The saying that an ounce of prevention is worth a pound of cure is especially true when it comes to delivering a healthy baby at the end of a high-risk pregnancy. Diabetes, infections or other complications greatly increase a pregnant woman’s chances of delivering a premature or sick infant. Fortunately for expectant mothers and fathers, proactive care from an experienced perinatologist can significantly improve the odds of delivering a healthy baby. For employers who bear the financial burden and social responsibility of providing health and disability insurance coverage to workers, this is good news.
A perinatologist is an obstetrical subspecialist concerned with the care of the mother and fetus that are at higher-than-normal risk for complications both during the pregnancy and up to one month after delivery. A high-risk baby might be cared for by a perinatologist before birth and by a neonatologist after birth.
“One really sick baby can incur hundreds of thousands of dollars in insurance costs,” says Dr. Patrick Walsh, director of neonatal intensive care at Western Medical Center Anaheim. “So having healthy babies is good for business leaders and the community.”
“We are able to treat many of the conditions that lead to premature births,” says Dr. Nandi Wijesinghe, medical director of obstetric services at Western Medical Center Anaheim. “The earlier a patient seeks treatment, the less likely it is that the baby will have complications at birth.”
Smart Business spoke with Walsh and Wijesinghe about these concerns.
What constitutes perinatal services?
Walsh: Perinatal services are provided by a highly specialized team, including a board-certified physician and a trained nursing staff. This type of care is critical because it’s difficult for premature infants to recover, and if things go wrong at birth, they go wrong very quickly. So it’s imperative to have specially trained personnel who attend to the patient over the course of her pregnancy and who will be on the premises of the medical center ready to step in, if needed, during labor and delivery.
What should patients consider when selecting a medical center and physician for peri-natal care?
Walsh: I would evaluate the level of staff interaction and how staffers respond to your questions, because you really want to be treated like a person not a number and you want answers to all of your questions. Also, it’s important to ask who will be attending the delivery. You don’t want a situation where the perinatologist or an anesthesiologist is on standby waiting for a call to come to the delivery room, because time is of the essence under these circumstances. Frequently, I wait outside the delivery room door just in case I’m needed when one of my patients is delivering. Also, mothers-to-be and fathers-to-be should ask which physician will be on call just in case the mother delivers when the perinatologist is on vacation. Also, ask how the doctor will transfer the information about the case to another doctor, should delivery occur while the patient’s regular perinatologist is away.
Wijesinghe: At large medical centers like tertiary medical centers and teaching hospitals, patients frequently are cared for by a team of physicians or an intern with limited hands-on experience. It’s important to have a continuum of care, from the physician’s office all the way through delivery. I believe that patients and infants fare better with a greater level of one-on-one attention that is afforded by a private practice perinatologist.
What are the positive outcomes that result from early treatment by perinatologists?
Wijesinghe: The likelihood of a baby having complications at birth is greatly reduced when high-risk obstetrics patients are under the early care of a perinatologist. This can reduce infant morbidity and mortality rates. The best outcomes are achieved by doctors who deal with these types of complications on a daily basis.
Walsh: New knowledge and practices improve the treatment for patients with high-risk pregnancies and premature infants. Patients need to be under the care of a specialist who is constantly focused on implementing new techniques in order to benefit from the resulting improved outcomes.
How do Orange County businesses benefit from this availability?
Walsh: Newborn intensive care is one of the most expensive forms of medical treatment available. The impact of caring for a sick infant can last for years, decades or even a lifetime. So having a preventive program available locally can make a huge difference in direct costs to businesses and help employees stay worry-free and productive.
Wijesinghe: In many areas, patients have to be referred out for this kind of medical care, which further increases the cost to employers and the anxiety level for patients. In poorly managed medical situations, the welfare of the mother and the infant can be compromised quickly. When we do our job effectively, the frequency of complications is reduced, and everyone benefits. For more information about prenatal care, contact Western Medical Center Anaheim.
DR. NANDI WIJESINGHE is medical director of obstetric services at Western Medical Center Anaheim. Reach him at (714) 774-8870.
DR. PATRICK WALSH is director of neonatal intensive care at Western Medical Center Anaheim. Reach him at (714) 502-1144.
When launching a new business venture, you must decide what form of business entity will provide the greatest tax savings and the best return to owners and investors.
An initial public offering (IPO) is often regarded as the coveted prize at the end of the rainbow for many entrepreneurs, so the firm is structured as a C corporation. But upon reaching success, many businesses are sold before going public. Structuring as a C corporation might eliminate some of the tax advantages that could be realized in the short term as an S corporation or a partnership, and it may result in double taxation when the business is sold, says Brad Graves, partner-in-charge of the Tax Group at Haskell & White LLP.
“Many entrepreneurs are leaving benefits on the table when they assume that an IPO is the endgame they seek, when a partnership structure might provide the best tax benefits today without diminishing the end result tomorrow,” says Graves.
Smart Business spoke with Graves about the tax advantages of the various business entities.
How do C corporations, S corporations and partnerships differ in flexibility?
For C corporations, income and losses are reported and taxed at the corporate level and profit distributions are generally characterized as dividends. There’s no deduction for profit distributions at the corporate level, because dividend income is allocated to the shareholder who recognizes the dividend at fair market value when reporting it for individual income tax purposes. Any noncash distributions trigger a gain at the corporate level.
As S corporations, a business’s income and losses are passed through to the shareholder level and allocation is equal for all shares. Noncash distributions trigger a gain at the corporate level that is then passed through to the shareholders. However, this increases the shareholder’s stock basis, which will eventually offset future income or generate a loss when the stock is sold.
As a partnership, a business’s income may be allocated among the partners with various preferences, guarantees and tranches in order to reflect the agreed upon economic sharing of the partners, as long as certain safe harbor provisions are met. In addition, noncash distributions do not generally trigger a gain.
What are the differences in taxation of operating income between the three?
C corporations are taxed on operating income at the corporate level, which can climb up to the maximum federal rate of 35 percent, and the lower capital gains tax rate does not apply for corporations. Capital losses are allowed up to the level of capital gains and can be carried forward five years or backward three years.
In S corporations and partnerships, all income is passed through and reported and taxed at the shareholder or partner level. Capital gains and losses are taxed at the shareholder’s or partner’s capital gain rates and subject only to the limitations at the shareholder or partner level.
What is the difference in how business losses are treated?
If you think that the business will be generating losses, at least for a while, it’s important to consider how they will be treated for tax purposes. For C corporations, losses may only be carried over at the corporate level. While S corporations pass losses through to the shareholders to the extent of stock basis, plus basis in shareholder loans to the corporation. However, if the firm will be heavily leveraged, a partnership may be preferable. Partnerships can utilize losses in much the same way as S corporations. Losses pass through to the extent of basis in partnership interest (capital account plus allocable share of debt, including debt from banks and other third parties) with one caveat that ‘at-risk’ limitations will limit losses funded by nonre-course debt unless it is ‘qualified.’
How do the three entities differ in the tax implications resulting from the sale or liquidation of the business?
A sale or liquidation of the assets by a C corporation results in double taxation. The corporation realizes gain or loss from the sales of the assets, pays corporate income taxes and distributes the remaining assets to the shareholders, who will be taxed on the proceeds they receive.
The S corporation is regarded as a ‘single-taxation’ entity when the business is sold, so gains or losses resulting from the sale are passed through to the shareholders, who report the income and losses and pay the taxes. Stock basis is increased, thereby reducing gain on stock redemption.
In the event of a liquidation of a partnership by distribution of the assets to the partners, no gain or loss is generally recognized so there’s no tax. In the event of a sale of the partnership’s assets, gains and losses at the partnership’s level are passed through to the partners, who report the income and losses and pay the taxes. The partners’ bases in their partnership interest receive a corresponding increase or decrease, thus ensuring only a single level of taxation.
BRAD GRAVES is partner-in-charge of the Tax Group at Haskell & White LLP. Reach him at firstname.lastname@example.org or (949) 450-6200.
After decades as a dormant, little-understood employee benefit, retirement plans are having a profound impact on businesses nationwide. The Pension Protection Act of 2006 (PPA) and the continued escalation of the so-called global war for talent has accelerated the need for companies to review how their retirement plan dovetails with their business plan.
“The PPA provides clarity around the rules for defined-benefit and defined-contribution plans, and that has created many new opportunities for companies,” says Christine Tozzi, Retirement Practice Leader with Watson Wyatt Worldwide. “In the last 18 months, most employers have made certain that their retirement plans have financial characteristics that manage risk, and benefit designs that help them attract, retain and motivate workers as well as enhancing their ability to retire employees at the right time for the business.”
Smart Business spoke with Tozzi about how CEOs can maximize the business value of employee retirement plans.
What are the current trends around retirement plan design?
Most CEOs are familiar with two types of pension plans: defined-benefit (traditional pension) plans and defined-contribution plans such as 401(k) plans.
A defined-benefit plan typically promises the participant a specified monthly benefit at retirement. The plan sponsor funds the program in a tax-advantaged trust and is ultimately responsible for the investment outcomes of plan assets. In a defined-contribution plan, the employee, the employer, or both contribute to the employee’s account. The ultimate value of the account will vary, based on the performance of the investment vehicles used for the funds.
One trend is a continued shift toward defined-contribution plans. Additionally, there have been many plan design changes to the traditional 401(k) that reflect opportunities from the new pension law. For example, companies install automatic enrollment features in their 401(k) plans. These plans increase employee participation by providing a default decision to participate in the plan, with a positive election needed to withdraw from the plan, which, in turn, encourages them to save more.
The second trend is that companies that sponsor pension plans are making changes to investment strategy and program design to capitalize on new approaches for minimizing financial risks. Risks such as interest rate, inflation, investment return and longevity can be mitigated with the right investment strategy and design. This explains the movement toward hybrid pension plans, a type of defined-benefit plan that offers various blends of defined-benefit and defined-contribution characteristics. They can ultimately offer substantially decreased financial risks to the company.
How can CEOs align retirement plans to the business plan?
If your business model relies on experienced employees, your retirement plan should pay greater dollars for tenure. Certain types of pension plans are effective in attracting mid-career workers and retaining older workers. If, on the other hand, the business model supports employment stays of five years or fewer, you should consider more of a portable hybrid defined-benefit plan or a defined-contribution benefit to attract those types of workers.
How can CEOs obtain ROI from pension plans?
Labor is frequently a company’s largest expense. Retirement plans can act as ‘levers’ in controlling the flow of people into and out of your company. Having a well-designed retirement plan will not only help attract and retain workers, but will also create more predictable retirement patterns among the company’s work force.
Studies show that installing a combination plan that offers a 401(k) coupled with a core-level pension can provide more predictable retirement patterns and increase the efficiency of providing retirement benefits. There are also links between retirement benefits and worker productivity. Also consider investing in education that improves employees’ retirement plan management skills so they actually can retire when the time comes.
How can management help employees manage their retirement plans?
- Communication and education are the best ways to help employees become effective managers of their own retirement funds.
- Provide targeted retirement plan statements to employees.
- Provide modeling tools so employees can track the performance of their retirement funds and forecast the amount of money available for retirement.
- Make advisory services available to employees that assist with asset allocation and projected retirement incomes from investments.
- Educate employees about updated life expectancies and projected changes in Medicare and Social Security.
CHRISTINE TOZZI is Retirement Practice Leader with Watson Wyatt Worldwide. Reach her at email@example.com or (415) 733-4346.
Hospice was originally envisioned to be a noninstitutional benefit that would provide end-of-life support for patients and their families. Because hospice care was primarily designed to be administered in an in-home setting, many people may not be aware that patients in acute care facilities can also receive the benefits of hospice.
Patients who are too frail to go home or who enter an acute care facility when the end of life seems imminent can qualify for hospice services. Medicare provides coverage for hospice, including the cost of the hospital stay and limited medications. Hospice not only offers hospice-trained nursing staff but services for the patient’s emotional needs, including scheduled visits from case managers, social workers and bereavement counselors, who extend their services to the entire family.
“Sometimes, it’s not best to transfer the patient to a long-term care facility, and it may not be feasible to send them home. That’s when extending their stay in an acute care facility like a hospital might be the best decision for the patient and his or her family,” says Dr. Raj Menon, medical director with Hospice Care of the West and staff physician with Coastal Communities Hospital.
Smart Business spoke with Menon about the benefits of hospice, and when patients are eligible for in-patient hospice care.
What is general in-patient hospice care?
Traditionally, when a terminally ill patient was hospitalized and death was imminent, that patient was discharged, returning home or to a nursing home or freestanding hospice unit for end-of-life care.
With in-patient hospice care, we are able to keep the patient in the acute care environment and extend the hospice continuum of care for 48 to 72 hours until either death occurs or the patient has a change of condition that permits his or her transfer to a long-term care facility.
When is in-patient hospice care appropriate?
If the patient is too frail, either physically or emotionally, to permit transfer to another location, or if the patient doesn’t have the immediate support of caregivers who can provide 24-hour care at home, it often makes sense to keep the patient in the acute care facility.
Frequently, the patient is initially admitted into emergency and then into the intensive care unit, where he or she is fully evaluated and the prognosis becomes clear. It isn’t uncommon to see a patient in the end stages of cancer develop other medical conditions, like infections, that require hospitalization for treatment. Often, the perception is that patients don’t receive any treatment for their conditions once they enter hospice. In this case, we can still aggressively treat the infection because the treatment will provide comfort to the patient and we can do that more effectively using an in-patient setting.
What are the care advantages of in-patient hospice treatment?
Hospital-based in-patient hospice units can be part of the comprehensive care of cancer and other end-stage diseases. The unit provides continuity of care within the same care setting. Environmental and psychological adjustments will be minimized for patients and their families, and the transition of care is smoother from the perspective of health care workers. Not only is the communication and transfer of medical information easier when the patient stays in the same facility, but the same physician can follow the case, assisted by a hospice-trained nursing staff that is on duty 24 hours a day. Additionally, the medical director for the hospice can also assume management of the case.
Patients receive fluids and antibiotics intravenously if necessary, as well as tube feedings, pain medications and mild rehabilitation to keep them comfortable. The family will immediately receive palliative care, including all of the counseling benefits that are part of the hospice program and should their loved one pass away they can continue to receive counseling for a period of 13 months following death.
Are in-patient hospice programs readily available?
Not all acute care facilities offer in-patient hospice treatment, but if the situation arises where this is the best solution for a member of your family, you can request transfer to a facility that offers the service. You may also request a consultation with a hospice professional to determine where you can find the most convenient acute care facility that offers an in-patient program.
The community benefits having in-patient hospice care as an option because the patient can be more at ease, and the family is reassured that the end of life will occur in a comfortable setting.
DR. RAJ MENON is medical director with Hospice Care of the West and staff physician with Coastal Communities Hospital. Reach him at (714) 556-6666.
This news is even more disappointing when factoring in that the number of employers offering consumer-directed health care plans (CDHP) continues to grow. In the same survey, the number of companies offering high-deductible health plans increased from 33 percent in 2006 to 38 percent in 2007.
A bright spot in the survey was the revelation that some firms are beating the odds and reducing the rate of increase from an average of 8 percent to 2.5 percent. Watson Wyatt Worldwide explored how these firms had gone about achieving that result.
“The best performing companies in the survey were more likely to implement programs that go beyond employee cost sharing,” says Dean Hatfield, senior benefit consultant for the Group Healthcare Practice at Watson Wyatt Worldwide. “They have involved the use of financial incentives, effective information delivery, efficient quality of care, maximum health and productivity, and decisions based upon data and metrics.”
Smart Business spoke with Hatfield about how the best performing companies are achieving better cost management results through comprehensive solutions.
What are the best companies doing to curb the rate of health care cost increases?
One of the most efficient ways for companies to curb their health care trend is by improving quality. When employers looked at the outcomes from medical facilities such as hospitals, they began steering employees toward hospitals and physicians that specialized in the employees’ needs for procedural or condition-related treatments. Consequently, the patients had fewer complications and lower mortality rates.
Rather than shopping for the lowest rate, employers looked at the available data and made decisions based upon medical outcomes. Not only were results better, but costs were lowered.
What other types of data should CEOs look at to help reduce health care costs?
The best companies looked at the data surrounding their employees’ health issues, such as employee absenteeism and the effect of employee wellness on productivity, to help structure their health programs and didn’t just focus on the aggregate cost of their health program.
For example, firms have found that obesity is the cause behind many illnesses and subsequent rising costs, including lost time. So now they are doing a better job of instituting programs that promote behavior changes. They are creating customized communication pieces tailored to defined employee segments with relevant and meaningful messages that teach employees the health conditions that can be improved or even avoided.
How important is employee education for achieving cost reduction?
It’s absolutely vital. The survey results show that most employees don’t understand key terms in their health plans like ‘co-insurance’ or ‘formularies.’ Because they don’t understand how their health coverage works or how they might benefit from selecting cost-effective health care services, employees are not effective cost management partners.
Merely cost-shifting to employees is clearly not enough. You have to educate them so they can become better managers of their own resources and their own health. The data also show that only about 50 percent of the employees read all of the materials provided them about their medical coverage and the other 50 percent only read the enrollment insert or plan changes.
What is the best way to provide information to employees?
The survey says that the most effective way to communicate with employees is by sending information in printed format to their homes (69 percent). Other effective means include providing information in printed format at work (67 percent), via the Internet (62 percent) and in face-to-face meetings (44 percent).
Research is key to making communication messages relevant and meaningful. Face-to-face education sessions are the most effective communication method, and different marketing techniques can maximize the attention spent on health care.
Teaching employees about not just the cost of care, but the value of changing their health behavior, is more effective if the education sessions are live and interactive.
Most employers are focusing on plan design and cost-sharing. It is effective in the short run but not in the long run. The best savings in the long run are being achieved by providing personalized, tailored programs and resources that inspire employees to take action; keeping health improvement behaviors on track; and boosting individual accountability through employee education and promotion of best practices.
DEAN HATFIELD, CEBS, is a senior benefit consultant for the Group Healthcare Practice at Watson Wyatt Worldwide. Reach him at (415) 733-4100 or firstname.lastname@example.org. For more information, visit www.watsonwyatt.com.
Bloodless medicine refers to the use of devices, techniques and careful preparation that enable patients to lose less blood especially during surgical procedures. The result is that many patients are able to undergo surgery without external blood transfusions.
The statistical outcomes for patients who have fewer transfusions during surgery are better. Patients also are learning that risk avoidance is a medical benefit resulting from the bloodless techniques, regardless of their religious beliefs.
“We started treating patients with bloodless techniques here in Orange County in the early 1980s, so we have a great deal of experience,” says Dr. Vinod Malhotra, medical director of the Bloodless Medicine and Surgery Program at Chapman Medical Center. “Because 60 percent of surgeries are elective and preplanned, the benefits achieved through elimination of blood transfusions are obvious. Patients just need to be educated and learn to ask for them from their physicians.”
Smart Business spoke with Malhotra about what patients should know about bloodless medicine and its related benefits.
What are the advantages of bloodless medicine?
First of all, there is less risk of contracting a blood-borne disease. While today we are able to detect the presence of many viruses such as HIV in transfused blood, there was a time when we were not able to do so.
Unfortunately, many patients contracted HIV and hepatitis C through blood transfusions. What we do know, is that by avoiding transfused blood altogether, patients contract fewer diseases.
Also, an allergic reaction occurs in 4 to 10 percent of all patients who receive a transfusion. Studies have shown that patients who receive banked blood experience increased adverse outcomes and longer hospital stays. Accordingly, the cost of treatment goes up.
In addition, there is now growing evidence of the clinical adverse effects of blood transfusions on a patient’s immune system. Studies have also shown that exposure to red blood cell transfusions increases the risks of the recurrence of cancer and the development of post-operative infection.
Is there a quality differential with transfused blood?
Yes, there certainly can be. Blood actually ages and legally, it can still be transfused up to 42 days after the date of donation. When we examine red blood cells under an electron scanning microscope, what we observe is that after 20 days, the red blood cells actually start to shrink so the blood loses its vitality.
Unfortunately, sometimes due to shortages, not every patient requiring a transfusion receives freshly donated blood. Trauma centers need and use the most blood, so they have it on hand; consequently, they frequently transfuse some of the oldest blood to, ironically, the sickest patients.
This is also the problem with patients attempting to donate and store their own blood prior to surgery. Patients often may need to donate several units, but it requires about a month to donate that amount of blood safely. By the time of the surgery date, the blood has aged and become stale when it is transfused.
What makes bloodless medicine surgical techniques unique?
Prior to elective surgery, the surgeon should work with the patient to build up his or her red blood cell count. Patients should avoid aspirin and other blood thinners to help reduce bleeding during the procedure.
Surgeons can further minimize blood loss by using alternative surgical techniques, such as carefully avoiding bleeding during surgery and using a laparoscopic approach.
Additionally, surgeons may use a machine called a cell saver that actually siphons away a patient’s blood that is lost during the procedure, cleans it, separates out the red blood cells and reinfuses the cells into the patient. These machines are available to hospitals, so patients should ask their surgeon to make arrangements to use the machine prior to surgery.
What differentiates one bloodless program from another?
A team approach at the hospital and the amount of experience of the surgical staff with the bloodless techniques is a vital component to outcomes, as is the willingness of the surgeon to use them.
Patients should not only ask about the experience of the medical team and their outcomes but make certain that the surgeon understands the philosophy and the patient’s wishes.
More than 89 percent of patients say they prefer not to have a transfusion during surgery. Considering the risk reduction, bloodless medicine just makes sense.
DR. VINOD MALHOTRA is medical director of the Bloodless Medicine and Surgery Program at Chapman Medical Center. Reach him at (800) 970-9470. For more information visit www.chapmanmedicalcenter.com/Bloodless.
For CEOs, success is predicated on the growth of the organization’s top and bottom lines. The sales force is usually accountable for the lion’s share of the required revenue increases, and they are often motivated toward the goals that are outlined in the variable compensation plan.
Although sales compensation needs to be considered a strategic endeavor, it becomes a tactical one when CEOs quickly attempt to fix the compensation structure if they find that it is not producing the desired results. So says Scott Barton, senior consultant with Watson Wyatt Worldwide. He says that there are three traditional reasons behind a CEO’s quest to find a better sales compensation structure: incentive expense is too high in relation to revenue growth; plan designs are inconsistent, fragmented or unclear across the organization; and sales management believes cash pay-out opportunities are not competitive.
“Our research shows that a number of factors define high-performing sales teams versus low-performing ones,” says Barton. “As we start to look under the hood at sales compensation, we often find a disconnect between the desired performance and the financial incentives.”
Smart Business spoke with Barton about the current trends in sales force compensation and how CEOs can align financial rewards with the company’s business strategy.
How can CEOs structure global compensation for sales?
Find the appropriate balance between global consistency and local specialization. A global structure should include a common comp philosophy and set of metrics for monitoring plan effectiveness. Local managers depend not only on competitive total pay opportunity for finding and keeping sales talent, but also a plan structure that fits with regional norms. Local attitudes toward at risk pay and tax policy are common differentiators.
Getting a handle on how each region pays its various sales roles is a huge endeavor in a fragmented, global sales organization.
Ultimately, though, the CEO needs to measure and compare the sales comp ROI from each geographic region. What matters for most companies is growth growth in revenue, profit and acquisition of new customers.
CEOs need to understand what's limiting growth. Sometimes it's the company's best customers. Watson Wyatt research shows that salespeople in poor performing companies spend much less time acquiring new business than their high-performing counterparts. Companies with a culture for business development have an edge for growth. The energy of high-growth sales teams and cultures contrasts sharply with that of organizations engrained in account management.
By comparing key growth stats, monitoring pay and performance results and experiencing first hand the sales culture in each region, the CEO should have a good foundation for building a global sales compensation structure.
Are CEOs including a broader base of employees in variable compensation?
We are seeing a trend toward inclusion of staff not traditionally eligible for variable pay plans. Drivers include creating a performance-based culture, greater sense of urgency and teamwork. For example, operational teams and IT project managers might now have a portion of their pay tied to goals that contribute to sales productivity.
There’s also a movement toward team-based compensation that includes employees who have a direct effect on customer retention and the overall customer experience. In the past, sales and those responsible for customer satisfaction were measured and compensated separately; now, some plan elements cross over, creating greater focus, accountability and synergy.
How can CEOs align sales compensation with the company’s goals?
Make certain the salespeople can influence and are accountable for the company's goals. A common disconnect is to include in the incentive plan measures for which the reps have limited influence, such as profitability or product mix. The goal is to pay salespeople for what's important to the company. To hold back pay from otherwise productive salespeople because of poorly performing lines of business is a dead end. Effective salespeople go to where they can influence their results and income.
What’s the best way to structure a plan to drive sales force effectiveness?
Plan design should be centered on how you want the sales people to spend their time. Compensation should be directly connected to results. Quotas are the bridge. Putting sufficient pay at risk into the plan on average about 30 percent of the target pay should be variable helps keep employees engaged and contributes to meaningful pay-for-performance relationships.
SCOTT BARTON is a senior consultant in the Compensation Practice of Watson Wyatt Worldwide’s San Francisco office. Reach him at (415)733-4263 or email@example.com.
Patients who are recovering from illnesses or accidents often find that the type of care that they require falls into a gray area when they search for providers. Hospitals, known as acute care facilities, are not geared toward long-term recovery needs, and nursing homes often do not have the right staff or treatments to improve the patient’s condition. The subacute care unit has emerged, fulfilling the need for many patients at a lower cost.
The Web site of the American Health Care Association defines subacute care as follows: “Subacute care is generally more intensive than traditional nursing facility care and less than acute care. It requires frequent (daily to weekly) recurrent patient assessment and review of the clinical course and treatment plan for a limited (several days to several months) time period, until the condition is stabilized or a predetermined treatment course is completed.”
Many patients enter the subacute unit with tracheostomy tubes or gastrostomy tubes, and after aggressive treatment the tubes often can be removed, says S. Salman Naqvi, M.D., medical director and pulmonary critical care specialist with the Subacute Unit for Coastal Communities Hospital.
Smart Business asked Naqvi what CEOs should know about subacute care.
What is the subacute level of care?
For patients who need to transition from an acute care facility, the subacute unit offers a complete course of treatment, which is generally more intensive than a skilled nursing facility. We often treat patients who may have suffered a head injury or need wound care or aggressive pulmonary hygiene. Some enter the facility in a persistent vegetative stage.
We offer an aggressive course of treatment that includes medical care as well as full rehabilitation services such as speech therapy, physical therapy including full range-of-motion exercises and social stimulation.
How does the subacute unit differ from a nursing home?
Nursing homes, or skilled nursing facilities, tend to offer services that are more custodial in nature, and the physician is only required to make monthly visits. In our unit, the patients are seen by a physician every week, and there is a physician on duty every day. We engage in an aggressive course of treatment designed to rehabilitate the patient.
We also employ a teamwork approach in designing and executing a course of treatment and consequently the nurses get to know the patients very well. I meet with the nurses daily, and we discuss each case. Once a month, the entire team, including physical therapists, dieticians, pharmacists and social workers, meet with the patient’s family to review our course of treatment. Family members are very important to patient recovery, so it is important to include them and get their feedback as to how the patient is progressing and can best be treated.
Who can benefit from a subacute unit?
Patients range from 20 to 90 years of age. Some often stay for a few months on a transitional basis, while others actually stay for extended periods of time. Our fees are anywhere from 40 percent to 60 percent less than acute care hospitals, so we offer a cost-effective solution.
How does the subacute unit treat the ‘whole patient’?
We have an activity department, and each patient is taken to the activity room where he or she can watch movies, play games, or listen to stories to create mental stimulation. We also give showers and baths instead of bed baths, and our social services team is involved with the physicians as well.
In an acute facility, the patients often can become depressed; by treating the needs of the ‘whole patient,’ we help to lessen depression.
In addition, we don’t like to over-treat the patients. If they come into the facility with a catheter or an IV line, we work to get those removed as soon as possible. Our goal is to rehabilitate the patient so he or she can be released and returned to a quality lifestyle.
S. SALMAN NAQVI, M.D., is medical director and pulmonary critical care specialist with the Subacute Unit for Coastal Communities Hospital. Reach him at (949) 548-3177.
As executives plan for their retirements and ways to secure their families’ futures, they have traditionally set up wills and trusts to pass along wealth to their children and to mitigate tax consequences.
These types of estate-planning documents can provide peace of mind for executives, along with financial security.
A relatively new way to pass along a sense of ethics and values that helped to create the family wealth is the Family Incentive Trust (FIT). The FIT provides more than just a vehicle to distribute assets; it establishes a framework that correlates to the beliefs of the grantor and helps reduce the worry that heirs will make errors or life choices that are not reversible.
Executives and CEOs who have worked hard and put a great deal of effort into building their wealth don’t want a child to become a less-than-productive member of society because of a significant inheritance, says Kerry-Michael Finn, vice president of financial planning for the Western Market of Comerica Bank.
Smart Business spoke with Finn about how FITs can help high-net-worth individuals assure the future for their families.
What is an FIT?
An FIT is a trust that passes along assets to the next generation, while trying to minimize potential negative effects. For example, the trust may specify that the inheritance be passed along through income matching or it can be distributed based upon clauses that require the heirs to achieve specific education levels or contribute community service time.
Income matching can be very valuable, because it may allow an heir to pursue a career in teaching or philanthropy that might not otherwise be an affordable option. It is also possible to tie monetary rewards to other achievements, such as refraining from drug or alcohol abuse or raising a family. Monetary awards can also provide the capital to make a down payment on a home or start a business.
How can CEOs benefit from having an FIT?
If the family business is privately held, it may be possible to pass along the ownership through the trust and preserve the same values that built the business. Even if the wealth has been built through a career in public companies, the concept of transferring values as well as cash can still be achieved.
How can I make certain that an FIT is a positive motivation for my heirs?
This can be accomplished by making certain that the document is flexible enough to accommodate a variety of circumstances while allowing each heir to become successful in his or her own way. For example, placing a requirement of obtaining a four-year university degree might not be achievable for everyone, but receiving a certificate through a trade or technical college as a substitute might be the type of incentive that will transfer the value without placing an unreasonable restriction on the heir.
If I currently have an existing trust, can it be amended to include an FIT?
In some cases, yes. Incentive language can be added or incorporated into an existing trust document. It may be best to review the existing trust as some tax laws may have changed since it was originally drafted, so it might be more efficient to draft a new document.
What measures can I take to make certain the FIT is flexible enough to handle unforeseen circumstances?
When an FIT is created as an irrevocable trust, it has a safety net built in, because the assets in the trust are not considered as assets of the beneficiary and generally cannot be attached by creditors or subject to division through a divorce decree.
The standard provisions of an FIT allow for additional distributions based upon the need for health, education or maintenance and support by the heirs. In addition, the FIT allows for additional distributions at the discretion of the trustee.
I normally recommend that the trustee be a family friend, attorney or accountant along with an institution. In these cases, having a family friend and an institution serving as co-trustees can be beneficial, because the institution will outlive the individual trustee. It is always good to start the process well in advance, so that the staff at the institution can get to know you and your values and thus make decisions and interpretations that they believe are in line with your core beliefs. I also recommend that grantors draft a letter or statement that very specifically states their beliefs and wishes for this trust.
KERRY-MICHAEL FINN is vice president of financial planning for Comerica Bank. Reach him at firstname.lastname@example.org or (714) 424-3823.
In the hectic times that accompany the launch of an entrepreneurial venture, often the last consideration for the CEO is how to establish a structure that will maximize the value of the business when it is eventually sold. However, if there was ever an opportunity to “begin with the end in mind,” it is before the first sales are actually booked, new client contracts are signed and the form of business entity is chosen.
As the business grows, knowing how the value of a business will eventually be established is vital when making decisions that will maximize the purchase price when the time comes to sell the business.
“If you wait until you receive an offer, it may be too late or very costly to remedy the situation,” says Steven J. Untiedt, a partner with Procopio, Cory, Hargreaves & Savitch LLP, a San Diego law firm. “I have heard some investment bankers estimate that the value of the business can be reduced by as much as 25 percent or more if you don’t anticipate and structure correctly in advance of a sale.”
Smart Business spoke with Untiedt about what CEOs should know as they establish a new business, or how they can take the necessary steps to re-position their existing company.
How can a lack of planning affect the purchase price of a business?
The purchase price of a business is often determined using the company’s earnings before interest, taxes, depreciation and amortization (EBITDA). The value of a business may equal some multiple of EBITDA, which varies depending on the type of business and industry that you are in. Therefore, anything that negatively affects earnings will have a significantly greater negative impact on the purchase price of your business. For example, if an important customer contract cannot be assigned or transferred to the buyer, the buyer will significantly discount the purchase price because of the negative impact on the potential earnings of the business. Sometimes going back and fixing these problems can be very costly.
Why does the form of the business entity matter upon a sale?
When it comes to closely held corporations, most buyers are interested in purchasing the assets of the company; they are not interested in acquiring ownership of the entire company by purchasing its stock from the shareholders.
If the founders initially elected to incorporate as a ‘C’ corporation, there will be two levels of tax that will levied upon the proceeds of the sale; one at the corporate level (because the corporation will recognize income upon the sale of its assets) and one at the shareholder level when the net sales proceeds are distributed to the shareholders as a dividend. As a result, the shareholders could end up with 35 percent to 40 percent less than they would otherwise have received, after taxes.
Is there any way to mitigate the adverse tax consequences of being a ‘C’ corporation?
Certainly paying attention at the outset and electing to establish the entity as a tax ‘pass-through’ entity (such as an ‘S’ corporation or limited liability company), when possible, is the best way to go. An ‘S’ corporation can always convert to a ‘C’ corporation in the future, if the need arises. Initiating any of these solutions sooner rather than later, before the business appreciates significantly, would be prudent.
At the time of sale, it may also be possible to negotiate an allocation of the purchase payments for tax purposes that lessens the adverse tax consequences.
How can CEOs best structure client agreements to obtain a maximum value when the business is sold?
Make certain that you pay attention to the boilerplate provisions in any agreements that the company enters into, such as those provisions that relate to assignment of the contract. It is best if these agreements give you the ability to assign the contract to others upon the sale or a merger of the company, and that the assignment can be accomplished without requiring the approval or consent of the other party to the contract. The value of a contract will be discounted if its assignability is in doubt.
How can promising someone an ownership interest in a closely held company affect the sale?
When a commitment of stock or other equity in the company is made to a key employee or some other person or entity, without properly documenting it, CEOs often do not anticipate how that will play out upon a future sale or merger especially in the early days when the business is struggling. Even oral or ‘napkin’ promises may be enforceable. The ownership of the company must be clarified and documented prior to any sale or merger, and you may have to obtain a release from any persons or entities who claim an ownership or other interest in the business.
STEVEN J. UNTIEDT is a partner with Procopio, Cory, Hargreaves & Savitch LLP. Reach him at (619) 515-3281 or email@example.com.