2018 Historic Doctors/Providers Payroll Tax warning!

Beware of the payroll taxman…

As reported in a recent interview in the Medical Republic paying doctors or providers incentives may attract payroll tax that many are unaware of. A checklist based on this recent case is below so you can test how safe you are from an audit.

We have recently received a number of reports of Tax Office audit activity especially in relation to payroll tax applying to providers who are paid on a percentage of fees generated. As a result, many medical practices are facing significant penalties and back pay of taxes up to 5 years totalling in some cases excess of $2m. Small and large practices are affected. Workcover, PAYG and Superannuation audits may also be consequently triggered.

Recently, a decision was handed down in the Victorian Civil & Administrative Tribunal (VCAT)  (The Optical Superstore Pty Ltd & Ors v Commissioner of State (Review and Regulation) (Corrected) [2018] VCAT 169 (9 March 2018)) which highlighted the issues associated with the applicability of payroll tax within medical practices.  

The Facts

There were four key issues in this case relevant to how payroll tax is calculated. By way of background, the Victorian Commissioner of State Revenue (the Commissioner) made a determination that Optical Superstore Pty Ltd (Optical Superstore) had failed to pay payroll tax related to various optometrists operating within Optical Super Stores. Optical Superstore had the matter referred to the VCAT challenging the determination of the Commissioner.

The basis of the challenge were; firstly, that the optometrists were engaged by Optical Superstore under a tenancy contract and not an employment agreement or contractor arrangement. Secondly, the payments made under the tenancy contract were occupancy fees and remittances from Medicare owed to the optometrist for the provision of medical services whereby neither of these payments amounted to ‘wages’ attracting payroll tax and further any additional payments made by Optical Superstores were an incentive under the tenancy agreement (referred to as a location attendance premium). Thirdly, the payment of remittances was a return of funds held on trust by Optical Superstore for the benefit of the optometrists and therefore not to be classified as a ‘wage’. Fourthly, the Commissioner should apply the legislative exemption requiring payroll tax on the basis that the services provided by the optometrists are services being provided to the public generally.

The Decision

The Tribunal found as follows:

  • The payment of occupancy fees and remittances were not ‘wages’ and therefore did not attract payroll tax.
  • However, the incentive payment (location attendance premium) was indeed a ‘wage’ and payroll tax was payable on that component. The Tribunal also noted that just because an agreement was titled ‘tenancy agreement’ did not mean that it could not be construed to in fact be a contractor arrangement.
  • The payment of the remittances was a return of funds held on trust by Optical Superstore but the Tribunal did not come to this conclusion easily as the funds had not been separated from other funds within the general operating accounts.
  • The Tribunal found that where there was an absence of arrangements with other optical stores the optometrists could not be classified as providing services to the public generally.

The outcomes of the decision suggest that a medical practice could be at risk of a payroll tax audit investigation in circumstances where the practice has:

  • poor or unclear tax, trust or corporate structures;
  • failed to maintain separate provider banking arrangements particularly in the area of trusts e.g. clearing account;
  • poor separate provider ledger accounting and audit trail documentation; and
  • poor systems which fail to clarify whether service providers could be deemed as employees or contractors.

Please note the issue as to whether maintaining separate bank accounts when operating trusts is of critical importance is subject to appeal and will be heard later this year.

This decision affects all practices. The message is, no matter how small or large your practice is, you must review your arrangements urgently.

However, the recent payroll tax decision may provide some clear and significant opportunities to reduce this practice overhead and risk. Don’t be tempted to cut corners. If you fail to put in place the correct structures and agreements, it may lead to an expensive tax audit by state revenue government departments or the ATO. A disgruntled staff member or an ill-informed adviser may put you at risk in this regard and it can become an expensive process to defend.

It is important to work with experienced practice advisers, lawyers and accountants. Do not cut corners. Your practice is your (and the community’s) most valuable investment.

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Many practices are aware that after their staff or practice employee salaries reach a certain threshold then state payroll tax is payable. In recent years each State has harmonised their State Payroll Tax laws to ensure there is some consistency.

Depending on your structure and arrangements payroll tax may or may not be payable on payments made to ‘relevant contracted’ doctors or providers.

Providers who are paid on a percentage of gross fees may be at risk of being required to pay payroll tax. The burden of the tax will depend on the practice agreements.

We have become aware that the various State Payroll Tax Offices have charged payroll tax on the net amount paid to practitioners after deducting Gross Fees from any service fee. They are also applying payroll tax on any guaranteed minimum arrangements. For example if an individual practitioner (regardless of whether they practice as a self-employed person, company or trust) is billed and receives a patient fee of $100 GST free, and then the practice takes out a 40% plus GST service fee from a clearing account, then the payroll tax office may treat the $56 payment to the provider like a payroll taxable salary.

So for example in Victoria payroll tax is charged in the following way:

Victoria – From 1 July 2017

Threshold:

   $625,000(annually)

   $52,084(monthly)

Rate: 4.85% metropolitan or 3.65% for regional employers

Therefore assuming the practice has exceeded the threshold because it, for example, employs a practice manager, nurse and receptionist costing greater than $52,084 monthly then an additional payroll tax applies of $2.76 i.e $$56.00 net receipt paid to the doctor x 4.85% metro rate.

This does not sound like a significant amount, however if the average GP bills $20,000 per month this represents an additional $970 per month in practice overheads per GP or $12,000 p.a.

Getting it wrong may run into the millions depending on what your arrangements are especially with your contractor doctors or providers.  

The fundamental issue of concern is that, on the net amount paid to a practitioner (i.e. their gross fees received, less service fees and a guaranteed minimum arrangements) – payroll tax may be payable. This will have significant and possibly crippling implications where PAYG, Superannuation and Workcover may also be payable.

2018 Payroll Tax Checklist

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Key areas Key Department Key factors to watch out for*

Description

Suggested solution Your comment

Yes/No/ Not Sure

*This is not a comprehensive list of factors Please seek your own independent legal and taxation advice or contact us at pa@healthandlife.com.au
1 Legal Structure Practice Structure Not clear on what type of structure you have e.g. partnership, company, service trust or company. What is the real reason and purpose beyond “my accountant told me”. Does it help with succession planning and promote a sustainable business model? Ask your advisers to explain. Consider obtaining written confirmation. Consider the appropriate legal arrangement i.e is it a landlord and tenant relationship and if so make it clear it is not an employee or contractor arrangement. If still not clear contact Health and Life and our experienced independent legal team will assist you
2 Individual Structure Regardless of whether it is a company or trust payroll tax is payable if it is deemed a “relevant contract” pursuant to the recent VCAT decision. Ask your advisers. Consider the Employee v Contractor test, (-note this is not a guarantee that it is not subject to payroll tax, however). Consider obtaining written confirmation. If still not clear contact Health and Life and our experienced independent legal team will assist.
3 Legal Agreement Do you have current signed legal agreements? Are they employee, contractor or landlord v tenant agreements? Does it clearly state the relationship, how money is held in trust and accounted for?. What are the Practitioner rights and obligations related to plant and equipment and ownership of records?. Who takes on the big risks e.g. litigation?  -Who is liable for medical and public indemnity, Workcover, PAYG, Payroll Tax, Super and GST? Are there any guaranteed minimum hourly rates e.g. 50% of gross fees or $50 per hour whichever is greater. Who has control? Can they sub-contract out and set their own appointments and who is ultimately responsible to the patient. Does the practitioner only get paid on what they bill? Ask your advisers. Consider obtaining written confirmation. If still not clear contact Health and Life and our experienced independent legal team for help. Consider purchasing legally vetted template agreements from Health and Life. Seek external legal and accounting advice.
4 Guaranteed minimums Does the practice offer guaranteed minimums e.g. 50% or $50 per hour whichever is greater? -Or is the fee arrangement simply that the provider retains 60% of earnings, regardless of how many patients they see – there are no guaranteed minimum earnings – if you see no patients, you receive nothing? Is it based on hours worked? Ask your advisers. If still not clear contact Health and Life and our experienced independent legal team will assist you. Consider purchasing legally vetted service agreement template from Health and Life that complies with your accounting and bookkeeping system. Seek external legal and accounting advice. See our Doctors Pay (Service Fee Calculator)for ideas on how you can properly track payments.
5 Practicing at different locations Are there any restraints of trade that may infer an employer or employee arrangement? Ensure it is clear that practitioners can see any patients directly of their own choosing at any practice. Consider removing employer type restraints. Seek external legal advice.
6 Workcover registration Is the registration for the practice under ‘General Administration’ or Medical and Health services? If the latter, then it could be held you are running a medical and health practice and not a service entity i.e. landlord tenancy arrangement. Consider updating the registration. Make sure insurance coverage for practice staff is not compromised. Seek external legal and accounting advice.
7 Legal, Accounting and Practice Business Advisers Have you used experienced legal and accounting advisers in setting up and operating medical and healthcare practices? Many accountants advise on tax returns and financial statements only. More extensive knowledge of healthcare awards, PIP’s SIP’s, Care plans, Homecare, Rural grants, SWOPE, vaccines and Medicare rebates etc where the minute detail of payment arrangements are understood in the context of your arrangements and how they interrelate and are implemented in practice. Ask your advisers. Consider obtaining written confirmation. If still not clear contact Health and Life and our experienced independent legal team will assist.
8 Business Model The purpose of your structure Can your advisers explain the purpose of the business model of the practice and how this entity can be valued for succession planning purposes? Does the service trust or company provide any services to patients (over and above the medical or healthcare services provided by the providers)?
The primary structure could be used to sublease at a premium rent e.g. pathology,pharmacy, consumables, receive practice grants and other provider service income e.g. allied health rent.
Ask your advisers. If still not clear contact Health and Life Accounting and Practice Advisers and our experienced independent legal team. Consider purchasing legally vetted template agreements from Health and Life that complies with your accounting and bookkeeping system. Seek external legal and accounting advice.
9 Accounting Financial Statements, Tax Returns and BAS Do your financial statements include medical or practitioner income or only service fee income? Avoid income related to employees existing in a service trust or company. The practice does not treat any of the monies (other than the service fees) as its income or as its assets. Other than the service fees, the monies are not included in the practice’s activity statements. How is the amount in the separate account treated in the financial accounts of the practice,? if at all? Ask your advisers. If still not clear contact Health and Life Accounting and Practice Advisers. Consider purchasing an accounting chart of accounts that complies with your accounting and bookkeeping system. Seek external legal and accounting advice.
10 Separate Provider Bank Account from the Practice operating account Each practitioner signs a form directing Medicare to deposit fees into a separate bank account e.g. a clearing or billings trust accountant that is not the service trust or company bank account that pays practice administration staff and practice overheads e.g. rent, IT and utilities. Only the earnings of the practitioners are deposited into this account – and other than the payment of service fees, the monies in the account are not used for any purpose other than to be returned to the practitioners at the end of the period. Are there any documents which expressly state that the monies held in the separate account are held on “trust” for the practitioners. Is there interest earned on the monies in the account? If so, who receives that interest? Can practitioners have audit access to this account? Are practitioner EFTPOS and merchant facilities link to the Practitioner and not the Practice Bank account? Ask your advisers. If still not clear contact Health and Life and our experienced independent legal team for your advice. Consider purchasing a legally-vetted service agreement template from Health and Life that complies with your accounting and bookkeeping system. Seek external legal and accounting advice.
11 Bookkeeping How are the various deposits into the separate account identified – ie- how are the deposits tracked against the various practitioners who provided the services? Does the practice maintain separate MYOB,QBooks or Xero ledgers for the practitioners account and Practice account? Is it reconciled daily or regularly? Implement Health and Life’s Doctors Pay Calculator https://www.healthandlife.com.au/what-we-do/services-peace-of-mind-solutions/specialised-services/products-for-medical-practices/doctors-pay-service-fee-calculator-tm/ and customised MYOB, QBooks or Xero Trust Ledger accounts and procedures.
12 Provider Tax invoices Tax invoice issued by the practice to a practitioner for the service fees. Remittance (monthly or fortnightly) from the practice to a practitioner showing the amount returned (less the service fees) Implement Health and Life’s Doctors Pay Calculator https://www.healthandlife.com.au/what-we-do/services-peace-of-mind-solutions/specialised-services/products-for-medical-practices/doctors-pay-service-fee-calculator-tm/ and customised MYOB, QBooks or Xero Trust Ledger accounts and procedures.
13 Admin Rosters Can the providers select their own appointment times and choose their own patients? Practitioners should be allowed the freedom to choose how they operate their practice.
14 Policy and procedures manual Do they consistently validate the land lord tenant arrangement or does it imply a contractor or employee arrangement? Ensure the substance of the contract is greater than the form. It is not sufficient to only have appropriate legal agreements. The right systems and audit trail must support the agreement.
15 Marketing Letterheads Does a legal disclaimer state that the provider is responsible for all conduct? Is only the treating practitioner name on the document? Does it imply the practitioners are contractors and or employees? Print out and check documentation. Seek an independent legal opinion. Ensure only the treating practitioners ABN appears on the documentation
16 Website Does a legal disclaimer state that the provider is responsible for all conduct? Does it imply the practitioners are contractors and or employees? Ensure each practitioners’ speciality interest and ABN appears on the website and patients can choose their provider.
17 Appointment cards Is only the treating practitioner’s name on the document? Print out and check the documentation. Seek an independent legal opinion. Ensure only the treating practitioners ABN appears.
18 Practice brochures Does a legal disclaimer state that the provider is responsible for all conduct? Does it imply the practitioners are contractors and or employees? Does it state they are independent practitioners co-located on the site? Print out and check the documentation. Seek an independent legal opinion. Ensure only the treating practitioners ABN appears.
19 Telephone Messages on hold Does a legal disclaimer state that the provider is responsible for all conduct? Does it state they are independent practitioners co-located on the site? Print out and check the documentation. Seek an independent legal opinion. Ensure only the treating practitioners ABN appears on the documentation.
20 Waiting room signage Does a legal disclaimer state that the provider is responsible for all conduct? Does it imply the practitioners are contractors and or employees? Does it state they are independent practitioners co-located on the site?  Only the ABN of the practitioner appears and not the Practice. Print out and check the documentation. Seek an independent legal opinion.
21 Patient Tax invoices Is the tax invoice issued in the name of a practitioner to a patient? Does a legal disclaimer state that the provider is responsible for all conduct? Does only the ABN of the practitioner appears and not the Practice. Print out and check the documentation. Seek an independent legal opinion.
22 Staff Practice staff and providers Can they consistently verbally describe the working relationship of all providers being self-employed and free to choose session times and patients they want? This also includes how the complaints handling process is managed and determined by the treating practitioner. Are the staff clear they are independent practitioners co-located on the site? Ensure the substance of the contract is greater than the form. It is not sufficient to only have appropriate legal agreements. The right systems and audit trail must support the agreement.

Where to from here?

We can help if you are not sure.

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Please note at Health and Life, we are accountants and practice advisers, not lawyers.

Please seek specific legal advice in relation to your own circumstances. We cannot be held responsible for any errors or omissions in this article. This article is for discussion purposes only. We work closely with Peripheral BLue Legal an independent law firm familiar with these issues which can assist you if required. We can confidentially assist with your initial inquiry at no charge or obligation and make sure you receive the right advice.

We thank the independent law firm Peripheral Blue for their assistance in preparing this article.

Contact David Dahm at pa@healthandlife.com.au or 1800 077 222 for further information.

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We thank Peripheral Blue Legal for their assistance with this article.

How to opt out of the Government’s national electronic health record now

Seriously how safe will your personal health records be?

The Australian Government announced in 2017  the creation of a My Health Record for every Australian to have by the end of 2018.

The ABC’s recent article My Health Record: Your questions answered on cybersecurity, police, and privacy boasts the now in trouble with Privacy Laws Health Engine is approved by My Health Record! Yes, the Federal Government states it will create a My Health Record for all Australians by the end of this year, unless they choose not to have one. But there is a small window period to OPT OUT. See Media Release.

In our view, the My Health Record is about as the closest thing we have had in recent years to the controversial Australia Card and comes hot on the heels of the recent Facebook Privacy breaches. The problem is that Big Government Data centres can become big and easy targets for privacy and security breaches. There are no guarantees in life, and no Government offer one, despite what they may claim.

We must decide; do we want to continue

 to share our highly personal and sensitive health and medical information or not? If we do nothing the decision will be made for us; by default, we will have given permission!  The decision will affect not only us but our loved ones.

To read our concerns about the Patient Controlled Electronic Health Record (PCEHR or My Health Record), click on the links below.

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  1. E-health warning
  2. The Australian Patient Controlled Electronic Health Record (‘PCEHR’) – On a path to nowhere MJA success or failure
  3. Your Medical Records Exposed … Confirmed!
  4. Malcolm Turnbull defends insurers’ access to health info
  5. Health Engine Patient Data scandal; what should you do next?

BUT: if you decide you do NOT want to have a My Health Record, then this is what you need to do NEXT.


HOW CAN YOU OPT OUT NOW?

If you decide that you don’t want a My Health Record created on your behalf, you will have the opportunity to OPT OUT, during a three-month period – from 16 July to 15 October 2018. (It’s not possible to opt out before 16 July 2018).

OPT OUT HERE!

The dates for the opt-out period were announced on 14 May 2018. See the media release for further details.

As a final comment, we do speculate why there was no national referendum or national TV  and newspaper advertising campaign on such an important issue when this program was first raised. More public consultation would have been useful.

Health Engine Patient Data scandal; what should you do next?

After a recent national patient data breaches headlines ….

‘Scandal-hit HealthEngine axes third party referrals, patient reviews’

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‘HealthEngine app announces ‘major changes’ after doctor and patient backlash’

This important article comes from an independent law firm Peripheral Blue. 

Now is a good time to consider what you need to do.

Even amidst the (almost daily) barrage of data breach headlines, the reports about the data sharing practices of HealthEngine and other providers have generated an enormous amount of publicity.

According to reports, HealthEngine has sold personal health data, collected via its online medical appointment booking service, to law firms who have used it to contact prospective clients for personal injury matters.

The public outcry about these revelations demonstrates just how protective people feel about their health information. As health service providers, patients view their medical practices as the custodians of their health data, even where that data is actually being processed by a third party. In fact, patients may be surprised at how many third parties have access to their personal information as part of the service they receive from their GP.

For this reason, health information has stringent protection under the Australian Privacy Principles, including restrictions around its disclosure for secondary purposes. The commencement of the new Notifiable Data Breaches scheme in Australia (which can attract fines of $2.1 million for non-compliance and applies to all private sector health service providers) means that medical practices must have data protection as a key compliance focus.

For overseas patients the new European Laws may also apply!

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The European Union’s strict new privacy law, the General Data Protection Regulation (‘the GDPR’), is now in place and has already had a wide-ranging global impact. The GDPR will apply to businesses outside of Europe where:

  • the business monitors the behaviour of EU data subjects and that behaviour takes place in the EU (which may include where the business uses marketing analytics technology to track behaviour); or
  • the business offers goods or services to data subjects in the EU.

Even if the GDPR does not apply to your particular practice now, increased globalisation means that it’s likely that the standards it applies will operate worldwide, as more and more businesses seek to impose their data protection obligations within contractual agreements.

These changes to the data protection landscape, and the growing prevalence of data breaches, mean that being accountable for your patients’ data protection is of critical importance.

An important component of data protection accountability is to ensure that any agreements you enter into with third parties to process health data on your behalf must include personal data protection obligations. Where the GDPR applies, contracts with third-party processors should contain specific clauses required by GDPR. You should also ensure that your contracts contain appropriate protections in the event that your practice is implicated in a data breach ultimately caused by a third party that you work with. This is particularly important in light of the requirements under the Notifiable Data Breaches scheme.

Some important steps to take now are to:

  • review contracts with third-party businesses that process data on your behalf and amend them if necessary;
  • be open and transparent with patients in your privacy policy and privacy notices about all the uses and disclosures of their personal information (particularly where that information is transferred to a third party), and;
  • notify patients (and seek consent if you need to) if your uses of their personal data change.

For more information contact us.

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We thank Peripheral Blue Legal for this article.

Medicare Audit Anxiety is hurting patient care; High Court Challenge – Thank you Julian Burnside QC – complete this historic survey

Medical error is the third biggest cause of death, and the following is yet another systemic example.

Source: Medical error the third biggest cause of death

According to a research report published by the British Medical Journal Medicare billing practitioners receive very little if any billing education in Australia. The current system is legally and administratively complex. Medicare and the relevant professional bodies do not provide any support.

The research concluded …

‘Australian doctors may not have expected legal and administrative literacy. Rather than reliance on ad hoc training, development of an Australian medical billing curriculum should be encouraged to improve compliance, expedite judicial processes and reduce waste. In the absence of adequate education, disciplinary bodies in all countries must consider pleas of ignorance by doctors under investigation, where appropriate, for incorrect medical billing’

Source: Who teaches medical billing? A national cross-sectional survey of Australian medical education stakeholders 2016

A doctor once told me the that current Medicare audit system runs like an insurance company that sends you to a cheaper repairer who does less work on you, and you get sicker.

On the subject of Medicare audits, a Federal Court challenge has just been lodged by trainee GP Dr. Anchita Karmakar on the 29th June 2018. This case,  to be heard by the Court shortly, possibly gives providers and practices affected by audits, their last and final say on this important matter. We need your help!

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It appears that from Medicare’s standpoint, patients are discouraged from visiting practitioners who sub specialise or have a speciality interest in their care and they are not permitted to know why. The patient does not themselves directly pay the doctor, therefore the doctor has no say in the matter, it appears.

Having made recent national medical headlines PSR faces High Court challenge we are proud to have been invited to assist on a pro bono basis in this very important public interest matter that affects every Australian’s access to healthcare. For some patients, it may help explain why their doctor may be reluctant to see them in certain circumstances. 

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Trainee GP Dr. Anchita Karmakar has launched on 29th June 2018 what may be considered a historic High Court challenge against none other than the Federal Health Minister. The allegation is that the current Medicare system and audit activity is systemically harming patient care.

Here is Dr Karmakar’s application  and affadavit

Our recent national survey that we need healthcare providers to complete appears to indicates this is overwhelmingly the case.

The following surveys will be used in evidence at the High Court public interest application. This is a unique opportunity for patients to have their say, and for healthcare professionals to have an anonymous and confidential say by completing these surveys and sharing it with their colleagues.

For patients to complete:

1.Your health rights to know  https://www.surveymonkey.com/r/HDK6N73

For doctors, providers and practice staff  to complete:

  1. Medicare Item Complexity https://www.surveymonkey.com/r/J87Z7KT
  2. To Bill or not to Bill- Doctor’s right to earn a living https://www.surveymonkey.com/r/ZLK7G6

We will publish the results in the coming months.

The Evidence

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With assistance from Julian Burnside QC, Dr. Karmakar has outlined the issues in a recent article  ‘David and Goliath: Medical Billing investigations and the silencing of doctors. We too are pleased to have been of assistance both in identifying the problem and the solution.

We believe that all patients and providers really want is ‘a fair go’ when it comes to using the healthcare system. The system needs to be more open, transparent and accountable. It needs to be sustainable and socially responsible. Yet in the absence of open, transparent, accountable and commonly agreed peer reviewed clinical standards, patients may continue to suffer by having necessary medical services denied them, without explanation.

We have a name for this: ‘”Medicare Audit Anxiety”. Doctors and allied health workers continue to be investigated for a range of services from doing supposedly too many Pap smears, care plans or drug and alcohol item numbers with no commonly agreed clinical standards in place.

How does the healthcare profession set global standards?

No global health case standards currently exist, according to leading world expert Professor Bill Runciman. Preventable medical errors are the third biggest killer of human life after heart attacks and cancer. Hence medical errors are inevitable, as there is no open and transparent system that exists to protect patients, providers and by extension even the taxpayer.

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The International Auditing and Assurance Standards Board IAASB.

For more on this, listen to an audio discussion: Introduction to healthcare standards by David Dahm

It explains how the accounting profession has set standards – so it is possible for the medical profession to do it too. Bringing about these changes will save lives.

Our view is that medical practitioners may not know when they are “breaking the rules” until it is too late and there is no training program they can undertake to learn the clinically relevant issues (and not just the administrative rules) when navigating their way around Medicare or the healthcare system. The existing rules appear solely based on a closed door system and many “peer reviewed” positions appear to lack the impartial intellectual rigour, openness, and transparency one would expect.

How do audits occur?

It appears that as a medical practitioner, being great at what you do, working hard and sub-specialising can put you at risk of a Medicare audit.

Medicare audits can arise from tip-offs from a disgruntled patient, a competitor or a Canberra-based Medicare employee who regards you as being outside the normal distribution curve for doctors who treat patients for a certain type of illness.

We have had doctors report many examples of this; such as allegedly ordering too many Pap smears, prescribing opioids and ordering CT scans. Or spending too much time with geriatric patients, where too many long item C instead of shorter 20-minute consultations have been claimed, or care plans claimed where the practice employs nurses.

The consequences can be devastating.  

Practitioners have been told that ‘If you do not pay us back we will escalate matters further’.  Medicare may require a subsequent auditor ‘friendly chat’ which may feel to the doctor like a form of entrapment, with those rights normally offered to citizens not properly explained to them. What support is forthcoming from insurance companies and or professional bodies may be legislatively hamstrung and conflicted. Usually, by this stage, it is too late anyway, since no appropriate legal representation is allowed in these meetings, which do not follow normal fair hearing rules.

The debilitating consequences

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The bottom line is that Government audits using no fewer than 25 patient medical records as evidence can statistically ‘deem’ and claim back from the doctor  without interviewing a patient and the doctor is labelled a ‘rorter’ without any peer reviewed open and transparent clinical standards.

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This is like being prosecuted for speeding and not knowing 60 was the speed limit. Then the police stating because you live down this road so over the last 5 years based on your history (the last 25 times we caught you not obeying the law that does not exist or is clear) you must have been speeding. Accordingly, we will issue you speeding ticket everyday over the last 5 years for all those times we did not catch you. By the way, we never told you were breaking the rules the first time you did and you can never find out for sure what they are.

Many of their peers are aware of what goes on but are too afraid to speak up and instead turn a blind eye.

Medicare can claim back over many years many hundreds and thousands of dollars from the practitioner based on what is statistically a very low sample of patients, without interviewing a single of the practitioner’s patients.

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This is akin to your boss demanding after five years of hard work, that you pay back 100% of your salary plus any expenses because they now believe your work was dodgy, despite the fact you were paid for the work and have since spent the earnings.

One also needs to ask why there is no timely Medicare feedback given within the first few months of Medicare being aware of an alleged problem, before making these large claims against practitioners. It seems extremely unfair.

Providers appear to have no legal standing to fairly defend themselves. Many complain of being bullied into paying the money. With the PSR boasting, they win 100% of their cases, they do not want the ‘shameful’ trouble and cost of facing a PSR investigation. It is hard for others to judge the real situation when these cases are not published.

Why do practitioners lack any rights to defend themselves? This affects all of us.

When doctors lose their rights to advocate for the care they believe they should provide their patients, those patients lose their rights to access high quality care.

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Our investigations reveal that bulk billing doctors (providers who do not charge their patients a fee and accept the Government’s payment) are particularly affected. In effect, these practitioners agree unknowingly to work for free by agreeing to bulk billing a patient consult. The 2004 High Court Peverill case highlighted this point.  As a consequence of this, they lose their normal contractual rights to defend themselves in the event of a Medicare audit.

See Health Insurance Commission v Peverill [1994] HCA 8. (1994) 179 CLR 226

From this case…

“Peverill makes it clear that medical practitioners who bulk-bill their patients exchange a proprietary right to a payment which they have earned by providing medical services for a mere expectation of an uncertain gratuity from the Commonwealth. Moreover, bulk-billing medical practitioners have no control over the monetary amount involved in the gratuitous benefit they are hoping to receive from Consolidated Revenue.[82]

In other words, “the fundamental principle that underlies the bulk-billing system is that the payment of a Medicare benefit as between the Commonwealth and the patient is a gratuitous payment.[67] Therefore, the assignment of this gratuitous payment by the patient does not bring the private medical practitioner into a contractual relationship with the Commonwealth.”

Source: DEVALUATION OF A CONSTITUTIONAL GUARANTEE: THE HISTORY OF SECTION 51(xxiiiA) OF THE COMMONWEALTH CONSTITUTION

Thus, a doctor cannot sue the Commonwealth for payment or anything else as they do not have the same contractual rights to protect themselves.

How can you help?

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Put simply, if you as medical practitioners elect to do nothing then you are guilty of being complicit. This is about your patients and the people who care for your loved ones in their time of need.

But you can play an important part by simply spreading the word now. Start discussing the issues with your family and friends.

The following two surveys will be used in evidence at the High Court public interest application. This is a unique opportunity for healthcare professionals i.e. doctors, allied health, practice staff and others to have an anonymous and confidential say by completing and sharing this survey with their colleagues now.

  1. Medicare Item Complexity https://www.surveymonkey.com/r/J87Z7KT
  2. To Bill or not to Bill- Doctor’s right to earn a living https://www.surveymonkey.com/r/ZLK7G6

We will publish the results of these surveys in the coming months. This is a national debate we need to have.

I would like to thank Dr. Anchita Karmakar for inviting me to appear as an expert witness before the Court on the subject of how the Professional Service Review operates. Thanks also to Julian Burnside QC who assisted pro bono in validating our long-held concerns.

For a complete background, listen to these audio blogs;

  1. https://www.spreaker.com/show/medicare-audit-anxiety
  2. Here are Dr. Karmakar’s application and affadavit

1st July 2018 3.5% Award pay rise or freeze revisited!

Did you know that on the 1st July 2018 your staff may be legally entitled up to a 3.5 % pay rise? Also just announced is a new option for people to be paid out their four weeks’ annual leave. Just ensure you have the agreement with them in writing!

July 2018 up to 3.5% pay Increase.

The industrial general minimum pay increase was set at 3.5%. However, it is important to refer to the specific Awards below.

The recent Medicare freeze has led to a number of important changes that could seriously impact your practice. Here we cover the four most important ways to address these changes by providing practice solutions for you. Regardless of whether you pay your staff above the Award, on the 1st July 2018 wage rates should be increased by up to 3.5% p.a. In general, staff wages represent up to 60% of the total overheads of a practice. These changes are accompanied by two more other challenges for employers in medical practices.

Firstly, for practices that predominantly receive the Medicare Benefit Schedule rebate, the rebate has been frozen from 2016 until 2018. (You may have started to feel the impact by mid-to-late 2017). The Medicare rebate from 1st July 2018 has been increased by less than 1.5%.

It is a bit late now to engage in drastic change if your practice is already under severe financial pressure. However we have provided some new ideas on how to survive the Medicare freezes without freezing wages; see our article What am I doing wrong? How does a practice keep up with practice overheads and not affect patient care?

These challenges represent an important opportunity to engage positively with your staff to enhance recruitment and retention, which will in turn aid in improving the sustainability of your practice. If you are unsure about where to start, our newly revised employment kit provides practices with a better employment package template for key staff in the short and long-term. These templates have been developed to provide staff with a solid career structure, which includes employer paid training.

1.  New national wage increase up to 3.5% p.a. from 1st July 2018.

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The new Award rate increased for the Medical, Nursing and Health Support Staff Awards is effective from 1st July 2018, even if you pay staff above the Award, unless you have a valid employment contract.

Regardless of changes in the Federal Budget, it is more than likely that Medicare rebate increases for general and medical practices will continue to not exceed the annual increase in the Fair Work minimum wage.

Practices and staff therefore have four options. Click on the link for smart ways to; 1) organised your pay structures from cashing out excessive leave, 2) reduce your reliance on Medicare income, 3) restructure your practice legally, and 4) ethically and sustainably improve staff productivity.

2.  Take it or leave it – cash out of two weeks’ annual leave!

There is a new option for people to be paid out two out of their four weeks’ annual leave – see https://www.fairwork.gov.au/leave/annual-leave/cashing-out-annual-leave. Just make sure it is in writing. Two weeks in lieu of actually taking leave can only occur if the employee is entitled to a minimum of four weeks leave.

For the practice, this can be a win-win opportunity. Accumulating excessive leave creates a significant liability for a practice. Note that any leave owning for annual, sick or long service leave is based on the employee’s current hourly rate.

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For example, a person who started five years ago and has had five annual pay increases and has had no annual leave (which admittedly would be rare) is entitled to be paid at the employee’s current annual employment rate and not at the rate when it should have been taken at the end of each year.

There are many reasons why no annual leave may have been taken, ranging from a lack of back up support staff to annual leave plans falling through.

However, the liability adds up, in either staff burnout or unnecessary financial liability. We have seen significant disputes arise when owners retire or staff are experiencing burnout and seek compensation for this reason alone.

Cashing out of leave as a policy may be a way to ‘meet everyone half way’ and may be a good idea to prevent employee burnout. However, taking four weeks leave annually rather than cashing out is good for staff morale and is also more family-friendly. Clearly smaller practices may have less flexibility in this area due to staffing constraints.

3.  Look at new ways to boost your income and be more efficient

There are a number of ways to do this. Read our latest article: What am I doing wrong? How does a practice keep up with practice overheads and not affect patient care? See our website for national MUST READ articles published on this topic https://www.healthandlife.com.au/what-we-do/news-and-archives/archives-current-news/.

4.  New changes to the Award – our employment templates will help you immediately comply.

These are the latest Awards, commencing 1st July 2018;

1. Medical Practitioners Award 2010

http://www.fwc.gov.au/documents/documents/modern_awards/pdf/MA000031.pdf

2. Nurses Award 2010

https://www.fwc.gov.au/documents/documents/modern_awards/pdf/MA000034.pdf

3. Health Professionals and Support Services Award 2010

http://www.fwc.gov.au/documents/documents/modern_awards/pdf/MA000027.pdf

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The main points include:

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  1.  A 3.5% increase in new Award rate increases for the Medical, Nursing and Health Support Staff Awards, effective from 1st July 2018 (even if you pay staff above the Award), unless you have a valid employment contract.

  2. A requirement to confirm employment terms to ensure your employment agreements are legally binding (we recommend you seek legal advice from a lawyer), regardless of whether you have a signed employment contract. They key points are detailed below. This is important if you wish to avoid an underpayment of wages claim and any related fines. These fines can be up to $54,000 per breach.

If you are thinking of absorbing future wage increases or ensuring your practice will not be hit with a claim for underpayment even if you are paying your staff above the Award, make sure you have properly implemented the employment laws. We recommend you seek independent legal advice.

Do you have legally binding and sustainable employment arrangements?

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As stated above, if you do not have signed and up-to-date employment contracts, your staff may be entitled, from 1st July 2018, to up to a 3.5% p.a. pay increase even if you pay them above the Award.

Practices should have updated their payroll software programs to reflect and pay these changes. Currently, wages represent 60% of a practice’s total overheads so it is a significant investment. Freezing staff wages can significantly hurt morale. However, any significant cost increases will have to be met by possibly reducing practice standards or increasing patient fees. Share this article with your staff and patients; see Greedy Doctors? to gain some context in relation to this vexed issue.

Great staff employment contracts are good for staff morale.

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Generally, staff prefer to work with practices that are open and transparent. This builds trust and prevents any misguided feelings that they may have been taken advantage of.

The new and revised 2018/19 Health and Life Employment Template Kit

As described in this news alert, there are quite a number of significant and sensitive changes.

The new terms provided in our employment kit will help identify, train and reward your key staff plus offer flexible working arrangements without significant risk to the practice. So it is a win-win for everyone. This solution will enable you to continue to reward your staff on merit and provide high quality services, thereby minimizing patient fee increases. In order to achieve this objective, we have updated our employment kit to include: see Employment Kit Offer for full table of content and cost

If you have any queries, before making any changes, please contact us at no obligation, by email at pa@healthandlife.com.au on 1800 077 222. Do you want to purchase an Employment Template Kit or Upgrade? See our Employment Kit Offer .

This will enable you or your practice to save thousands of dollars on expert advice and time. Most importantly, this process will only add to your staff morale and recruitment and retention strategies. This may be a perfect solution for your practice if your staff are concerned about their future wages or working conditions.

The content of the employment kit includes useful job descriptions and a quote for the kit. Email us at pa@healthandlife.com.au to order. We strongly recommend you consider reconfirming your employment agreements in order to implement these changes at your next six monthly staff performance appraisal.

We continue to provide this unique and exclusive template throughout Australia. Please note we are not lawyers, however we have had these agreements reviewed by lawyers.  

It is important you seek independent legal advice before implementing any ideas from this article or related links referred to. The purpose of this article is so you can ask better questions from your advisers.

By contacting Health & Life we can assist you and where necessary refer you to the highly skilled and experienced external lawyers we work with regularly.

What am I doing wrong? How does a practice keep up with practice overheads and continue to provide quality patient care?

The recent Medicare increase is equivalent to a wage earner receiving a 1.5% p.a. pay rise after a decade of pay freezes.

Practices will either have to cut costs or work longer hours, risking burnout.

On 1st July wages increase up to 3.5% but Medicare increases by less than 1.5% after a long freeze.  

The Medicare rebate will increase by 55c for standard GP visits from July 1.

For a list of other item numbers, including specialist items, that will increase from 1st July and beyond see the Fact Sheet Medicare Indexation Schedule The key question arises; how does a practice keep up with Fair Work wage increases and not affect patient care?

It is important to begin by considering why you own a practice, or work for one.

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Mark Bouris has a national TV series called The Mentor. A multi-millionaire businessman, Bouris has shared some insights into the factors shared by all of the struggling businesses he sought to turn around. These can equally apply to any profession.

“I think people go into business because they think it’s a lifestyle that they’re going to achieve, or they were a good mechanic or a good skilled trades-person, for example, and they just think that they’ll be good in business doing that. But there’s a difference between being a good plumber [or Doctor or healthcare practitioner] and being in the business of plumbing… they’re two different things.”

According to Mr Bouris, the common issues he saw among the businesses he worked with on the show (and in others he has seen more widely, particularly among family businesses), result from a failure to act as businesspeople and implement business-minded ways of working.

These problems, he said, include:

  • A lack of structure
  • A lack of business systems and processes
  • Not holding regular planning and strategy meetings
  • Failing to keep proper records
  • Being under-insured

Focus on improving patient care, alternate income, productivity and reduce practice overheads waste.

Some key areas for health practitioners to review are:

  1. Get your strategy right! – Ready, Fire, Aim

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The most important thing to do is to get your strategy right – start with an end in mind. Ask what the practice should look like. For example; “our practice will be multi-disciplinary in five years with five full time equivalent practitioners providing holistic 24-hour care”.

Ever heard the expression, “ready, fire, aim?” I frequently hear people use those words to describe how their organisations operate. I am always surprised at the number of people who are almost boastful about being part of a “ready, fire, aim” culture.

This refers to simply reacting to something and taking immediate action, before thinking it through very thoroughly. Like everything, taking quick action has its good and bad side. The key for success is to think things through carefully.

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The Managing Complex Change Model (M. Lippitt, 1987; T. Knoster, 1991)  

Do not be afraid to ask for external help from colleagues, practices, and advisers. Making the wrong decision can be very expensive, like taking the wrong road when you reach that fork in the road.

  • Structure – do you have the optimal and most sustainable business and legal structure?

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Your business structures should inherently promote good succession planning. At some stage, you will have to semi or fully retire.

Your business structures should provide the following to prospective practice owners:

  1. Succession planning-friendly
  2. Fair reward for effort and risk – i.e. passive income investment-friendly
  3. Peace of mind – providing asset protection
  4. Scaleable – it should not matter what size the practice is
  5. Tax friendly

Some practice structures do achieve remarkable results. However poor implementation or inadequate understanding of them may lead to their undoing – the devil is in the detail.

Recent tax audit activity is of concern, but is also an opportunity if you grasp the fine details. Note the example provided below.

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Alternate income – time to diversify

Go big, boutique or broke – the reality is for many practices, sub-specialising is key to success, whether it is skin clinics, child and women’s health or obesity clinics.

  • Healthcare screening and prevention should be the new norm

It is interesting to note that in future, increasing amounts of money will go towards healthcare screening and preventative health activities. Practices need to continue to focus their efforts in this key area. Patients are more likely to trust and use a practice that is proactive than one that is merely reactive. Promoting patient continuity is key; see Keeping the same doctor reduces death risk, study finds.

  1. Reduce Bulk Billing by 10%

This is one of the hardest measures for practices to take. Yet many practices who do have a great mix billing policies never look back. It can improve patient engagement and satisfaction. Patient gaps can be kept affordable.

Why not simply continue to bulk bill 100%? There is no point if your practice survives and yet patients die. This may sound melodramatic, but if you continue along this path eventually patients will suffer from a lower quality of services. In the end patients will be harmed if providers are having to see more and more patients in less time, and excessively cut costs to stay afloat, causing a decline in front-line services.

We are already seeing more Medicare audits where doctors have to pay back substantial amounts of money for ‘inappropriate services’. In the absence of any Medicare Audit “proof of appropriate service” guidelines, this is a real risk for the future. The less attention a practitioner pays to documentation the more they are at risk from a complaint from Medicare, a competitor or staff member. But when you reduce bulk billing you are less exposed to the possibility of Medicare audits.

Systems – are we doing the right thing the right way the first time?

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Working smarter is the key.

Many new, effective low-cost systems are available to help you monitor patients and staff. These will help keep everyone on the same page.

Get good advice from experience consultants and advisers who have a track record. It can be very time- consuming and expensive if you get it wrong. Time is your most valuable commodity. Watch your key numbers and receive timely monthly advice. It is a bit late to change things after you see your accountant 12 months after the fact.

See our A Powerful New Way to Manage your practice for some simple and great ideas.

Staff productivity – are the staff doing what they could and should be doing, and are they providing value to the practice?

Consider outsourcing if it gets all too hard – it is cost effective.

It is important staff are set clear outcomes and are provided with timely and meaningful feedback. Interacting with patients and people is their key role.

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Many back-office roles have become hard to fill, requiring a high level of expertise and ongoing monitoring. So much so that it has now become much cheaper than a bookkeeper to outsource or automate these critical functions, saving much valuable time and money. This frees up your staff to work ON your practice and not just IN it. At Health and Life, we offer automation and outsourcing services, from calculating the provider payroll, to accounting compliance and monthly financial reporting, that is cost effective. We will be soon also be able to provide you with an opportunity to outsource your ongoing legal compliance.

For more information see “Fixed Fee Financial outsourcing of your bookkeeping and or accounting”.

For these and many other cost effective and practical solutions or any other assistance please do not hesitate to call David Dahm for a free no obligation consultation on pa@healthandife.com.au or 0407 620 120 on how we can help you.