Partnership alternative

[SM761987]

Does anyone on here get paid directly to an LLC? Are you a partner at your practice?

Have any of you brought this up to your employer who has refused partnership?
It seems like a good alternative for someone who is happy with their current role/compensation but wants to obtain tax deductions.

Take your desired salary, add your malpractice, reimbursements for association dues/licensing fees and get that paid to an LLC by your employer as an independent contractor.

Claim your deductions - malpractice, car, dues, Solo 401K, etc, then pay yourself a salary and then a dividend at a lower tax percentage.
Isn't the take home pay overall higher versus the W2 salary with the employer claiming all the deductions?

What are the pros and cons with this method of compensation?

Why would a reasonable employer disagree with this payment structure for an employee they have been happy with for 5 years or so? It keeps the employee out of the books, but somewhat happier due to the write offs they can now obtain

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[air bud]

Does anyone on here get paid directly to an LLC? Are you a partner at your practice?

Have any of you brought this up to your employer who has refused partnership?
It seems like a good alternative for someone who is happy with their current role/compensation but wants to obtain tax deductions.

Take your desired salary, add your malpractice, reimbursements for association dues/licensing fees and get that paid to an LLC by your employer as an independent contractor.

Claim your deductions - malpractice, car, dues, Solo 401K, etc, then pay yourself a salary and then a dividend at a lower tax percentage.
Isn't the take home pay overall higher versus the W2 salary with the employer claiming all the deductions?

What are the pros and cons with this method of compensation?

Why would a reasonable employer disagree with this payment structure for an employee they have been happy with for 5 years or so? It keeps the employee out of the books, but somewhat happier due to the write offs they can now obtain

🤔

 

[GreenHousePub]

I do an S-corp instead of LLC

 

[dtrack22]

I do an S-corp instead of LLC

This guy gets it

 

[HardRoadPaved]

What are the pros and cons with this method of compensation?

Con... it's fraud

Con... why wouldn't the hiring practice want to take those deductions for themselves?

Con... Billing and credentialing nightmare. You saw the patient in a location that's already an established practice of the same specialty.

Con... You couldnt reap any DME benefits and put a kickback issue at hand.

Con... Liability issues and how your LLC could be affected.

 

[icebreaker32]

I know CPAs do not recommend S-corps as often as they used to 20 years ago, but have no idea the specifics.

Get some advice from a reputable CPA familiar with healthcare.

 

[619]

Why would a reasonable employer disagree with this payment structure for an employee they have been happy with for 5 years or so? It keeps the employee out of the books, but somewhat happier due to the write offs they can now obtai

Your employer can disagree because how will it affect the non-compete clause? Once you are an independent contractor you can't be bound by a non-compete.

 

[dtrack22]

It would need to be structured a little differently than the OP describes, buuuut…

Con... it's fraud

A group paying an associate a % of their collections as a contractor is most certainly not fraud

Con... why wouldn't the hiring practice want to take those deductions for themselves?

The hiring practice still takes the allowed deductions annnnd they don’t have to pay payroll taxes on money to the contractor. They would likely come out ahead.

Con... Billing and credentialing nightmare. You saw the patient in a location that's already an established practice of the same specialty.

Credentialing with commercial plans would take longer, but most EMR software could handle the claims/billing without issues. Maybe not cheap/free EMRs used by podiatrists, but most can.

Con... You couldnt reap any DME benefits and put a kickback issue at hand.

Yup, you’ll lose out on DME revenue. That may or may not be worth the cost of partnering ($$$ buy in) or the % of collections you might be able to negotiate as a contractor (50%) vs what they give you as a podiatry associate (30%)

Con... Liability issues and how your LLC could be affected.

Such as…? LLCs don’t offer significant protection from liability. I’ve always wondered what people think LLCs magically protect you from. If the company has tax obligations and certain debts/liens, your personal assets can still be targeted during settlement.


To icebreakers point; An S Corp isn’t a legal entity unto itself, rather it’s a tax status. So an LLC can still elect to be taxed as an S Corp. LLC paperwork, formation, etc. is easier than that of a “corporation” so that may be why they recommend forming an LLC? I’m not sure in which specific instances a CPA might recommend being taxed as a sole proprietorship vs an S Corp though.

 

[NatCh]

Payments go to my LLC, from which I then pay myself as an S-Corp. It's all highly technical. You probably wouldn't understand...

 

[619]

Yup, you’ll lose out on DME revenue. That may or may not be worth the cost of partnering ($$$ buy in) or the % of collections you might be able to negotiate as a contractor (50%) vs what they give you as a podiatry associate (30%)

To me this is HUGE!!!!!

Any of you that actually look at your EOB and see how much insurance (both medicare and private) pays for DME then you will stop worrying about surgery and convert your practice to DME dispensary if you care about collections. You guys know there are essentially million dollar companies whose only job is to dispense and bill DME and they make a boat load of money. That don't even practice medicine, just dispensing and fitting DME to patients. CAM boots, night splints, most braces essentially cost less than $25 to purchase and insurance reimburses more than 10X. Do you know how many 20550 you have to bill to catch up to single CAM boot reimbursement or one custom inserts?

Remember, DME also includes skin grafts, Collagen powder etc. Another example is a prefab AFO Richie brace (L1971) has a broad diagnoses for coverage (Ankle arthritis, ankle tendonitis, Ankle Sprain etc) and reimburses over $500 and the brace itself is cheap to purchase. I could go on and on about DME.

A new patient comes in and you take x-ray and inj and it pays peanuts but include a DME then you double your reimbursement for that single visit. So without a DME, you have to see twice as much patients as the next guy who regularly does DME. Obviously, those who are paid based on wRVU do not appreciate DME.

 

[dtrack22]

You do have to deal with that commercial insurance patient who gets their EOB and sees they owe $250 for the same walking boot they found on Amazon for $50. Or the $90 they owe for the $20 night splint. But yeah, DME is usually worth a few hundred grand to a busy practice and the hassle (inventory/overhead/insurance claw backs/pissed off patients/etc) that comes with it is justified.

 

[dtrack22]

Obviously, those who are paid based on wRVU do not appreciate DME.

Yes and no. Downstream and ancillary revenue like DME is the reason that many of us wRVU providers can get 80-90% of the professional fees (e/m and CPT codes) we bring in. All of the fees you generate pay for the staff/overhead and therefore I get paid a significantly higher % of my collections than a PP doc would. An employed doc isn’t using their own productivity and collections to pay for their overhead, or at least not as much of it as a private or group practice.

 

[NatCh]

You do have to deal with that commercial insurance patient who gets their EOB and sees they owe $250 for the same walking boot they found on Amazon for $50. Or the $90 they owe for the $20 night splint.

Yeah, there is that...

"Doc, is your boot that much better than what I can buy online?"

"That extra $200 is for me showing you how to use Velcro straps and a pump..."

I actually hate this part about DME. It reminds me of the awful car dealership upcharge that takes advantage of uninformed customers. You know, like $3000 for the same new tires that you can buy at Tire Rack for $900.

 

[619]

For my practice, we verify all new patient insurance and benefits so I only dispense DME for patients who don't have any out of pocket expense (only $45 co-pay) or I sometimes waive/discount the 20% co-insurance that some patients have. I collect all co-pays, deductible, and co-insurance at time of service at check-out. So I never have to chase any patient for money and neither do any patient get any surprise bill. I don't use any 3rd party billing agency.

For patients who are not covered for DME, I actually pull up Amazon and show them where to purchase it. I let them know this CAM boots through their insurance cost $250 or patient can do next day delivery from Amazon for $45 for same CAM boots. Same for custom inserts, if patient is covered under their insurance with no charge to patient or a 20% co-insurance then I make them custom inserts. If not covered, I offer them the prefab OTC inserts which I sell for $60.

 

[dtrack22]

I sometimes waive/discount the 20% co-insurance that some patients have.

You have to be careful with this. Is a small solo practice going to get caught/in trouble for it? Probably not. Just like a middle class W2 earner can fudge on their taxes every year and never get audited by the IRS. But the routine waiving of copayments and co-insurance is a violation of federal anti-kickback law for Medicare patients. On the commercial side it can be considered false billing and/or a breach of contract, the former is a violation of the law. With the feds you can be found criminally liable and commercial companies have successfully found doctors and healthcare organizations to have civil liability when taken to court.

You can document financial hardship and do these things on occasion. But if any payer discovers that it is being done on every patient who’s plan doesn’t have a flat DME $ copay? Have fun paying that back…or in prison.

Like I said, DME is profitable but comes with plenty of hassle/headaches. Its not really hard to see why someone making $400-500k in an employed situation doesn’t really care they aren’t directly profiting off of DME. Although, there are plenty of employed docs who have negotiated a wRVU value for orthotic dispensing, so you can still directly capture some of that revenue.

Also, probably shouldn’t admit to regularly waiving copays (especially if it’s about waiving the 20% coinsurance on Medicare patients without a secondary when putting on skin subs). Those whistleblower finders fees can be attractive 🤣

 

[dtrack22]

"Doc, is your boot that much better than what I can buy online?"

"That extra $200 is for me showing you how to use Velcro straps and a pump..."

Don’t forget the “fitting” process and the ability to return the device 😂

Way more valuable than the exact same thing for 1/5 the price on Amazon