As you have seen in the wide range of topics covered as part of our exploration of asset protection over the last few months, the days of doctors simply opening an office and treating patients as a business model are long gone. Things are now much more complex and the burden on doctors and practice managers is greater than ever before.
I strive to proactively identify and eliminate as many risks as possible. The best practice of risk mitigation in all forms includes examining the fine details of essential financial and legal planning. As a beginning roadmap through this complex legal landscape I provide the following list that physicians and practice managers can use to perform a “self-exam” on these vital issues in two parts.
While the list may appear long, it is by no means complete, as new threats and solutions evolve on an almost daily basis. The good news? We can break it down into simple categories that can be addressed one issue at a time with great efficiency of scale and cost.
1. Liability Insurance: Let’s make sure it’s enough, and then let’s have a back-up plan (See item #2 below). This refers to both professional (malpractice) and personal liability coverage. These days we see six and seven figure exposures from routine events like auto accidents, business disputes, and employee lawsuits, as just three examples.
2. Asset Protection Planning: Think of it as Net Worth Insurance. Distancing you from your assets and protecting them from your personal and professional liability. This requires simple, cost effective and pro-active planning today while you still have well defined legal options. There is little or nothing to be done, except paying defense or bankruptcy attorneys, if you get caught in a suit before you do something.
3. Employment Practices Liability Insurance: What’s also know as “EPLI” coverage is more important than ever, especially given the current economic/employment climate. Your practice is five times more likely to be sued by an employee than anyone else.
4. Coordinated Financial Planning: Making sure the money you make is working as hard for you as you worked for it and that the planning you have in place includes both growth and loss-prevention strategies. A plan that is all upside and has no risk tolerance is a sure loser; remember what happened in 2001 and 2008.
5. Disability Insurance: Protecting cash flow against injury and illness at the times you need it the most. Large amounts of coverage with lots of sophisticated bells and whistles are available. Also make sure that your cross-purchase or buy-sell agreements are properly funded. If a partner or key employee has a stroke or some other debilitating illness, how long will the practice be willing and able to make large monthly payments to a non-productive partner?
6. Life insurance: Make sure you have appropriate amounts in place to cover estate taxes, generate income for survivors and pay off debts you want settled. Also make sure that you are not paying too much and have the most flexible policy with the greatest number of benefits. Again, cross-purchase and buy-sell agreements must be carefully funded. We routinely see these agreements between our business owner clients that are either unfunded or under-funded. If a partner dies with no coverage or inadequate coverage in place you could easily find yourself across from their family in a courtroom explaining why the business should not be liquidated to pay them the deceased’s share.
7. Worker’s Comp Coverage: Making sure that you and your employees are protected against injuries and their rising costs.
8. Employee Benefits Planning: From basic benefits like 401K to Executive Compensation planning. There are a number of ways to provide these benefits; some are more advantageous to you, the business owner/employer than others.
9. Employee Handbook: Governs their rights and your responsibilities, controls actions in the workplace and your employer policy. If you don’t define certain polices the courts (or worse, the employee’s attorneys) will define them for you. This is one of the highest ROI investments you can make in your business, in my opinion.
Learn more about Ike Devji, J.D., and our other contributing bloggers here.