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Liability lessons

Article-Liability lessons

Key iconKey Points

  • Failure to adequately protect assets is the most common financial mistake that physicians make, according to one expert
  • Paying more taxes than necessary and poor practice planning are second and third on the list of common financial mistakes made by physicians

Christopher R. Jarvis, M.B.A.
Failure to adequately protect assets is the most common financial mistake that physicians make, and cosmetic surgeons are no exception, according to Christopher R. Jarvis, M.B.A., of O'Dell Jarvis Mandell LLC in Cincinnati, Ohio. "When you combine the common misconception that plaintiffs and attorneys won't go after physicians' assets because of some kind of ethical consideration with the fact that there are, in fact, ethical rules requiring an attorney to go after such assets, you can understand why asset protection strategies are so important," says Mr. Jarvis. Paying more taxes than necessary and poor practice planning are second and third on the list of common financial mistakes made by physicians.

Mr. Jarvis, along with partner David B. Mandell, J.D., M.B.A., writes, lectures and consults on issues related to asset protection. Their fourth financial book for physicians, For Doctors Only: A Guide to Working Less and Building More, was recently released. "We have discussed asset protection with as many as 10,000 physicians throughout the past decade, and the vast minority — perhaps 20 percent — have hired someone who is responsible solely for practice planning," says Mr. Jarvis. "Most have someone who handles billing and other administrative duties, but confusing day-to-day practice management with practice planning can be a costly mistake."

AR AT RISK The risk of a lawsuit is the primary reason why asset protection is so important for physicians. "Physicians face malpractice liability as well as general business risks, such as employee-related discrimination claims and sexual harassment claims," Mr. Jarvis tells Cosmetic Surgery Times. "Physicians often don't realize that a claim by a patient or employee will likely threaten all of the practice's accounts receivable, which is typically a medical practice's most valuable asset," he adds.

Asset protection strategies can be broken down into two categories: asset protection at the practice level and asset protection at the personal level. "The first thing we start with is the practice, because that's where the money starts and it's where most of the liability will come from," says Mr. Jarvis. The first step in protecting the practice's assets is to make sure that multiple legal entities are used to run the practice. "For instance, there would be a professional corporation or a professional association that actually engages in the practice of medicine, and then there could be additional entities such as Limited Liability Companies [LLCs], which would own the equipment and real estate and lease those assets to the practice," explains Mr. Jarvis. "What this comes down to is that the practice doesn't own anything. It just employs people and collects accounts receivable, pays bills and pays salaries. This way, if there is a lawsuit against the surgeon and the practice, the creditors can't touch the assets of the practice."

GETTING PERSONAL The area of personal asset protection comes into play when a physician is named personally in a lawsuit, which happens when a surgeon is charged with malpractice in a situation with a very grave outcome. "Since physicians are held to a higher standard than others, they cannot hide behind the corporate veil for protection from creditors," explains Mr. Jarvis. "For this reason, surgeons must make sure that valuable personal assets are adequately protected."


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