The Magnificent Seven Considering Making the Jump to Private Practice? First Make Sure You Nail these Seven Must-Dos for Success. Features
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Features  |   January 01, 2014
The Magnificent Seven
Author Notes
  • Denise Dougherty, MA, CCC-SLP
    is past president of the American Academy of Private Practice in Speech Pathology and Audiology and the organization’s liaison to ASHA’s Health Care Economics Committee. She is also an afliate of ASHA Special Interest Groups 13, Swallowing and Swallowing Disorders; and 15, Gerontology. ·doughterty1952@yahoo.com
  • Janet M. Krebs, MS, CCC-SLP
    is director of Communication Therapy Center in Glen Rock, N.J., and a past president of the American Academy of Private Practice in Speech Pathology and Audiology. · janet@speechspecialties.com
Article Information
Practice Management / Professional Issues & Training / Features
Features   |   January 01, 2014
The Magnificent Seven
The ASHA Leader, January 2014, Vol. 19, 42-46. doi:10.1044/leader.FTR1.19012014.42
The ASHA Leader, January 2014, Vol. 19, 42-46. doi:10.1044/leader.FTR1.19012014.42
You’ve had a solid 10-years-plus career as a speech-language pathologist in schools or health care. You enjoy what you do but want more flexibility in your schedule, so you’re looking at going private. It’s a big step, with lots of financial considerations and risks, so you want to start with just a few private clients. What are the bare essentials you need to get rolling?
Before you do anything else, have an honest conversation with yourself. Private practice is not for everyone, and even if you are doing it part-time, it requires time, money and effort. The Small Business Administration offers a useful list of 20 questions to consider before starting a small business (bit.ly/sba20questions).
Also refer to my September 2008 ASHA Leader article, “Transitioning to Private Practice” (on.asha.org/practice-transition), which lists numerous resources to consult as you consider private practice.
seven steps to success
If you can confidently answer the SBA’s 20 questions and feel ready to make your move, you need to make sure you have seven important elements.
1. Build a cash reserve. Having a secure money supply is especially important if you plan to practice full-time but is also a good idea if you are practicing part-time. A part-time practice needs less reserve, assuming you’ve kept your full-time position. Investigate a line of credit with your bank and use it only for emergencies. Banks determine your line of credit based on your credit history. They may want to review your business plan. You might aim for the equivalent of one month’s living expenses to give you some financial security. For a full-time practice, you might aim for sufficient funds to cover two months’ living expenses. Some part-time practitioners charge start-up costs to their credit cards. But credit card interest rates are much higher than those associated with a line of credit.
Once you’ve decided to move forward with a practice and are going through the preparation steps, put money into savings for start-up costs. If your credit is not the best, develop a plan to improve your credit rating. Contracts and clients may not consistently pay on time, and without a nest egg, your practice may not survive.
2. Make a decision about payment sources. Becoming a provider for public and private health insurance takes time. Companies want copies of your license, malpractice insurance, references and other documents, and the review process can take up to 120 days. Contact companies for their application. Some companies use the Council for Affordable Quality Healthcare to assist with the credentialing process. You need an National Provider Identifier number (https://nppes.cms.hhs.gov/NPPES) and a tax ID number for these applications. An NPI number is mandatory for billing insurance, and is separate from enrolling in health care plans. People often think when they get their NPI number they have enrolled in Medicare (on.asha.org/npi-reimbursement), but the processes are separate. Social Security numbers can be used or apply for an Employer Identification Number at www.ein-gov.us. If you use a company name, consult bit.ly/name-registration to determine if the name is available. Your attorney also could do this for you.
If you see Medicare patients, federal law requires that you be enrolled as a Medicare provider. There are no “opt-out” provisions for SLPs that exempt them from billing Medicare. Even if the patient submits the claim to Medicare on his or her own, the patient must include the NPI of the Medicare-enrolled provider who performed the services. Failure to submit a claim within one year of providing a Medicare-covered service may result in civil monetary penalties.
Cash-only practices are easier to manage, of course, but clients may be financially unable to pay out of pocket or may not want to because they already pay for private insurance. Whether cash-only or reimbursement-based, be sure your policy is to collect at the time of service. Forgetting the checkbook can be a convenient client excuse week after week. Some clients prefer paying in advance for the month. Others prefer paying weekly. You may want to accept credit/debit card payments. A good resource for families paying their own way is Care Credit (www.carecredit.com), a credit card for health care expenses. There is an application process, but Care Credit makes it easier for families who have to pay out of pocket.
3. Establish a fee schedule. Your published fee—which must be consistent regardless of the payer source—can be whatever you want, but understand that insurance companies often pay a percentage of your fee (as delineated in your contract) and the client may or may not have a co-pay. The co-pay and negotiated fee usually don’t add up to your fee-for-service cost, and are documented in your accounts receivable as a contractual “write-off.” With a cash-only practice where you have not entered contracts with private insurers, your fee can be higher than what insurance might pay (except for Medicare beneficiaries). However, often clients decide to use their insurance benefits rather than pay out of pocket, especially if treatment takes more time than they expected. If you are not a provider that participates in their health insurance, they may choose to go elsewhere to use their benefits.
If you offer a sliding fee scale, the qualifications must be based on income, the inability to pay, or other non-discriminatory characteristics, not on insurance type or referral source.
Federal law requires that you bill Medicare beneficiaries no more than the Medicare rate for your geographic area. To find these rates, look for the Medicare fee schedule through your regional Medicare Administrative Contractor (on.asha.org/med-admin-resources).
4. Understand how to code and bill. Without correct coding of procedures you perform and services you provide, claims may be denied or reimbursement delayed. If you are a cash practice, clients may need a superbill—a standard form that health plans use to process claims (on.asha.org/superbill)—to submit invoices to their insurance company for reimbursement. ASHA offers numerous resources to help you understand reimbursements and coding, as well as a sample superbill to use in your practice (on.asha.org/practice-reimbursement).
5. Build your referral sources. Reach out with your business cards, brochures and other marketing materials. Spend time designing your logo and a marketing packet. SCORE (Senior Corps of Retired Executives, www.score.org) can help develop your marketing tools. SCORE offers webinars, templates, tools and mentoring. The Small Business Administration (www.sbaonline.sba.gov) also offers tools, e-newsletters and free online training. Or call the business department at your local college—many offer seminars on developing your marketing strategies and materials. Students majoring in business often are required to perform community service projects in marketing, which means free assistance. Remember, you must market and network consistently, even if you are part-time. Join organizations such as the chamber of commerce and other community organizations to network. Networking may take some time to pay off in the form of a referral, so it’s important to do it all year.
6. Purchase malpractice insurance and clearances. Protect yourself from possible lawsuits filed by clients. Companies such as Marsh (http://usa.marsh.com) and HSPO (www.hpso.com) offer malpractice policies.
If you provide services to other agencies, schools or other organizations, you must provide a copy of your malpractice policy. Referral sources may not refer clients until you provide the proper clearances, such as child abuse and criminal activity. Some jurisdictions and organizations require fingerprinting, which adds to the processing time. In Pennsylvania, the Department of Public Welfare receives the Federal Criminal History Record from the FBI. Fingerprints are forwarded to the state police and then to the FBI as required by federal statute. Your state may have a Childline and Abuse Registry for clearances (abuse and criminal history). In Pennsylvania, for example, schools require the Act 24 form regarding arrest and conviction. When you negotiate a school contract, hiring officials supply you with the forms or website links.
7. Check your vision. One thing never to stop doing is checking your vision and, if things aren’t working, inspect and tweak your plan. We all start out with a vision, but visions change over time. Rethink your stream of revenue. Investigate new referral sources. Market your practice. Join community organizations and network. Reassess your skills and continue your education. Learn new techniques and market those new skills. If you don’t change, your practice may not survive.
when to go beyond part-time
As you get going, keep an eye on how your business is progressing. Do you have more clients than you can handle part-time? Has your referral base grown? Are you able to make a profit? If so, it may be time to consider a full-time private practice. A full-time practice gives you more time for marketing your business. If your referral sources are pleased with your work and know you are expanding, additional work may be easy to find. If this is your direction, watch the nest egg. The extra time allows you to increase your marketing efforts, but in the meantime, those available slots are not generating revenue. The line of credit may be very important initially as you grow your business. It would be advisable to have two months of living expenses in a savings account to help you through this process (see first suggestion).
On the other hand, some part-time practitioners hire additional help rather than move into full-time. Hiring may work, but it comes with additional concerns. Are these staff members independent contractors or employees? You may have one view and the Internal Revenue Service or the state has the opposite determination. If you are unclear, complete IRS form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding (bit.ly/irsformss8). The IRS reviews the four-page document to establish employee or independent contractor status. If you misclassed your staff, your business is liable for employment taxes and fines. (See “Employer or Contractor?” on page 45).
If you decide to hire staff, work with an attorney to develop employment contracts, job descriptions, expectations (productivity, caseload, pay structure), and policies and procedures. Know how to document any concerns if performance is not up to your expectations, and how to terminate an employee if necessary.
Some practices have a profit margin of 20 to 30 percent built into their fees. As reimbursements decrease, you may need to reduce your profit margin. Profitability can improve by decreasing expenses, decreasing staff and/or increasing productivity. “Business Matters: A Guide for Speech-Language Pathologists” (on.asha.org/businessmatters) has information on calculating the costs of doing business.
If you decide to start a private practice, clearly your goal is success—but sometimes it doesn’t work (“I’m in Private Practice—Now What??” ASHA Leader, March 13, 2012; on.asha.org/privatepracticenowwhat). To keep a pulse on whether your practice is succeeding or failing, keep an eye on your profit/loss statements. Have your accountant review these statements with you periodically to identify concerns. There may be a pattern you can identify—some months are traditionally slower because of vacations and holidays, for example. Referrals can fluctuate and there may not be enough work to support the number of SLPs you’ve hired. Some practitioners decide expansion was not a good idea, and downsize to remain profitable. Your goal is to keep your business profitable. As business owners, we have to make tough decisions—some contracts may not be profitable to continue because of lower reimbursements, unreimbursed travel time or other factors. Staffing issues may need to be addressed as referrals fluctuate or reimbursements decrease.
Private practices require time, money and effort. If you have done your homework, your business has a much better chance to be profitable. But for as many things as you should do, there are also plenty of things not to do. Check out my list of “Don’ts” online (www.asha.org/leader).
When hiring, should you pay staff as employees or contractors?

BY JANET M. KREBS

One of the questions posed most frequently by private practitioners is, “When I hire others to work for me, can I pay them as contractors?” The correct answer is, “It all depends on the role they will have in your business.” That answer may sound evasive, but the determination is not simple and all the requirements need to be considered.

As an employer, it always appears to be simpler to just hire someone as an independent contractor who would be responsible for his or her own taxes and Social Security deductions—and all you have to do is cut a check for hours worked and issue a 1099 form at the end of the year. That’s what I did when I first had speech-language pathologists working for me. Everything went along smoothly until my state Department of Labor decided to audit my business. After lots of anguish and preparation, it turned out that I owed the state six years of back taxes and penalties for all my employees.

The decision brought me to my knees. The only silver lining was the state’s willingness to waive the penalties—leaving me responsible for paying only the back taxes—if I immediately changed the status of all my “contractors” to “employee.” The state is motivated to weed out independent contractors because employees yield more revenue—that is, an employer pays a larger percentage of the employee’s income in taxes than does an independent contractor.

So, how can you avoid such an experience? Review all the requirements and make certain that your “independent contractors” are not, in reality, considered “employees.” This general rule of thumb published by the Internal Revenue Service can often add clarity to the decision (bit.ly/7-tips-for-owners).

Define the relationship

The IRS uses three characteristics to determine the relationship between businesses and workers:

  • Behavioral control—whether the business has a right to direct or control how the work is done through instructions, training or other means.

  • Financial control—whether the business has a right to direct or control the financial and business aspects of the worker’s job.

  • Type of relationship—how the workers and the business owner perceive their relationship.

Therefore, if you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are most likely employees. Conversely, if you can direct or control only the result of the work done—and not the means and methods of accomplishing the result— then your workers are probably independent contractors.

Seek clarification

However, there is much more to the process, according to the Small Business Administration, which offers clarification between an independent contractor and an employee (bit.ly/employee-or-contractor). Independent contractors:

  • Operate under a business name.

  • Have their own employees.

  • Maintain a separate business checking account.

  • Advertise their business services.

  • Invoice for work completed.

  • Have more than one client.

  • Have their own tools and set their own hours.

  • Keep business records.

An employee:

  • Performs duties dictated or controlled by others.

  • Is given training for work to be done.

  • Works for only one employer.

Know—and obey—the rules

If you are considering whether to hire someone as an employee or an independent contractor, do your due diligence and research the ramifications. The Small Business Administration offers a concise reference (bit.ly/employee-or-contractor) that also indicates ramifications of incorrect classification.

According to the SBA, misclassification of an individual as an independent contractor may have a number of costly legal consequences. If your independent contractor is discovered to meet the legal definition of an employee, you may be required to:

•   Reimburse the person for wages you should have paid under the Fair Labor Standards Act, including overtime and minimum wage.

•   Pay back taxes and penalties for federal and state income taxes, Social Security, Medicare and unemployment.

•   Pay any workers’ compensation benefits for misclassified injured employees.

•   Provide employee benefits, including health insurance and retirement.

The Internal Revenue Service issues Form SS-8 (bit.ly/irs-new-hire), designed to determine if a new hire qualifies as an employee or independent contractor. If you are unsure, take the time to explore and file the form. (Note: The IRS will not review forms for a proposed transaction or on hypothetical situation.)

I decided to take the easy and cheap way out, or so I thought. In the long run, it cost me much more in back taxes and fees for professional representation at my audit.

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January 2014
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