of either spouse can reach all community property of the two spouses.

Myth #3: 1 Am Insured, So I’m Covered.”Gentleman Checking His Asset Protection
While we strongly advocate insurance as a first line of defense, an insurance policy is 50 pages long for a reason. Within those numerous pages there are a variety of exclusions and limitations that most people never take the time to read, let alone understand. Even if you do have insurance and the policy does cover the risk in question, there are still risks of underinsurance, strict liability, and bankruptcy of the insurance company. In any of these cases, you could be left with the sole financial responsibility for the loss. Lastly, with losses that fall within the plan’s coverage limits, you still may see your future premiums go up significantly.

Myth #4: 1 Can Just Give Assets Away If I Get Into Trouble.”
Another common misconception of asset protection is that you can simply give away or transfer your assets if you ever get sued. If this were the case, you could just hide your assets when necessary. You wouldn’t need an asset protection specialist. You would only need a shovel and some good map-making skills so you could find your buried treasure later.
In recognizing the potential for people to attempt to give away their assets if they get into trouble, there are laws prohibiting fraudulent transfers (or fraudulent conveyances). In a nutshell, if you make an asset transfer after an incident takes place (whether you knew about the pending lawsuit or not), the judge has the right to rule the transfer a fraudulent conveyance and order the asset to be returned to the transferor, thereby subjecting the assets to the claims of the creditor.
If you have been sued or suspect that you may be sued, there are other ways you can protect yourself. Typically, reactive last minute strategies are not very effective and may be much more expensive than the highly successful strategies that can be implemented when there are no creditors lurking.

Myth #5: “My Living Trust (Or Family Trust) Provides Asset Protection.”
There have been countless instances where clients have come to us with the impression that their revocable Living Trust provides asset protection. While you are alive, this is simply not true. Revocable Trust assets are fully attachable by any creditor as the trust is a grantor trust. Later in this Lesson you will read about Irrevocable More