All Children's Hospital & Health System in St. Petersburg, FL, has signed a letter of intent to join the Johns Hopkins Health System as a fully integrated member, the two systems said Tuesday.
The non-cash transaction between the two venerable not-for-profit health systems—the first of its kind for JHHS outside of the Baltimore region—is expected to be completed by the end of the year.
"The integration of All Children's into Johns Hopkins Medicine creates a synergy that allows both partners to continue our mission-centric work in children's healthcare," said Gary Carnes, president/CEO of All Children's. "We believe it increases All Children's value as a key community asset, extending benefits near and beyond to the families of children in need of top-notch clinical care by adding the benefits that the world-class teaching and research opportunities of Johns Hopkins Medicine will bring."
The proposed transaction hasn't been finalized, but the plan calls for ACH to retain its voluntary medical staff and physician organizations, including those University of South Florida physicians practicing at ACH. ACH will operate under the direction of the JHHS governance structure.
"All Children's is a very attractive organization because of its robust high quality clinical programs, its strong regional brand presence, and very high quality leadership team," said Edward D. Miller, MD, dean/CEO of Johns Hopkins Medicine. "The full integration of ACH into JHM offers a unique opportunity to both institutions. With this integration—and as part of its historic mission—JHM can leverage the intellectual and human capital within its pediatrics programs to expand the reach and impact of its current clinical, teaching and research programs."
All Children's Hospital, which opened a one-million-square-foot, 10-story tower and adjacent outpatient building in January, will retain its name and mission, and donations made to the Hospital's Foundation will remain for the benefit of All Children's. Leadership and day-to-day operation of the 259-bed freestanding pediatric hospital and outreach facilities in eight west Florida counties won't change. Local community leaders will continue to provide oversight of All Children's as majority members of the Hospital's Board of Trustees.
"Integration with Hopkins will position us to jointly shape the future of children's healthcare in partnership with an unparalleled leader in medical research and teaching," said Claudia Sokolowski, All Children's Health System board chair. "The potential economic impact for St. Petersburg, the Tampa Bay area and the state of Florida is significant and lasting. But the positive impact for children and their families will extend well beyond our geographic reach for generations to come."
JHHS' Maryland affiliates include The Johns Hopkins Hospital, Johns Hopkins Bayview Medical Center Inc., Suburban Hospital, and Howard County General Hospital Inc., and The Johns Hopkins University School of Medicine.
ACH is part of the $1 billion All Children's Health System, with more than 2,800 employees on its main campus and 10 outreach centers located throughout west central Florida. The system, founded in 1926 as a hospital primarily for young polio victims, has a patient mix that is 70% Medicaid.
The National Association of Public Hospitals and Health Systems has appointed Bruce Siegel, MD, to the newly created position of CEO. He succeeds Christine Capito Burch, who is retiring after serving 20 years as executive director, NAPH announced Monday.
"This is an unprecedented time for our patients and the public hospitals that serve them each and every day. I am eager to work with these crucial safety net systems to ensure that they have the resources and the support to protect their communities," Siegel said in a statement. "Healthcare reform may have passed but our work is just beginning."
With the appointment, Siegel becomes the first African-American to lead a major hospital association in the United States. He is now director of the Center for Health Care Quality and a professor of health policy at the George Washington University School of Public Health and Health Services. Siegel was president/CEO of Tampa General Healthcare, and the New York City Health and Hospitals Corporation. He also served as commissioner of health for the state of New Jersey.
"Safety net hospitals and health systems must gear up for the implementation of health reform, while also responding to the increased need for safety net services during the current economic crisis," said NAPH President Larry S. Gage. "Bruce's experience leading two of the nation's most important safety net health systems, coupled with the major role he has played at George Washington University in studying the needs and concerns of vulnerable patient populations, provide an ideal background for this position."
Siegel has conducted studies on quality and equity for the Robert Wood Johnson Foundation, the Commonwealth Fund, the California Endowment, and the Agency for Healthcare Research and Quality. He is a member of the National Advisory Council for Healthcare Research and Quality and he has served as a director of the Accreditation Council for Graduate Medical Education.
""Bruce Siegel's deep understanding of health disparities will assist members in serving our diverse communities and in positioning public hospitals to be leaders in implementing health reform," said Lisa Harris, MD, who led the search process for NAPH. Founded in 1980, NAPH represents the nation's largest metropolitan safety net hospitals and health systems.
"Siegel earned an A.B. from Princeton University, a Doctor of Medicine from Cornell University Medical College, and a Master of Public Health from Johns Hopkins University School of Hygiene and Public Health.
Click here to read more about Siegel's appointment.
From all indications, the nation is emerging—however slowly—from the worst recession since the Great Depression. Although the brightening economic outlook will be welcomed, it also creates a new set of challenges as nonprofit hospitals and health system struggle to retain top-level executives.
Providing top talent with hefty pay hikes or bonuses at a time when 15 million people are out of work could prove to be a public relations disaster for a nonprofit hospital, especially if rank-and-file workers have received modest (if any) pay hikes.
On the other hand, the market for top healthcare talent is competitive. Nonprofits that don't provide executives with fair market compensation risk losing them, which is a far more expensive proposition.
Ron Seifert, executive compensation practice leader for Hay Group's healthcare practice, says that compensation increases in the last year were below historical trends, partly because many executives understood the market realities and "took one for the team." However, in the coming year, if the economic recovery continues, Seifert says, those same executives might not be so willing to wave the pom poms.
Seifert says most nonprofit hospital boards—well aware of the economic realities, political climate, and public perception—have done a good job exercising discretion with executive compensation packages over the last year.
The Hay Group's 2010 Healthcare Compensation Study, which looks at data from more than 120 integrated health systems, and 1,268 hospitals, found that pay hikes for healthcare employees decreased in 2010 to a rate of 2.5%, compared with a 4% increase in 2009.
For the C Suite, the newly released survey found that:
Turnover decreased at the executive level: CEO (5.2% in 2009-2010 from 14% in 2008-2009), the COO (4.1% from 11.6%), and the CFO (5% from 12.2%).
Executives faced a drop in salary increases: all executive groups experienced a decrease in both the most recent and next planned salary structure increases from the 2009 report. For instance, in 2010, the number of CEOs receiving at least a 6% increase in base salary has dropped to 22%—its lowest level in 10 years.
"People have been hunkered down," Seifert says. "They have been fully committed to seeing their organizations and healthcare through this very difficult time, but these are executives and they are not blind to opportunity. These hospitals need to be run by capable leaders and if you have high-performing individuals, the reality is you shouldn't mess around with their retention if they are that critical for you."
So, what will the next year bring? Seifert expects that more health systems will turn to long-term incentive plans as a retention tool for top executives. He notes that 24% of survey participants have a long-term incentive plan in place in 2010, up from 19% in 2009.
Of the organizations with LTI plans, performance units are the most commonly used vehicle, with 95% offering such a plan.
Beyond specific tools, Seifert says he anticipates "continued temperance in decision making" and a more focused approach to designing compensation packages.
"We will likely see an uptick, but it's more a demand for talent—not opening the floodgates," he says. "If you want to keep people retained, it's going to be selective, but you are going to need to do something. Boards are going to struggle more with pay decision-making going forward. and it is not going to be across-the-board type of budgeting. It's more likely to be focused on individuals. Going forward, the reality is they will have to think carefully if they want to retain key leaders."
Ninety-four people in five cities—including more than seven physicians—have been charged in alleged schemes to submit $251 million in Medicare false claims, U.S. Attorney General Eric Holder announced Friday.
The joint Medicare Fraud Strike Force operation involved 360 law enforcement officials from the FBI, HHS-Office of Inspector General, and other state and local agencies, who made 36 arrests in Miami; Baton Rouge, LA; Brooklyn, NY; Detroit; and Houston. More arrests are expected today and through the weekend as other warrants are executed.
"With today's arrests, we're putting would-be criminals on notice: Healthcare fraud is no longer a safe bet," Holder said in a media release. "The federal government is working aggressively—and collaboratively—to pursue healthcare criminals around the country and to bring these offenders to justice."
Charges unsealed today against the 94 defendants who are accused of various fraud-related offenses, include conspiracy to defraud Medicare, criminal false claims, violations of the anti-kickback laws, and money laundering.
The charges are based on a variety of fraud schemes involving physical therapy and occupational therapy, home healthcare, HIV infusion, and durable medical equipment.
The defendants charged today allegedly submitted false claims to Medicare for treatments that were medically unnecessary and oftentimes, never provided. In many cases, complaints allege that Medicare beneficiaries accepted cash kickbacks in return for allowing providers to submit forms saying they had received the non-existent or unneeded treatments that were collectively valued at more than $251 million.
In Miami, 24 people were charged for allegedly participating in schemes that led to $103 million in false billings. The defendants include owners of companies, doctors, nurses, and patient recruiters, as well as a medical biller who is alleged to have billed approximately $49 million for fraudulent services.
In Baton Rouge, 31 people were charged in schemes involving fraudulent claims for DME totaling approximately $32 million. The defendants include the owners of nine different purported medical services companies, four doctors, 14 patient recruiters and others.
In Brooklyn, 22 people were charged with filing fraudulent claims totaling $78 million. These schemes involved false billing for physical and occupational therapy and DME. The defendants include the owners, patient recruiters and employees at three different medical clinics and a medical equipment company, and three doctors. Six defendants are Medicare beneficiaries, who allegedly sought treatment from numerous providers, causing the submission of multiple claims to Medicare.
In Detroit, 11 people at five medical services companies were charged in schemes to submit fraudulent $35 million in bogus claims for home health services, nerve conduction tests and injection and infusion therapy sessions.
Four defendants were charged in Houston for their alleged roles in a $3 million scheme to submit fraudulent claims for DME.
In addition to the arrests, law enforcement agents are executing search warrants for ongoing healthcare fraud investigations.
Since its inception in March 2007, the Strike Force has obtained indictments of more than 810 people and organizations that collectively have billed Medicare for more than $1.85 billion.
Superior Health Partners trustees have finalized the formal affiliation agreement that went into effect on July 1 between Marquette General Hospital and Bell Hospital in Michigan's Upper Peninsula. Elected board officers are outlining initial priorities for the accountable care organization, the health system announced today.
"With the legal documents signed, our new board officers in place and our strategic plan outlined, we can move forward with plans to create an accountable care organization which relies on close hospital partnerships, collaborative alignment with physicians, robust information technology infrastructure and operational expense management," says SHP Board Chairman Tim Larson, who is also Marquette General Health System board chairman.
The legal documents forming the affiliation were signed at the SHP Board's first official meeting, which was held at Bell Hospital. The new board also adopted formal strategic plan priorities.
Elected SHP Board officers include: Larson; Vice Chairman Robert DellAngelo, MD; and Secretary/Treasurer Ron Katers. Gary Muller, MGHS president/CEO since 2007, was named SHP president/CEO.
"It's the goal of SHP to build an accountable care organization that can serve the entire Upper Peninsula," Muller says. "The partnership between Marquette General and Bell, and the potential for other hospitals to join SHP, puts our region way ahead of the curve both from a statewide and national perspective. It is impossible to over-emphasize the importance of our planning on improving regional healthcare quality and access, as well as strengthening the incredible healthcare economic engine healthcare represents in the U.P."
Muller said key to initial SHP success will be physician recruitment. "By enhancing physician recruitment efforts, the number of services and specialties available will be greatly increased, and patients will have access to more services in the Upper Peninsula," he says. "That, in turn, means more jobs for U.P. residents. There is an old saying the U.P. that our region's best export is our youth. Healthcare is creating the types of jobs that we hope will eventually render that old saying obsolete."
The strategic affiliation creates a healthcare network with more than 3,000 employees under its combined MGH-Bell umbrella. MGH, in Marquette, is a 315-bed regional referral center. Bell Hospital, in Ishpeming, MI, is a 25-bed critical access hospital.
Hospitals would have to cut direct costs by an average of $1,082 per case—14%—to sustain operating margins if average inpatient reimbursements from commercial insurers were paid at today's Medicare rates, according to a new study by the healthcare information company, Sg2.
"This changing environment requires a radical shift in behavior. The onus firmly resides with the provider," Sg2 Chairman/CEO Michael Sachs says. "The healthcare leader of the future must recognize incremental and long-term cost saving strategies today, while still delivering cost-effective, quality care."
With MedPAC projections of overall Medicare margins to be -5.9% in 2010 and performance-based penalties looming, Sachs says the threat of commercial insurance reimbursement rates approaching Medicare levels in some markets adds tremendous financial pressure to health providers.
"In order to survive and thrive, it is imperative for all organizations—regardless of size—to create a clinically integrated framework and understand financial implications of the growing Medicare population and performance-based incentives," Sachs says. "Now is the time to implement a disease-centered approach that not only uncovers financial opportunities, but addresses clinical performance across both inpatient and outpatient settings."
Sachs says demographic and economic forces are driving the pressure to reduce costs. The Medicare population will nearly double by 2030 as the 78 million Baby Boomers begin turning 65 in 2011.
Additionally, a slow economy makes health insurance coverage expensive for employers, and places pressure on commercial payers to reduce premium costs. Consequently, payers are forced to reduce reimbursements to providers— rates that could eventually approach Medicare levels in some regions, Sachs says.
The good news is that there is a lot of fat in the system that can be cut.
Sachs notes that Centers for Medicare & Medicaid Services estimates that 40% of total Medicare spending is waste in the form of provider error, unnecessary care, avoidable admissions and lack of care coordination.
To identify waste, Sachs says providers can use a disease-centered clinical approach that will identify the top Medicare severity diagnosis-related groups with the highest cost-reduction opportunities. He says hospitals can also improve clinical integration by assessing their performance across inpatient and outpatient settings.
Sg2's analysis is based in part on comparative data gleaned from the National Inpatient Sample. The analysis indicates that hospitals' cost reductions vary by market, provider type, case mix, payer mix, relative payment levels, and size. For example, large community hospitals would require a cost reduction averaging 17% to maintain overall operating margins at today's Medicare reimbursement rates. The average cost for small-to-medium-sized community hospitals would be $849 per case, and for academic medical centers it would be $1,168 per case.
Miami-based Florida International University's newly opened Herbert Wertheim College of Medicine has signed an affiliation agreement with Cleveland Clinic Florida.
John Rock, MD, founding dean of Wertheim, says the agreement with Cleveland Clinic Florida introduces another respected partner to the affiliations FIU already has, and will provide a valuable dimension to the college's unique approach to medical education.
"We are very excited to be affiliated with such a respected institution that has an excellent national reputation," Rock says. "Cleveland Clinic is world renowned for providing quality healthcare at an affordable cost and we are proud to partner with them to train the next generation of doctors."
The affiliation will allow FIU medical students in their senior year to receive clinical training from physicians in various specialties.
"Cleveland Clinic was founded on the principle that research and education are at the cornerstone of patient care," says Bernie Fernandez, MD, CEO of Cleveland Clinic Florida. "This partnership with FIU allows us to meet South Florida's healthcare and patient needs by investing in the next generation of physicians."
Herbert Wertheim College of Medicine, South Florida's only public medical college, began classes for its inaugural class of 40 medical students last fall. The college emphasizes a patient-centered care curriculum and stresses cultural competence as a key to providing quality care for South Florida's diverse demographics. When at full capacity, the medical college will have 480 students.
FIU's other clinical partners include Baptist Health South Florida, Jackson Health Systems, Mount Sinai Medical Center, Miami Children's Hospital, Mercy Hospital, and Leon Medical Centers, Broward Health, and Memorial Healthcare System.
The release Tuesday morning of HHS' long-awaited meaningful use requirements for healthcare information technology drew generally favorable, but guarded reviews from patient, physician, and hospital advocacy groups—all of whom are still sifting through the dense, 863-page document.
David Blumenthal, MD, National Coordinator for Health Information Technology co-wrote in an opinion column Tuesday in The New England Journal of Medicine that the "most important part" of this regulation is what it says hospitals and clinicians must do with EHRs to be considered meaningful users in 2011 and 2012:
In the original proposal, we identified a broad set of objectives, all of which would need to be met. This included 23 objectives for hospitals and 25 for clinicians. The DHHS received many comments that this approach was too demanding and inflexible, an all-or-nothing test that too few providers would be likely to pass," wrote Blumenthal and coauthor Marilyn Tavenner, RN, principal deputy administrator of CMS.
"In the final regulation, we have divided these elements into two groups: a set of core objectives that constitute an essential starting point for meaningful use of EHRs and a separate menu of additional important activities from which providers will choose several to implement in the first 2 years."
Despite those assurances, Steven J. Stack, MD, a board member of the American Medical Association, reaffirmed that the nation's largest physicians' association is trying to determine if the new rules provide caregivers with they flexibility they'd called for during the comment period.
"The AMA and 95 state and specialty medical societies submitted formal comments to CMS on an earlier draft of this rule and cautioned that the proposed criteria for meaningful use was too aggressive and would prevent many physicians from participating," Stack said. "The AMA is committed to EHR adoption that streamlines the clinical and business functions of a physician office and helps physicians provide high-quality care to patients. It is critical that barriers to implementation are removed so physicians can successfully adopt new technology."
Stack said that after reviewing the final rule, AMA plans free webinars in the coming weeks to educate physicians on the requirements for meaningful use and how they can incorporate them in their practices.
William F. Jessee, MD, president/CEO of the Medical Group Management Association, said he was pleased that the federal government acknowledged physicians' concerns in the comment period. "While challenges remain, the final rule provides a better approach to the 'real-world' issues faced by practices as they move toward 'meaningful use' of EHRs," Jessee said. >
"Improvements sought by MGMA" contained in the final rule included a reduction in the originally unrealistic thresholds related to e-prescribing, administrative transactions and computerized physician order entry, among others," he said.
Jessee said MGMA will continue to work closely with the federal government "to incorporate additional changes related to implementation of the incentive program to allow the greatest number of practices to achieve widespread meaningful use of EHRs."
Blumenthal and Tavenner said the meaningful use rule must be achievable and ambitious and "strike a balance between acknowledging the urgency of adopting EHRs to improve our healthcare system and recognizing the challenges that adoption will pose to healthcare providers"
"The regulation must be both ambitious and achievable. Like an escalator, HITECH attempts to move the health system upward toward improved quality and effectiveness in health care. But the speed of ascent must be calibrated to reflect both the capacities of providers who face a multitude of real-world challenges and the maturity of the technology itself," Blumenthal and Tavenner wrote.
The Federation of American Hospitals, the lobbying and trade association for for-profit hospitals, offered guarded praise for the new rules, saying they should help provide the impetus for hospitals to advance HIT for improved patient care. However FAH President/CEO Chip Kahn said "there is further work to do."
"Under today's final rule, multiple hospitals under a single Medicare provider number will not receive their full allotments," Kahn said. "Patients of a hospital should be confident that their hospital is receiving the full HITECH incentive, regardless of whether that hospital has an individual provider number or shares a provider number with other hospitals."
Kahn said it is "essential" that Congress clarifies the definition of an eligible hospital to put all hospitals on a level playing field for the distribution of incentive payments.
In addition, FAH wants HITECH incentive payments to recognize the continuum of patient care. "Congress should expand the legislation's reach to include post-acute hospitals and care," Kahn said. "Doing so is a step we must take to reap the full rewards that information technology can offer patients through improved care integration and coordination."
Christine Bechtel, vice president of the National Partnership for Women & Families, a patients rights advocacy group, applauded the Obama Administration for "making some reasonable concessions but standing firm against industry pressure to gut the regulations."
"Providers who take federal aid will now, appropriately, be required to use IT in ways that improve outcomes for patients and support the caregivers who now struggle to coordinate care in our fragmented system," Bechtel said. "An end is finally in sight for the days when doctors have to sift through incomplete and incomprehensible hand-written medical records—when patients must tote test results from doctor to doctor—and when family caregivers spend endless time trying to coordinate medications and treatments for those who can't do so for themselves."
As HIT gathers momentum, Bechtel said regulations should be strengthened "so providers who violate privacy laws are ineligible for federal IT dollars, and so providers are required to give all patients timely access to their health information as well as to the kind of education resources that help improve their outcomes."
Troubling yet predictable findings emerge from the 2010 Review of Physician Recruiting Incentives, the annual survey from physician recruiters Merritt Hawkins/AMN Healthcare, which reflects the market realities of the past year for healthcare in a down economy.
The survey also provides clues for the near term. It's based on 2,812 permanent physician and certified registered nurse anesthetist searches in 48 states which the Irving, TX-based recruiters conducted from April 1, 2009, through March 31, 2010.
First, recruiting was down in 2009-10 for the first time in the 17-year history of the survey, even though there is nothing to suggest that demand has abated.
"This is quite possibly our most accurate survey ever because the decisions that were made from the client base were 'had to,' and not 'want to' decisions," says Merritt Hawkins Senior Vice President Travis Singleton. "We have a bottleneck. The needs didn't go away. In fact, they compounded. But our clients said there was an almost complete stop, wait, and hold. In that respect, the survey is the truest representation of what these different clients had to do to survive."
Among the contributing factors, Singleton says, were the overall poor economy, a corresponding lack of capital, the uncertainty of healthcare reform, falling medical utilization and reimbursements, and an unwillingness of many physician-candidates to relocate in a challenging economic climate.
Second, hospitals, health systems, and medical groups in more-populated areas were doing the bulk of the hiring. In 2008-09, hospitals, physician groups, and other healthcare entities in communities with less than 25,000 people conducted 39% of the Merritt Hawkins searches, and communities with 100,000 or more people conducted 26% of the searches. That's a flip-flop from 2008-09, when smaller communities conducted 39% of the searches, and larger communities conducted 26% of the searches.
"You can tie that to financial woes," Singleton says. "The smaller groups and hospitals were on the front line. When you saw capital dry up, when you saw the pressures of having to put guarantees out to recruit physicians becoming tougher, the ones that flat out couldn't do it were the communities with 25,000 or less. I'm not saying it was easier for the larger systems, but the larger metro and health system-oriented clients had the wherewithal and resources to recruit."
Third, even though recruiting is down, the overall demand for primary care physicians remains strong. Family practice, internists, and hospitalists were among the top five most sought-after specialties.
Family practice and internal medicine are going to continue to rise "as the geriatric patient base demands it, with our chronic and high-risk patients that we are dumping on the system," Singleton says. "Hospitalists have been our Steady Eddie and that will remain the same because it's become an accepted practice of both quality and expense savings."
Interestingly—and tellingly—psychiatrists and emergency physicians were among the top five medical specialties sought in 2009-10.
"The economy is down and you can tie emotional and mental health with economic times," Singleton says. "Certainly, when it is combined with people's jobs, it has been the most undiagnosed and unclear of all modalities out there."
Singleton says the rising demand for psychiatrists also may reflect the growing understanding in the healthcare community that mental health is underserved and the push for mental healthcare parity. "There has been such a need for psychiatry for so long. These patients have been shuffled through the primary care system, and to be quite frank, that isn't the best way to diagnose and treat these patients," he says. "As that has been getting more publicity over the last two or three years, you are seeing the need go up."
Unfortunately, psychiatrists represent the oldest demographic among healthcare specialists, and not enough younger physicians are coming into the field. "Those who want to come into the field only want to do outpatient, and the need right now is inpatient," Singleton says.
Fourth, despite the demand, primary care compensation remains the lowest among medical specialties. Family physicians' compensation averaged $175,000. Orthopedic surgeons were tops, averaging $519,000.
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"Under the current structure, primary care salaries are about what they can be," Singleton says. "They are going to go up a little more, but there is just no room. Without massive reform, you aren't going to see a huge difference."
"The more telling stat in this survey is the lows. We always focus on the average, but when you look at the lows, family practice compensation jumped up $20,000 (from $120,000 in 2008-09 to $140,000 in 2009-10) in one year. That is massive considering the total compensation. That tells us it is so competitive out there. There are no more oases. There are no destination cities. Everyone is somewhat on a level playing field, and that is scarier than the average going up."
Fifth, the numbers of physicians abandoning private practice for hospital employment has swelled from a trickle to a stream to a tsunami. "We are seeing it on a scale like never before," Singleton says, adding that the desire for employment is now coming from both physicians and hospitals.
"In the past it's been one side pushing an agenda—the hospital wanting market share," he says. "This time it's the hospitals realizing that to control costs and outcomes as best they can—but also in an effort to control their lifeblood, the physician—you have to have flexibility. And in today's market, there is no flexibility without employment."
As compensation becomes more competitive, Singleton says more hospitals will be even more incentivized to take up the employment model or something similar, especially as accountable care organizations come to the fore.
Synergy of care and bundling are examples of those things pushing down this funnel of employment. "Those larger organizations that have experience in that field are one step ahead," he says. "Some of these other smaller clients that know this is the outcome have never done it before. They are not equipped to employ physicians. If anything, the numbers of employed physicians will shoot up next year because that segment is now forced to join the game."
On the physician side, Singleton says it's a wonder that any private practices are left, especially in light of the ongoing uncertainty over healthcare reform and Medicare reimbursements.
"Think about the year that they just went through," Singleton says. "Imagine coming to work. The rules of the game could change on you at any moment. There is such a lack of stability and a lack of guarantees in their world right now. Anything that can give them both of those areas they are going to do. Employment does just that."
Another deadline has passed in the long-drawn efforts of the nation's academic medical centers and teaching hospitals to recover more than $2 billion in social security taxes that the hospitals and their medical residents paid under protest to the federal government for more than a decade.
Teaching hospitals filing for a Federal Insurance Contributions Act (FICA) are required by The Internal Revenue Service requires refund to have submitted by July 9 a power of attorney Form 28-48, assigning representation for the refund process. The IRS will send back a notification letter that sets in motion a 120-day organizational period for hospitals to document their FICA rebate claims.
Teaching hospitals are trying to regain FICA taxes that they and residents paid from 1995 until April 1, 2005. For years, the IRS had treated medical residents as employees, requiring them and their teaching hospitals to pay FICA taxes on their earnings, even though no specific regulation was on the books addressing the special status of residents. The teaching hospitals claim that medical residents are students in a learning environment, and are therefore exempt from paying FICA taxes.
In April, 2005, after years of lawsuits and complaints, the IRS imposed specific FICA requirement for medical residents, but said that teaching hospitals and residents that had paid the FICA taxes under formal protest in a "pre-regulation" period between 1995 and the first quarter of 2005 would be eligible for a rebate, plus interest.
By some estimates, teaching hospitals and medical residents could each be due rebates of between $3,000 and $3,500 per resident, per year, for the 10-year period. Several estimates peg the total value of the rebates as more than $2 billion.
The legality of the April 1, 2005 FICA requirement for residents is being challenged in a separate suit that will be heard by the U.S. Supreme Court this fall.
Robin Greenhouse, a partner and tax specialist with the law firm of McDermott Will & Emery LLP, which has litigated on behalf of several teaching hospitals, said the FICA refund process will require extensive documentation, and that any teaching hospital that has not begun the process should do so now.
For example, teaching hospitals must show the IRS a consent form signed by every medical resident dating back to 1995, which Greenhouse said could prove to be particularly time consuming.
"It requires identifying last-known addresses, sending out consent forms, responding to inquiries, tabulating the information you get, that will all go to the IRS," Greenhouse says. "There is a lot of work the academic medical centers are doing either in-house or with outside consultants. These are residents who may no longer be affiliated with these academic medical centers. So identifying their last known addresses takes work." Greenhouse says teaching hospitals need to at least make a "reasonable effort" to contact former residents, using first-class mail, and giving residents 45 days to respond.
"That is an area where hospitals need to be careful. The IRS will look at the reasonableness of their efforts," Greenhouse says. "They don't have to be perfect but they have to have acted reasonably."
Teaching hospitals must also understand that moonlighting by medical residents is not exempt from FICA taxes that Greenhouse says needs to be "scrubbed out" of refund claims. "So, academic medical centers need to review their records and identify potential amounts for moonlighting. The IRS will be looking for that," she says. When the claim is approved, teaching hospitals will get a lump-sum check from the IRS that will include an aggregate amount for the medical students.
"The medical center is going to have to send out individual checks to the former residents and they are going to have to include the appropriate amount of interest," Greenhouse says, adding that the interest rate the IRS pays individuals on claims refunds is higher than the rate it pays corporations.
The teaching hospitals also must submit to the IRS a Form 1099, indicating that taxable interest was paid on the reimbursement, and a Form W-2c, which will be sent to the Social Security Administration to reflect that FICA taxes were not deducted on the medical residents' pay.
