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Fam Pract Manag. 2000 Jul-Aug;7(7):70.

Vicarious liability insurance

Q

I am one of six family physicians in a limited liability company (LLC). Our LLC has no assets other than our accounts receivable. We each have personal malpractice insurance as well as general liability coverage. Would “vicarious liability” insurance insure our LLC in a malpractice claim against one of our physicians? Or is this type of coverage unnecessary since the LLC essentially has no assets and would likely be dropped from a lawsuit?

Whether this coverage is necessary depends on how much your LLC has in the way of receivables. In most practices, collectible accounts receivable are equal to 1/12 to 1/3 of a year's gross collections. Protecting the receivables may be reason alone to buy the insurance — to cover any potential liability and to pay any related legal fees. If a suit is brought, a smart lawyer will sue all parties, including the LLC.

Practice valuation

Q

One of our residents is considering buying into a practice. How do you determine the value of a practice?

When you buy a practice, you have to pay your share of the current value of the furniture and equipment, accounts receivable (adjusted according to the practice's historical collection rate), goodwill and other assets. From these amounts, you then deduct your share of any loans and other liabilities to determine the value of the practice.

Goodwill (intangible asset value) is the hardest value to calculate, and fewer practices are charging for it these days. To determine whether you should pay for goodwill, look at the potential earnings in the practice. For example, if the average family physician earns $135,000 in the community and the average doctor in the practice earns only $125,000, you shouldn't pay for goodwill. On the other hand, if the average doctor in the practice earns $145,000, you should be willing to pay extra for this higher earning potential. Generally, the value of goodwill should be three to four times the excess earnings. In this example, it would be $30,000 to $40,000 (i.e., [$145,000 -$135,000] x 3 or 4).

Once you've prepared an offer, meet with an accountant or lawyer with expertise in medical practice management to determine whether the offer is reasonable and fair. Practice valuation specialists can also determine an accurate practice value for you, but this service can cost from $3,000 to $5,000.

Supervising physicals

Q

In order to prevent sexual-assault claims from patients, our primary care group would like to establish a policy about the supervision of physician examinations of members of the opposite sex. Are there also risks of unsupervised same-sex exams? What might such a policy

Any physician organization is wise to have a policy statement about the supervision of all physical exams, regardless of the gender of the physicians and patients involved.

A policy should require that a third party be present when a physician performs an examination of the sexual and reproductive organs and available to supervise any other physical examination at the patient's option. The policy should state that it's each physician's responsibility to inform patients of this option. The policy should also state that patient dignity must be maintained at all times, explain the implications of physician misconduct and explain how to handle flirtatious advances from patients.

All allegations of misconduct should be taken seriously, documented properly and acted on immediately. If you're unsure how to proceed, seek legal counsel that specializes in these matters.

Medicare conversion factors

Q

What are the current Medicare conversion factors for 1999 and 2000, as set by the Health Care Financing Administration (HCFA)?

In 1999, the conversion factor was $34.7315. In 2000, it is $36.6137.

The conversion factor is the dollar figure that HCFA uses to translate the relative value units (RVUs) in the Medicare fee schedule into Medicare-allowed amounts. Generally, the conversion factor multiplied by the total RVUs for a service equals the amount Medicare will pay participating physicians for that service, unadjusted for geographic differences.


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Copyright © 2000 by the American Academy of Family Physicians.
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