2009 Midterm Exam Review

2009 Midterm Exam Review Practice Options (Chaps 1, 2, 4)  What are the key trends in optometry practice patterns?  What effect does practicing solo, in a partnership, or in a group have on income?  What percentage of private practice income is generally derived from services? From materials?  What percentage of patients is generally covered by third party plans?  What are the average costs of practice as a percent of gross income for wages and benefits of employees? Office lease? Cost of ophthalmic materials? Net income? Practice Purchase (Chap 3)  What are the major advantages of purchasing a practice? Disadvantages?  What is the optometrist-to-patient ratio considered necessary for a rural practice? Suburban practice? Urban practice?  What are the key economic indicators of the health of a practice?  How do you estimate the approximate value (sales price) of a practice?  What is the average sales price as a percent of gross income?  How are accounts receivable managed in a practice sale?  What is a “transition period” for the selling optometrist?  How are optometry practice sales financed by the seller?  How is “goodwill” depreciable? How is it allocated in a sale?  What is amortization? To what asset can it be applied?  In valuing assets for the sale of a practice, which assets most favor the buyer (in terms of depreciation after the sale)? Which assets offer the least tax advantage?  Is land depreciable? Supplies and inventory?  What is a “break even” analysis? Why is it used? Associateship (Chaps 5, 13)  What economic factors of a private practice should be evaluated by a prospective associate?  What factors indicate a practice is ready for an associate?  How does an associate show the associate can “pay his or her own way”?  How is bonus income determined?  What are the key strategies to achieving a successful negotiation?  What are fringe benefits? Why are they so valuable to associates? How do associates claim a tax deduction for these benefits if they must pay for them instead of the employer?  What 3 legal elements are necessary to form a contract?  What is the usual stumbling block to the successful negotiation of an employment contract and how can it be overcome?  What right does an associate have to the records of patients seen as an associate? To the names and addresses of these patients?  What is a covenant not to compete and how can it be applied to an associateship agreement? Proprietorship (Chaps 6, 33 [pgs 331-337])  What are the advantages of practicing solo? Disadvantages?  How is an individual practitioner’s practice income calculated and taxed?  What is the liability of a sole practitioner for contracts and lawsuits?  What are the basic provisions of Individual Retirement Accounts?  How much can be placed in a traditional IRA or Roth IRA annually (below 50)?  When are contributions deductible (self-employed, employed with no other retirement plan, employed with employer retirement plan)?  When can contributions be withdrawn without penalty?  How does a Roth IRA differ from a traditional IRA?  What determines that a Roth IRA cannot be used?  How much can be contributed annually to a SEP IRA?  Who determines the size of contributions to a SEP IRA?  Can a SIMPLE IRA be set up for employees if there are other employee retirement plans?  How much can be contributed to a SIMPLE IRA annually (below 50)?  What is the difference between matching contributions and non-elective contributions to a SIMPLE IRA? Business Organizations (Chaps 7, 8, 33 [pgs 331-337])  What are the advantages of partnership? Disadvantages?  What is the legal status of a general partnership?  What is the Uniform Partnership Act and what effect does it have on the partnership agreement?  What is “joint and several” liability?  How are partners and partnerships taxed with respect to income?  How does a limited liability company differ from a general partnership with respect to taxes? Liability?  What are the general provisions of a Keogh Plan?  What is a profit-sharing plan? Pension plan? Combination plan? How do they differ?  How much income can be contributed annually to a Keogh defined benefit plan? Defined contribution plan?  What is vesting? How is it applied to the contributions of employees?  When can Keogh contributions be withdrawn without penalty?  What are the characteristics that distinguish corporations from other types of business organizations?  What are the advantages of practicing as a professional association or corporation? Disadvantages?  How do PAs and PCs for optometrists differ from business corporations?  Why is a PA or PC taxed and what is the federal rate?  How does an optometrist obtain some insulation from liability in a PA or PC?     What are the advantages of a Limited Liability Company compared to a professional association or corporation? How does a Subchapter S Corporation differ from a PA or PC? How is a Sub-S Corporation taxed? What is the liability of a shareholderemployee optometrist? Why are Sub-S Corporations often used for separate optical dispensaries? Financial Planning (Chap 33)  What are the 5 steps needed to establish a financial plan?  When filling out a financial statement, what is an example of contingent income?  When budgeting, discretionary spending should be limited to what percent of monthly income?  What is the federal tax bracket for an optometrist earning the mean income for optometrists (as reported by the most recent AOA Economic survey)?  What are the 3 types of investments that are generally used?  What is the “rule of 72” for investment income?  How does one earn a capital gain? What is the likely tax rate for capital gains when stock, bonds, and similar investments are sold?  What is the rule of thumb for retirement income expressed as a percentage of current living expenses?  What is the cost of living index? Consumer price index? How are they applied to retirement planning?  What are the general provisions of a 401(k) plan?  What percentage of income can an employer contribute? An employee? What are the monetary limits (under 50)?  What is a Roth 401(k) plan? How is it different from a Roth IRA?  What is the (often-cited) key to building a sizable retirement income? Fees, Credit, Collections (Chaps 34, 35)  What is “fee splitting”? When is it most likely to occur?  What is “locum tenens” and how does it apply to substitute doctors?  Can the Medicare “anti-kickback” law be applied to post-operative care of a cataract patient by an optometrist? What is the “kickback”?  Under what circumstances would a coupon providing a discounted fee for services by an optometrist be deemed unprofessional conduct?  Why is establishing fee-for-service charges so important for third party reimbursement?  What are the major factors to consider when setting fee-for-service charges?  What is “chair cost”? What is its importance? (Be able to calculate an example.)  What is the usual markup for ophthalmic materials?  Why are dispensing fees preferable to markups for third party plans?  What is the customary method used by optometrists for payment of services and materials?  What effect does the Equal Credit Opportunity Act have with respect to the awarding of credit by optometrists?      When credit is awarded, are 4 or less payments required to avoid the many disclosures of the Truth-in-Lending law? The federal Fair Debt Collections Act applies to attorneys and collections agencies—does it also apply to optometrists? Are contracts with minors for non-essential health care services enforceable by optometrists? How can potential problems with minors be avoided? What is the preferred method for in-office collections efforts by optometrists? If an optometrist utilizes small claims court, what are the usual legal remedies allowed for the collection of amounts awarded by the court? Leases (Chaps 17)  What is the usual cost of an office lease (percent of gross income), according to AOA surveys?  In an office lease, what is “step-up” rent? What is the difference between a net lease and a gross lease?  How is an option to renew exercised? What are “caps” and when are they necessary? How is the right to sub-let usually described?  In what ways are maintenance fees managed?  What insurance does a lessee need?  What is an exculpation clause? What is an acceleration clause?  What are the circumstances under which the lessee should be allowed to terminate the lease?  What is a “pro forma analysis” and how is it performed? Income Taxes (Chap 38)  What are the major exclusions from taxable income?  What is the “adjusted gross income”? Do deductions from gross income include contributions to a traditional IRA? Keogh Plan? 401(k) Plan?  How much can a gift be before tax reporting is required?  If a principal home is sold, what are the tax ramifications of the gain?  What kind of distance requirement must be satisfied before moving expenses can be deducted?  Can a student taxpayer deduct books, tuition and supplies? Expenses for room and board while at school? Interest on student loans?  For a self-employed OD, how much of his or her health insurance premium can be deducted? How much of his or her Social Security contributions?  What is the standard deduction? Can extra deductions be claimed by persons over 65? Blind? How?  What are “itemized deductions” and how are they determined? What are the special limits (percent of adjusted gross income “floor”) for medical, casualty, and miscellaneous deductions?  Can medical expenses reimbursed by health insurance be deducted?  Can personal (consumer) sales taxes be deducted? How?  What part of home mortgage payments is tax deductible?  How is the value of non-cash charitable deductions figured?        How can travel-related searches for employment be deducted? What are the allowable “exemptions” from income and how are they applied? How many tax brackets are there for individuals? What is the lowest? The highest? How are credits applied to taxes owed? What are the Hope and lifetime learning credits and how does one qualify for them? How about the child credit? What age must children be to fall under special rules for the payment of taxes? What is earned income? Unearned income? Who does not have to file a tax return? If a form to extend the filing of the return is submitted (form 4868), what still must be done to avoid penalties? Business Taxes (Chap 39)  What types of business organizations must file their own tax returns?  What is the difference between the cash and accrual income accounting systems?  What is the difference in the tax treatment of capital assets as compared to business-related expenses?  What is basis? How is basis usually created? How is it used to calculate gain or loss from the sale or other disposition of property?  For expenses to be deducted by a business they must be what (2 basic requirements)?  To determine the cost of goods sold, what must be conducted by optometrists at the end of the tax year?  Can gifts, benefits, interview and moving expenses for employees be deducted?  To what extent can the costs of operating a leased automobile be deducted by a practitioner?  What is the difference in tax deductibility of repairs compared to improvements that prolong useful life?  Can bad debts be deducted?  What are the rules for the deductibility of business-related travel, lodging, subsistence, and entertainment expenses? How does this affect the deductibility of continuing education expenses?  Can business-related credit card interest charges be deducted?  Under what kind of business entity can premium costs for life and disability insurance coverage for the optometrist be deducted?  Can Social Security taxes for employees be deducted?  Can office lease expense be deducted?  Can the fees paid to lawyers and accountants be deducted?  Can books, instruments, trial lens sets, and so forth bought as students be depreciated after entering private practice?  Can intangible assets be depreciated? What is an example?  What 3 things must be known before depreciation can be calculated?  How does the Modified Accelerated Cost Recovery System apply to depreciation deductions claimed by optometrists?  When must straight line depreciation be used?         What business assets are included in 5 and 7 year depreciation periods? When do the highest deductions under the MACRS occur? What is the depreciation period and method of depreciation that must be used for patient records? What is expensing (section 179 deduction)? When can it be used? What is the expensing limit? What effect does using it have on the expensed asset’s basis? How is the deduction for business use of an automobile calculated? What are the special rules for use of the “cost per mile” method for vehicles? How are “caps” applied to the depreciation of automobiles under the MACRS? What are the depreciation rules for vehicles used less than 50% for business purposes? To deduct the use of a home office, what 2 requirements must be met? Tax Reporting (Chap 40)  How does a new practitioner obtain an employer identification number?  How does an employer determine the amount to be withheld from the wages of employees for payment of income taxes? What is the W-4 form used for? Circular E (publication 15)?  Where do employee income taxes have to be deposited, and how often? When do deposits have to be sent to the IRS?  What percentage of wages must be contributed by employees for the Social Security/Medicare tax? What is the “ceiling” on Social Security contributions? What percentage must be contributed by employers on behalf of employees?  How does a self-employed optometrist determine the amount to withhold from income for payment of income taxes? What is Schedule 1040-ES used for?  How does a self-employed optometrist determine the amount of business income that is subject to Social Security/Medicare taxes? What is Schedule C used for? What is Schedule SE used for?  What amount and percent of a self-employed optometrist’s business income is subject to the Social Security tax? Medicare tax?  What are the wages and percent that are applied to calculation of the federal unemployment tax? Who pays the tax? What if an employee leaves and is replaced during the year?  How are payments to state unemployment tax credited to the federal tax?  How is the federal unemployment tax collected and deposited, and when? Billing and Coding (Chaps 36, 37, Dr. Classé’s powerpoint)  What is the difference in benefits between vision and medical insurance plans?  What is a deductible? How is it applied to a medical plan?  What is a co-payment? How is it applied to a medical plan?  How is the reimbursement for a vision plan determined?  How is reimbursement calculated for a medical plan? (Be able to calculate Medicare reimbursement problems.)  What key optometric service is not covered under Medicare? How does an optometrist obtain reimbursement for non-covered services?       What role does an optometrist’s fees-for-service play in determining that optometrist’s Medicare reimbursement? Can regularly discounting fees-for-service affect Medicare reimbursement? What is “assignment” under Medicare? How is Medicare reimbursement determined if an optometrist accepts “assignment”? What is Medicare Complete coverage? “Medigap” coverage for Medicare? What vision-related benefits are mandatory under Medicaid? How are optional vision-related Medicaid benefits What are the eligibility requirements for the Early and Periodic Screening, Diagnosis, and Treatment program? Third Party Reimbursement (Dr Day’s powerpoint)      What is “medical optometry”? How is this type of practice affected by third party reimbursement and income? What is the usual effect on a practitioner’s fees for services and materials? What benefits do medical HMOs or PPOs typically provide? What is a V code? When is it used? How does a practitioner bill for punctal plugs (code and procedure)? How are multiple procedures indicated for billing? How is payment calculated for multiple plugs? What is the appropriate coding for a glaucoma suspect? What testing (procedures) should be performed for the glaucoma workup? What testing cannot be performed at the same examination and still receive reimbursement? How frequently can visual field testing be performed (without special clinical justification)? What is the appropriate billing (code and procedure) for removal of a lash (epilation)? How is a modifier used? What is the appropriate billing (code and procedure) for a diabetic patient without retinopathy? What is an S code? When is it used? What is the appropriate diagnostic code for first day follow-up of cataract surgery? How is co-management indicated? How should billing be performed on a patient with vision and medical insurance who has both refractive and medical diagnoses?      Midterm Examination 1. 2. 3. 4. 5. Secured test (not reproducible) 100 questions National board format (objective question, 4 choices) One best answer 2 hours for exam