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The Conflict Between EMR Adoption and HIPAA Violation Issues
Description of Research
The purpose of this study is to measure and identify the major benefits and challenges of EMR implementation. The objective of the study is to describe the existing situation and experiences on the implementation of EMRs across the country. This study has employed a significant qualitative approach. it is based on collection of available data in regards to the implementation of EMRs and critical analysis based survey results from Family and other specialties physicians’ perceptions. The method I used will be a descriptive analysis of published literature and reports, and critical analysis of conducting surveys. The research goal is to evaluate the transition from traditional medical records to a paperless system. it is also to determine whether or not this rapid change will be co variable and potentially correlate with the impact of using EMRs versus HIPAA violations.
Selection of Participants
A total of 51 physicians from a variety of specialties within small and medium-size medical practices and varying locations in the Los Angeles and South Bay areas in Southern California were chosen to participate in this mail survey.
The effect of using EMRs and privacy concerns perceived by physicians are measured through an administered questionnaire. The quantitative measurement including the cost of implementing EMRs have been assessed in this survey. in addition, the qualitative measures are used to assess the physicians’ perceptions on how EMRs would benefit them, from improving the quality of care and medical errors to increasing health care efficiency while saving costs, and their personal attitudes toward this IT network.
Fifty one EMRs physician users from different locations and medical practices in the South Bay of California were randomly selected to participate in this important survey. The assessment of their attitudes toward EMRs’ adoption based on the result of the questionnaire tends to be positive. Statistical analysis is performed to correlate the implementation of EMRs versus the number of HIPAA violations. This allows me to examine the positive and negative impact of using EMRs in healthcare industry settings, and to observe any correlation to the transition.
Measures of Questionnaire
The questionnaire consisted of 6 parts. The first section included questions about physician practice and ownership profile, the number of physicians in the practice, volume of patients in a typical day of practice, number of employees and ownership type. The second section contained questions about EMRs adoption and type of EMRs using in their practice. The third section included the cost and maintenance fees of EMRs adoption. The fourth section-contained questions about the benefits of using EMRs in physician practices included multiple-choice questions to evaluate specific and potential aspects of EMRs.
The fifth part was asked about the challenges or barriers of EMRs, which included multiple-choice questions. The last section contained questions about patient privacy and confidentiality issues whether EMRs is still secure and physician satisfaction related to EMRs using a 4-point Likert scale ranging from Strongly agree(4), Agree (3), Disagree(2) and Strongly disagree(1), and similarly to Very satisfied(4), Satisfied (3), Dissatisfied (2) and Very dissatisfied(1).
Next, I was very interested in measuring the underlying costs and benefits of EMRs. Responses to questions about the EMRs adoption cost and annual maintenance fees revealed that 7 physicians (32%) do not know the upfront cost of software and hardware installation as well as ongoing maintenance fees. This result indicated clearly that they have implemented EMRs through their large medical group organizations that purchased IT for them. however, 32% of physicians reported that the average cost of EMRs adoption is between $30,000 and $100,000 per physician and annual maintenance fees is between $1,000 and $2,000 per physician. in addition, 6 physicians (27%) reported that EMRs adoption cost is below $30,000 per physician. Lastly, two physicians (9%) reported that EMRs cost is about $100,000 per physician with more sophisticated and complex features. Responses to questions about EMRs benefits are illustrated in table 1.
Of the 22 who responded to the question whether EMRs improves their practice’s productivity and efficiency, 95% of physicians reported, yes. Then, they were asked to check benefits of EMRs aspect that apply to their practice. there is a significant number of physicians who believed that electronic medical records have played a key factor in their medical practices’ productivity and efficiency as well as the quality of care and patient safety and medical reimbursement, such as: 1) saving their staff’s time for looking and filing chart (96%), 2) saving office space for chart storage (91%), 3) increasing chart documentation and accuracy for medical reimbursement 72%), 4) improving drug refill capabilities (72%), 5) reducing medical errors (72%) as well as 6) improving clinical decision-making (72%). also, when asking physicians about how much time it will take them to look up or get a patient’s health record electronically within the same practice, 91% reported that it takes less than 5 minutes and 10 minutes from an external provider.
Responses to question about the EMRs challenge, a significant number of physicians (45%) reported that they have faced none of these issues with health information technology. however, of the 22 who responded to the EMRs return on investment, 22% of physicians reported that EMRs provides an insufficient return investment. 4 % of physicians reported that they have faced all these above issues with EMRs (e.g. the figure above).
Next, when questioning physicians about the impact of EMRs on patient’s privacy and confidentiality issues using a 4- point Likert scale, 62% of responders still strongly feel that EMRs is secure and safe.
The advantages of implementing of EMR system in physician practices settings are obvious, for patients and health professionals. Ease of access to the health information, increased safety and quality of care are predominantly positive aspects of EMRs from the perspective of patient health as well as from physicians’ perceptions. With our modern electronic world in healthcare industry, health professionals and physicians will gain potentially from the possibility to share patient’s health information network within the same practice and among external providers. Elimination of duplication tests, monitoring chronic disease management or adverse drug interactions through EMRs enhancement will make the healthcare delivery system more efficient and cost effective. as a result, the research studies and survey clearly suggest and confirm that health professionals and physicians perceive that the EMRs are much better than paper records because it can enhance patient safety and care.
The Conflict Between EMR Adoption and HIPAA Violation Issues
Iphone Insurance
The iphone is regarded as an final icon in the marketplace of cellular telephones but this does not come as so low-cost. As a fortunate owner, you would want to safeguard your piece of prized possession and 1 of the best way is consider out iphone insurance policies for your mobile phone.
One particular can’t deny that iphones are open to numerous range of pitfalls that may finish up with you reaching again for your credit score card or checkbook. these dangers incorporate the telephone:
Becoming stolen from whereverBreaking down exterior of manufacturer’s guarantee intervalBeing ruined in any sort of crash
Beneath mentioned are the noteworthy rewards for using out the iphone insurance policy:
Immediately after the warranty period
The new iphone which comes with producers guarantee usually lasts for only minimal period of time, primarily only a calendar year.
What will occur, when the guarantee of your iphone expires, most possibly you will have to bear the charges of the repairing or have to find a substitute for your iphone.
With no iphone insurance policies you also have to discover out a person equally able of repairing this sort of a complex phone and also have to uncover the income for repairing, which would be extremely expensive for you. in addition, you also have to element with your mobile phone until it’s not repaired and on leading of it you arrived to know that it’s extremely hard to repair service the telephone, then you will be left holding a costly paperweight.
Commonly the iphone insurance policies policy handles all the repairs expense and they even offer replacement after the expiration of the manufacturer’s warranty.
In the meantime, if you are still with no a phone and your claim is found productive, then you would be issued with a substitute or have your telephone fixed up and will be returned to you within 48 hours, with the aid of some insurance providers.
Other advantages of iPhone insurance policy
Accidents can happen at any time, no make a difference how cautious you are with your iphone and if yours precious is dropped by error on carpeting, then it is certain to get heavily ruined or can even break. if you would be possessing iphone insurance policy in this circumstance then your phone can be very easily repaired or changed in accordance with insurance provider’s conditions and problems.
One of the principal problems of owning these costly devices, which of course iphone is, is the truth that they are often targeted by the robbers. now days phones are extremely effortless to steal as they can be simply snatched from your hand or from the pocket in the street, they are also targeted in residence burglaries or can be effortlessly stolen out of your automobile. the insurance policies of iphone addresses these kinds of thefts provided the theft meets the required recommendations given by the iphone insurance policy provider.
Whilst selecting iphone insurance policies, it is really important to be aware the restrictions and exclusions which are being used in the insurance policy coverage. For that reason, it is really necessary to make positive that the insurance policy go over you are acquiring is appropriate for your wants and consequently, ought to prove advantageous in scenario of emergency.
Originally posted 2012-02-06 03:06:41.
TotalMD – The Advantages Of Using This Affordable Practice Management Software
I have been a medical biller and software trainer for 20 years. My clients want value for their money, so I am always on the lookout for better medical billing software with great features and a low price tag. We use several practice management systems in our billing service including Medisoft, AdvancedMD, and TotalMD. These are all great systems, but that hasn’t stopped me from my quest for that perfect software. TotalMD has the same great price and ease of use as Medisoft does, however, it has some other advantages that are not as obvious.
Let’s review the features that everyone wants:
Ease of Use
Time is a precious commodity in a medical office or billing service and easy to use, intuitive software saves time. I like software features that do not require you to walk around the block to get next door. TotalMD foots the bill in this regard. it has all the features you need and is simple to use and requires very little training.
Great Price
TotalMD is very reasonably priced and does not require upgrades in order to obtain support. and just as important, the training and support fees are very reasonable.
Now, let’s take a look at some other features that not all software users think of:
Great Technical Support
Everyone needs technical support once in a while and no one wants to spend a lot of time on the phone, on hold, waiting to resolve a problem. TotalMD is very responsive and really delivers in this area.
Remote Access
TotalMD is a desktop solution but it also offers an ASP model. Medical billing services will appreciate this flexibility because many of their clients want to share the data from any location.
Connectivity to Other Software
This is an important requirement that doesn’t receive enough consideration and it is where TotalMD excels. The software provides integration on several levels which offers more choices to a practice or billing service.
Electronic Health Records
The connectivity to EHR (electronic health records) systems is really important. Unfortunately, some practices only discover this as a potential problem after they have already made a software purchase. TotalMD has free, built-in HL7 capability that allows it to integrate with or talk to popular EHR software like SpringCharts, Praxis, Amazing Charts, and others. What is HL7? It’s a function that passes data elements from the practice management system to the EHR system. This important feature offers providers more choices in electronic health records software.
A medical office may like their practice management software, however, it may not integrate or link with the EHR of their choice, in which case, a third party HL7 (linking) software may be needed. things can get complicated when two to three vendors are involved in coordinating installations and technical support. This may result in added expense and can be time consuming for the user.
Medical Coding Software & Other Add-Ons
TotalMD also intergrates seamlessly with several other well known products. you can look up CPT and diagnosis codes using Encoder Pro medical coding software. there is also credit card processing available by Intuit or X-Charge at very affordable rates. This service is a time saver because it works seamlessly with the software.
Electronic Processing
With TotalMD, electronic billing can be handled using any clearinghouse. The user is not limited in this respect. My favorite is the electronic remittance posting feature. you can download your 835 ERA files from ANY clearinghouse and post them with ease in TotalMD. Insurance verification is also a very valuable feature that can be integrated into the patient scheduler using either Gateway or Apex clearinghouses.
Document Manager
This is another well integrated product. if your electronic records requirements are minimal, TotalMD also has a very reasonably priced document manager. This easy-to-use software allows your office to organize, capture and store:
(1) patient insurance cards, driver’s licenses and ID cards
(2) patient signatures on your own financial, privacy and patient release forms
(3) all printed documents
(4) mail merge templates for letters and forms.
TotalMD is an all around great product and the vendor is a pleasure to work with. Affordability and ease of use are critical, however, technical support and product integration are also really high on my priority list, and TotalMD delivers.
TotalMD – The Advantages Of Using This Affordable Practice Management Software
HIMS Spec I Job
Date: may 8, 2012
We’re sorry, this position has been filled.
But don’t give up your job search just yet!
Click Here to see all Mayo Clinic Job Openings in Rochester, or click below on one of our main categories:
Rochester Minnesota Nursing Jobs: Professional nurses at Mayo Clinic in Rochester, Minn., deliver comprehensive care of the highest standard. the Department of Nursing coordinates and collaborates with other disciplines to provide excellence in patient care. This commitment provides quality holistic nursing care to patients and their families from their initial clinical visit through hospitalization and the transition to their discharge destination.
Minnesota Medical Office Jobs: whether you are a recent medical secretary or medical transcriptionist graduate or a skilled professional, Mayo Clinic is a place where you can achieve your goals and discover career and personal fulfillment. We invite you to explore a medical secretary or transcriptionist career with Mayo Clinic in Rochester, Minn. here you will be a valued member of an outstanding healthcare team, and you will experience the exceptional environment of one of the world’s leading healthcare institutions.
Minnesota IT & Programming Jobs: the size and scope of practice at Mayo Clinic makes it unique. Technologies that have been created here are used worldwide. Computers, joined with video, wireless and engineering technology, support every aspect of Mayo’s clinical practice, research and education. Glimpses of future technology suggest ways in which Mayo Clinic will remain an international leader.
Why Apply for a Job at Mayo Clinic?
Mayo Clinic recognizes that every staff member contributes to the care of the more than 500,000 patients who pass through its doors each year. To ensure that we also care for our employees, Mayo Clinic provides a comprehensive benefits package that recognizes the importance of a balance between your professional and personal lives. This dedication to our employees has resulted in Mayo Clinic consistently being named one of FORTUNE’s “100 best Companies to Work for.”
Mayo Clinic is an affirmative action and equal opportunity educator and employer. Post-offer/pre-employment drug screening is required.
Surveon to showcase full lineup of EMR Series at IFSEC 2012
Published on 2 May 2012
Surveon’s EMR Series features Milestone Systems’ XProtect surveillance software
Surveon, the complete megapixel solutions provider and Milestone Solution Partner, recently announced it will showcase the full lineup of EMR Series -megapixel hardware RAID NVR solutions featuring Milestone Systems’ industry-leading XProtect surveillance software, at IFSEC 2012 in Birmingham, UK, from May 14 to 17. EMR Series offer 2, 5, 8-bay all-in-one desktop recorders and rack-mount NVRs and can support up to 112 hard disk drives and 6 to 2,000 channel megapixel recording with high availability and easy maintenance.
Surveon’s EMR Series provides high I/O rates, large capacities, and overall system stability necessary to help system integrators easily meet the demands of megapixel environments. Combined with an industrial-grade design, EMR Series offers an ideal solution for any scalable surveillance projects from retail, hotels and schools to building complex, transportation, and urban surveillance.
Designed 100% in-house, the EMR Series provides many advantages compared to commercial off-the-shelf solutions and PC NVR solutions. The EMR Series systems deliver professional video appliances and have gone through a comprehensive QA process including hundreds of hours of rigorous assurance testing on performance and integration validation with XProtect. In addition, the EMR Series is a fully integrated solution that does not require complex assembly procedures and offers high quality and reliability.
Survone’s EMR Series comes with a fully integrated Milestone XProtect solution in the Greater China region. In other regions, XProtect is pre-loaded in EMR and requires an XProtect license from Milestone’s distribution channel.
Practice Management Software & EMR – Single Source or Best-of-Breed?
Introduction
For some, electronic medical records (EMR), electronic health records (EHR) and personal health records (PHR) all mean different things. to others, they are one in the same. One thing is certain – we are living in the era when medicine is irreversibly making technology a vital component of record keeping, practice management and ultimately, patient care. from government initiatives and mandates to private payer incentive programs, the push is definitely on for doctors to embrace not only electronic claim submission through their practice management system (PMS), but also the adoption of electronic medical records systems.
Knowing that you’ll need to implement this type of software is one thing, figuring out which programs are best for you is an entirely different matter. if you do a little research, you will find that there are over 300 companies that market practice management software. Dig a little deeper and you’ll find that there is another 300 plus companies that say they have and EMR solution. to cloud the issue further, some vendors offer all-in-one or single source solutions while others stick to their niche and offer either a PMS or an EMR solution only (best-of-breed). even if you find software vendors that you think are reputable and have good software, you usually have to choose between a single source and a best-of-breed solution.
In this article, I will discuss the benefits and disadvantages of both the single source and the best-of-breed approaches to procuring PMS and EMR packages. I’ll also explore another option I call the full integration approach.
A Single Source Solution
Although both PMS and EMR are meant to be used in the same doctor’s office, they have completely different functions. Practice management software typically handles the billing and scheduling while EMR packages are on the clinical side – assisting practitioners with note creation, storing patient charts electronically, managing test results, X-rays, etc. While both systems are used by different people with different job functions, they are both involved in managing the same business transaction: the patient encounter. Doesn’t it make sense for these two software systems to work together seamlessly, passing information back and forth as the patient wends his or her way through a doctor visit? the short answer: yes, absolutely.
One approach to getting your PMS and EMR programs to work together is to find one company that sells and supports both programs. Often bundled or sold as a suite, these single source solutions offer the promise of seamlessly integrating the office workflow. Other benefits can include having only one contract to sign and one point of contact for sales, service and support.
While more and more companies are announcing that they have a single source solution, there are downsides to this approach. the main problem is that appointment scheduling, billing and collecting money are completely different activities from the clinical side of the patient encounter. most companies offering a complete PMS/EMR solution started life as either a practice management company or an electronic medical records company. as a consequence, their expertise is almost always heavily weighted towards either practice management or electronic medical records. Rarely will you find a company that can do both sides equally well. as a result, buying a PMS/EMR suite could run the risk of having to put up with a good EMR package and a mediocre or poor practice management package, or vice versa.
It is also worth noting that many single source solutions on the market today started life as two different applications from two different companies – then were brought under one roof as a result of an acquisition or merger. when considering a single source solution, find out if they were originally developed by the same company. While some products that have merged do a good job of integrating with each other, there are others out there that do not work as smoothly as they could.
Best-of-Breed
Instead of looking to one company for both PMS and EMR software, another popular approach is the so-called best-of-breed approach. That is, finding the best vendor for each application.
On the EMR side, the clinical demands on a system can be radically different from specialty to specialty. for example, the need to track dosage regimens and patient progress over long periods of time by an oncology practice is completely different from the types of clinical support a family practice might need, which differs even more from the needs of an orthopedic surgeon. Because of this EMR specialization, many practices have opted to go with an EMR vendor that has a long history and extensive expertise in their particular specialty. They choose the best-of-breed for their specialty.
While EMR tends to cater to specific specialties, practice management tends to be a bit more generic. most offices have similar needs for scheduling, billing and collections. That is not to say there aren’t many best-of-breed choices to be made with practice management. there are wide ranges in cost, complexity and technology. some systems have been designed for single doctor offices while others are priced for very large groups and clinics. Practice management best-of-breed choices often come down to the extras: features beyond basic scheduling and billing, ease-of-use and the quality of service and support.
The main advantage to this best-of-breed approach is that you’re looking for the best products for both PMS and EMR. if you’ve done your homework, you’ll find outstanding products from companies that have extensive experience in your specialty. the sales and support staff are more likely to provide better assistance tailored to your practice needs.
One disadvantage of the best-of-breed approach might be that you’ll end up with practice management and electronic medical records systems that don’t communicate with each other, causing some tasks, patient demographics entry, check-in/check-out and procedure charges, to be duplicated.
Most reputable software houses in healthcare offer HL7 interfacing capability which can ensure that patient and appointment data are shared. some even offer charge postings, and some check-in/out. Interfacing your products can bring a big boost to your practice, but the level of interfacing capabilities will vary greatly from vendor to vendor. Due to inherent limitations in some products, only a very basic level of interfacing might be possible. you will want to do some homework and make sure that at a very minimum, the interfaced systems can pass demographics, check-in/check-out and charges can be passed from the EMR back to the PMS billing system.
Full Integration Model
A third approach is emerging for PMS and EMR integration that can provide the benefits of both the single source and best-of-breed. This approach, which I’ll term full integration, is when best-of-breed PMS and EMR vendors partner and enhance their products so that they work seamlessly together. many systems have been interfaced so that basic information such as check-in and patient demographics are passed from the practice management system to the EMR. a deeply integrated solution would include all of those typical interface functions plus much more. for example, systems can be deeply integrated to achieve the following benefits:
- Improved Workflow Management – Going well beyond basic check-in/check-out functions, deeply integrated systems can share workflow messaging, tasks, procedure charges and provide a single point for login and authentication. for example, after seeing a patient, the nurse practitioner could send a message or task from the EMR screen to the front desk PMS screen.
- Single Source Benefits – Similar to purchasing a complete system from a single vendor, companies that have successfully integrated their products can offer many of the advantages of the single source one-stop-shop. when considering the purchase of deeply integrated systems, you may have one point of contact for sales. Companies that have successfully partnered may also offer streamlined contracts and pricing, making it easier to understand your total investment.
- Best-of-Breed Benefits – if two companies that are truly best-of-breed in their market partner to offer a deeply integrated product, you gain all of the benefits from the best-of-breed model while avoiding many of the disadvantages. if you’ve chosen your companies well, you’ll have a practice management company that has extensive experience in your type of specialty. It will excel in scheduling, billing, office workflow management, collections and more. on the EMR side, you’ll feel confident that the EMR vendor will have a track record with and know the proclivities of your specialty. when you call in for support, you will be more likely to reach people that have specialized experience and knowledge of your needs.
Conclusion
At this time, the market for PMS and EMR is still dominated by stand-alone applications that may or may not be best in their breed. Increasingly, vendors are feeling pressure to offer complete, turnkey solutions. as a result, companies are acquiring other companies in the hopes of providing complete solutions. Still others are opting to develop the parts they need to offer what they feel will be a complete solution. a few companies have realized the considerable expense and risk involved with acquisitions and development and have opted to partner with other solutions to fill out their product offering. if you can find companies that have partnered to provide a complete solution AND they are each best-in-breed AND are experienced in your specialty and type of practice, you might want to strongly consider going with the deeply integrated solution.
Practice Management Software & EMR – Single Source or Best-of-Breed?
Health Care Industry Careers – Still Growing Strong
Health care careers are still growing at an impressive pace despite the current economic climate. according to the United States Bureau of Labor Statistics-BLS-health care will generate 2.4 million new jobs by 2018. It is for this reason many individuals regard the field of health care a recession-proof industry. those who are interested in pursuing employment in this field may wish to consider the following careers:
Registered nurses work in a variety of medical settings caring for patients who are physically or mentally ill. Once a person has obtained a degree in nursing, he or she will find there are many employment options from which to choose. Positions can be found in hospitals, nursing homes, emergency clinics, doctor’s offices, schools, state hospitals, dialysis centers or rehabilitation facilities. Regardless of where an individual with a nursing degree chooses to work, he or she will find that making a difference in the lives of other people is a richly rewarding occupation. those interested in the field of nursing will also be pleased to discover that registered nurses earn an average annual wage of $65,000, according to the BLS.
Another fine option for those who have a health care degree is a career as a dental hygienist. A dental hygienist works under the supervision of a dentist or oral surgeon where he or she assists with taking x-rays, creating patient history files, assisting with dental procedures, and educating patients regarding proper dental hygiene. Dental hygienists enjoy salaries similar to that of registered nurses and as a continual need for dental care is always present, job security is not typically a cause for concern for those in such positions. Although every state has different requirements for dental hygienists, most states require that a person have a minimum of an associates level degree in dental hygiene before he or she is allowed to practice.
Paramedics and Emergency Medical Technicians
There is a continual need for paramedics and emergency medical technicians-EMTs-in the United States. In most areas of the country, paramedics are required to possess an associates degree, as well as complete a specific number of clinical hours out on the field under the supervision of an experienced paramedic. Paramedics and EMTs can expect to earn a starting salary of approximately $38,980 according to reports posted on Payscale’s Website. Saving lives while earning a good salary make such positions attractive to individuals who hold a health care degree.
Working as a medical assistant may involve anything from reception work in a doctor’s office to performing basic clinical tasks in an examination room. Training for such a position involves learning clerical and clinical duties, accounting, record keeping, and medical terminology. according to the BLS, medical assistants in 2009 earned a mean annual wage of $32,060, making it a practical choice for those who wish to break into the field of health care.
Each person must decide which career in the health care industry is most appropriate for him or her. It is wise for one to explore several job options, particularly those that offer the greatest opportunity for advancement, before making a final decision. However, regardless of which type of employment a person chooses, he or she will likely experience good job security and fulfilling work upon entering the field of health care.
Effective Leverage and Optimal Capital Structure
How do small firms choose their capital structure? when is it appropriate for a small business to fund its operations with borrowed funds? What is the nature and function of effective leverage in financial management? These questions relate to the optimal capital structure of a business enterprise-the appropriate mix of debt and equity that maximizes the return on investment and shareholders’ wealth while minimizing the cost of capital, simultaneously. clearly, effective leverage is vital to a sound business strategy designed to maximize the wealth producing capacity of the enterprise. in these series on effective financial management, we will focus on the pertinent financing strategic questions and provide some guidance. The overriding purpose of this article is to highlight some basic financial theory and industry practice in effective financial leverage. for specific financial management strategies please consult a competent professional.
Please note that the appropriate amount of financial leverage for each firm differs markedly based on the overall industry dynamics, market structure-level of competition, stage of industry life cycle, and its market competitive position. Indeed, as with most market indicators firm-specific leverage position is insightful only in reference to the industry expected value (average) and generally accepted industry benchmarks and best practices.
Types of Leverage:
Financial Leverage: Degree of financial leverage is the ratio of the EBIT/EBT-earnings before interest and taxes divided by earnings before taxes. when a business relies on borrowed funds for its operations-the financial leverage is created as the business incurs fixed financial obligations or interests on the borrowed funds. A given percentage change in the firm’s operating income (EBIT) produces a larger percentage change in the firm’s net income (NI) and earnings per share. Indeed, a small percentage change in operating income (EBIT) is magnified into a larger percentage reduction in net income. The degree of financial leverage (DFL) measures a firm’s exposure to financial risk or the sensitivity of earnings per share (EPS) to changes in EBIT. therefore, DFL indicates the percentage change in earnings per share (EPS) emanating from a unit percent change in earnings before interest and taxes (EBIT). in general, a firm’s short-term financing needs are influenced by current sales growth and how effectively and efficiently the firm manages its net working capital-current assets minus current liabilities. Note that ongoing short-term financing needs may reflect a need for permanent long-term financing including an evaluation of the appropriate mix and use of debt and equity-the capital structure.
Operating Leverage: Fixed operating costs, such as general administrative overhead expenses, contractual employees’ salaries, and mortgage or lease payments create operating leverage and tend to elevate business risk. The impact of operating leverage is evident when a given percentage changes in net sales results in a greater percentage change in operating income (EBIT)-earnings before interest and taxes. Operating leverage is calculated as follows: DOL = CM/EBIT-contribution margin divided by earnings before interest and taxes or percentage change in EBIT divided by percentage change in sales (revenues).
Combined Leverage: Degree of combined leverage (DCL) is the combination of the effects of business risk and financial risk. Degree of operating leverage (DOL) and degree of financial leverage (DFL) combine to magnify a given percentage change in sales to a potentially much greater percentage change in earnings or operating income (EBIT). There is a direct relationship among the degrees of operating leverage (DOL), financial leverage (DFL) and combined leverage (DCL). A firm’s degree of combined leverage (DCL) = DOL X DFL or CM/EBIT X EBIT/EBT that is CM/EBT. The degree of combined leverage (DCL) may also be calculated as percentage change in EPS divided by percentage change in sales that is the percentage change in earnings per share emanating from a unit percent change in sales volume.
Optimal Capital Structure: this is the appropriate use of debt and equity that minimizes the firm’s cost of capital and maximizes its stock price. please note that a non-optimal capital structure or lack of optimal debt and equity mix may lead to higher financing costs and the firm may reject some capital budgeting projects that would have increased shareholders’ wealth with an optimal financing. further, the effects of different capital structures and differing degrees of business risk are reflected in a firm’s income statement. please note that operating leverage tends to magnify the effect of fluctuating sales (revenues) and produce a percentage change in operating income (EBIT) larger than the change in sales (revenues) while financial leverage tends to magnify the percentage change in EBIT and produce a larger percentage change in EPS. therefore, a change in sales (revenues) through operating leverage affects EBIT. this change in EBIT through the effect of financial leverage subsequently affects EPS.
Some useful Guidelines:
When a firm grows, it needs capital which may be funded by equity or debt. Debt financing has costs and benefits. Debt has two significant benefits: interest paid is tax deductible, which minimizes debt’s effective cost; and debt carries a fixed charge, so stockholders do not have to share their net income if the enterprise is extremely profitable. on the other hand, high debt ratio indicates higher risk and hence higher cost of capital; and if the firm fails to earn sufficient income to cover its fixed charges it must produce the shortfall or face bankruptcy. therefore, firms with volatile earnings and operating cash flows must limit their use of debt financing. Certainly, effective cash flow and leverage management is critical to prudent and sound strategy designed to maximize the wealth producing capacity of the enterprise. Additionally, strategic analysis, market analysis and financial analysis should be internally consistent and congruent. The EBIT/EPS analysis allows a firm to evaluate the effects of different capital structure on operating income and the level of business risk. The variability of sales or revenues over time is a basic operating risk. please note that in capital budgeting for a specific project to increase shareholders’ wealth, it must earn more than its cost of capital or hurdle rate.
In practice, firms tend to use target capital structure-a mix of debt, preferred stock, and common equity with which the enterprise plans to raise needed funds. and because capital structure policy involves a strategic trade-off between risk and expected return, the optimal capital structure policy must seek a prudent and informed balance between risk and return. The firm must consider its business risk, tax position, financial flexibility and managerial conservatism or aggressiveness. while these factors are crucial in determining the target capital structure, operating conditions may cause the actual capital structure to differ markedly from the optimal capital structure. therefore, the target capital structure should be used as a guide toward an ideal capital structure that minimizes the weighted average cost of capital (WACC) while maximizing the shareholders’ wealth.
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WHO’S NEW/PROFESSIONAL DEVELOPMENT
Daytona Beach
Mark Patten has been named senior vice president and chief financial officer for Consolidated-Tomoka Land Co. He most recently was executive vice president and chief financial officer of SolarBlue LLC, a developer of alternative energy solutions located in Orlando. Prior to that, he worked in a financial capacity for several other companies, including Legacy Healthcare Properties Trust Inc. and Simply self Storage He earned a bachelor’s degree in accounting from the University of Florida.
DeLand
Joe Brash has been named president of Kingspan Insulated Panels North America, which is based in DeLand. He has been with Kingspan for several years, most recently as managing director of the company’s Central and Eastern European business. In Europe, he oversaw the Kingspan manufacturing plant, as well as 35 sales offices in Poland, Hungary, Slovakia and Czech Republic. In his new position, Brash will target the commercial and industrial construction markets. the company is a global manufacturer of insulated metal panels for building construction.
Ormond Beach
Jennifer Miller and Susan Cunningham, Premier Home Staging, have earned certification as home stagers. they will consult with clients in organizing, decluttering and downsizing, along with staging homes to maximize their sales potential. Miller and Cunningham have a combined 18 years of experience in the real estate industry.
Ralph Grossman has joined the Foundation of Financial Wellness as a certified instructor promoting financial stability and wellness. He has also joined Compass Financial Management Co. as an authorized agent focusing on financial planning. He retired in 2011 after 32 years in the banking industry, 27 of those as a store manager for Wells Fargo Bank.
Palm Coast
Bill Haussmann, broker/owner of Haussmann Realty, has earned the designation of Certified Residential Specialist from the Council of Residential Specialists, a not-for-profit affiliate of the National Association of Realtors. He completed advanced courses and demonstrated expertise in the field of residential real estate.
Port Orange
Debra DeLoe, a family nurse practitioner, has joined quick Care Medical Treatment Center. she is a graduate of the University of Buffalo School of Nursing, earning a master’s degree in nursing and family nurse practitioner in 2004.
This information was compiled by business-desk clerk Peggy Ellis. the Daytona Beach News-Journal publishes notices of new hires, promotions and professional development of managers and professionals in Volusia and Flagler counties. Anyone interested in being included should contact Peggy Ellis at 386-681-2560 or peggy.ellis@news-jrnl.com.
Flagler Animal Hospital, 130 Old Kings Road, Flagler Beach, will offer 24-hour emergency service beginning Saturday. Dr. Robert Tate, owner of the veterinary practice, and his staff offer a variety of medical and surgical services for area animals, including a laboratory, pharmacy, digital radiography and ultrasound.
The practice also provides routine immunizations and wellness care, internal medicine, pain management, radiology and dental care for animals. Hours: by appointment. Telephone: 386-439-1606. Website: flagleranimalhospital.vetsuite.com.
CG Marine Surveying & Consulting has opened in Palm Coast. Owner Chuck Graf, a U.S. Coast Guard Master Mariner, offers assistance to area boaters in deciding what type of boat to purchase and also provides pre-purchase and insurance surveys, damage assessment and claim surveys, and end-of-warranty and pre-delivery surveys.
Graf, a Seabreeze High School and Embry-Riddle Aeronautical University graduate, retired from the U.S. Air Force after 25 years of service. He has more than 40 years of boating experience and is a member of the Society of Accredited Marine Surveyors. Hours: by appointment. Telephone: 386-283-0506. Website: cgmarinesurvey.com.
Home Aide of Florida, a company based in Cocoa that provides services to seniors, is now operating in Southeast Volusia County. Owner Mary Dowty and local team leader Ginny Vasilopoulos offer assistance with errands, shopping, cleaning, organizing and appointments.
The company also offers Companion call, a service in which a staff member calls seniors at a prearranged time to make sure they are taking medications or just to talk to them to alleviate loneliness. A separate part of the business is Work Aide, through which the company can help small businesses with short-term projects. Hours: by appointment. Telephone: 855-777-4675. Website: homeaidesimplifies.com.
Compiled by Peggy Ellis. Businesses that have newly opened, physically enlarged locations or new or changed ownership are invited to send details to What’s new, Business Desk, the News-Journal, P.O. Box 2831, Daytona Beach, FL 32120 or fax to 386-252-4428. new businesses need to submit a photocopy of an occupational or other business license for verification. For questions, call Ellis at 386-681-2560 or email peggy.ellis@news-jrnl.com.
Mass. may lead country in health reform again
Health care costs too much. everyone agrees. But no one seems to know what to do about it.
If Obamacare survives Supreme Court review and takes effect in 2014, it will go a long way toward reducing the number of people without insurance. But it leaves the problem of rising costs relatively untouched.
Obama’s plan is modeled on the Massachusetts law signed by then Governor Mitt Romney in 2006. when the state implemented that plan, it led the country in attacking the problem of uninsurance.
Massachusetts stands on the verge of leading again, this time in addressing high costs. Similar bills were introduced last week in each house of the state legislature to limit annual spending increases. both would implement an aggressive new approach that is yet to be tested anywhere else.
Massachusetts perennially struggles with high health care costs, which run about 15 percent higher than the country overall. Its cost-of-living is high, and it serves as home to several expensive academic medical centers.
The 2006 reforms have drawn attention to the state’s health care cost problem, but they are not the cause. Per capita health care spending in Massachusetts has exceeded the national average for over 20 years. and the gap began growing several years before the reforms were enacted.
Both of the pending bills would peg annual growth in health care spending to the rate of increase in the state’s “gross state product” (GSD) (the state-level equivalent of the gross domestic product). If spending exceeds the cap, steps to reduce them would automatically take effect.
But the bills diverge in their aggressiveness. The House of Representatives proposal would cap health care spending at the GSP’s growth rate through 2015 and then limit it to half a percentage point below that rate for subsequent years. (Click here to see the House bill.) The Senate proposal starts at half a point above GSP growth through 2015 and then lowers it to the GSP rate. (Click here to see the Senate bill.)
If spending by a health care provider or insurance plan grows more than the prescribed rate, the House bill would empower a new state agency to require that payment contracts be renegotiated. it would also impose a luxury tax on especially expensive providers. The Senate bill would merely require providers and insurers to file confidential performance-improvement plans.
Both bills also encourage a shift away from fee-for-service reimbursement, which pays separately for each service that a provider renders, to global payments that cover bundles of services. But the Senate bill does this only for state-run plans, while the House version covers private insurance, as well.
If either bill, or a compromise between them, becomes law, it would a national first. No state has acted as aggressively to tackle health care costs. nor has the federal government. Yet the need to find a solution to rising costs is increasingly urgent.
The Massachusetts 2006 health reform law succeeded in bringing down the state’s rate of uninsurance to the lowest in the nation. and it has served as a model for national reform.
A plan by Massachusetts for a new approach to controlling costs could lead the country yet again. Based on the state’s past success, it seems the perfect place to start.
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