Because many home care and hospice providers are small companies and because I keep hearing commercials on the radio for companies that help other companies incorporate or organize as an LLC, I thought I would post a few thoughts on the two most common forms of organization for small businesses. Most of you are either incorporated or organized as a limited liability company. For those of you that are incorporated, I would guess that you have filed for treatment under subchapter S of the Internal Revenue Code. Such a corporation is usually referred to as an S corporation and is taxed as a partnership. (Many individuals think an S corporation is a specific form of incorporation, but it is really just a shorthand way to refer to a corporation that is taxed under Subchapter S.)
The reason you chose to incorporate or organize is most likely for the personal liability protection. As a health care provider, you have employees which creates a number of potential sources of liability. The corporation and LLC acts as a ?shield? to help protect you from losses beyond your investment in the company.
Most attorneys and accountants have an opinion as to whether a small business is better off to organize as an ?S corporation? or an LLC is better. In my opinion, they are equal from a standpoint of limited liability and (because of subchapter S) taxation. However, I favor the ?S-corporation?, because there is over one hundred years of case law discussing corporations, corporate governance, corporate liability, shareholder?s rights, etc. This provides a relatively high degree of certainty when it comes to answering questions about a set of facts. In most instances, if an issue comes up regarding the corporate form, it is an issue that has been addressed by the courts before. As an attorney advising clients, predictability is a good thing.
Furthermore, the concept of a corporation is familiar to clients. Most individuals understand shares, shareholders, board of directors, board meetings and the other concepts associated with a corporation. This makes it easier for the client to understand the ?corporate formalities? and follow them. Following the corporate formalities is important for many reasons.
[I will add the following disclaimer: In some states or in certain limited circumstances, an LLC may have specific advantages for a business due to that state?s law.]
Another common misunderstanding regarding corporations and LLCs is the notion that operating as a Corporation requires more paperwork, in the form of resolutions, minutes of board meetings, etc. This is not true. If done properly, a company can be incorporated in a way that will not require any more paper than an LLC.
My real point is this, for small health care providers, S corporations and LLCs are basically the same for liability and tax purposes. The LLC is often recommended as necessary for tax purposes, when in fact, it is not necessary. If you are thinking about using one of those services that advertise on the radio, I would recommend you speak with both your accountant and your attorney instead.
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I have been dealing with a number of issues resulting from surveys lately and I can?t help but make a few comments. This may seem obvious to you, but I keep seeing these things cause providers problems and so I feel the need to repet myself.
First, it never ceases to amaze me how surveyors miss documents in a clinical or employee file. I understand form talking to surveyors that part of the problem is that every home health agency does things slightly different. This creates an issue for surveyors who do not know your files the way you do. One thing that can assist surveyors greatly is trying to make it obvious what is in the file.
For example, you are required to have criminal histories for employees. The location of these items in the employee file should be noted so that it is obvious to the surveyor were to look. If you are cited for failing to have this documentation, you can engage in the informal dispute resolution process (In Indiana) and usually have the tag removed. However, if IDR is not an option or is unsuccessful, you are stuck with a tag that you do not really deserve. It is far easier to make these items obvious than to fight an incorrect tag later.
Another issue that keeps popping up is surveyor confusion resulting from the use of incorrect terminology. For agencies that offer both skilled and unskilled (homemaker/companion/attendant) care this is an even bigger issue. Many a home health aide or attendant has noted in the client?s file that he ?administered? medication. When, in fact, he simply reminded or assisted the patient with the medication. By writing administered in the record, the employee has created a problem for you come survey time.
You should train your employees regarding terminology, especially for your non-skilled employees such as homemakers and companions.In states such as Indiana, where agencies are licensed and where State law differentiates between home health care and personal services, errors in terminology can lead to other problems. Personal services licensure statutes have been passed or are being passed in a number of states.
These statutes govern the provision of unskilled home care such as companion, homemaker, and attendant services. Because they are non-medical services, they often have less restrictive standards.Agencies that offer both types of services need to be careful not only that the non-skilled employees use the correct terminology assisted with bath, not bathed, etc, but also that the files are kept separate. Misuse of terminology or intermingled files can lead a surveyor to site your agency for a violation of the home health COPs or licensure regs., because the surveyor mistakenly reviews a personal care file as a home health file. The personal care file is maintained according to a different set of standards which will result in citations.
In Indiana, the state has indicated that agencies offering both types of service should keep the files strictly segregated and during a home health licensure/certification survey they should only produce the home health files unless the surveyor specifically asks for personal care files as well. This avoids confusion for the surveyor.
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