Forgetta ‘bout it: Free Agents and FICA

QuarterbackFall time is synonymous with football. Just as in football, health care has it’s own brand of free agents. And just as in football, compensation and other related activities are treated differently in health care. Find out how you can say “forgetta ‘bout it” to private practice physicians and FICA and other employment-related taxes on your cost report.

Per the 2015 Medscape Physician Compensation Report, 63 percent of physicians are employed, with less than a third (32 percent) in private practice. This follows the trend reported by a major physician recruiter, which revealed a hospital employment rate of 11 percent in 2004, rising to 64 percent in 2014. This shift is occurring due to the increasingly uncertain environment and burdensome administrative requirements in private practice.

Employment of physicians is challenging for many reasons, including how it’s reported on Medicare cost report. Employed physicians’ compensation must be disclosed on Worksheet A-8-2 as either provider or professional component (see Medicare Cost Report Talk blog tip #10 posted on June 13).

Employment-related taxes, such as FICA, Workers’ Compensation and Unemployment Compensation, which are paid by a hospital on behalf of an employed physician, are considered business expenses of the hospital and not fringe benefits. Thus, the amount for A-8-2 excludes these dollars.

Tip #19:

For Worksheet A-8-2, exclude FICA from the benefits add-on to physician salary (Pub. 15-1, Section 2122.3).

Further guidance can be found on the Centers for Medicare and Medicaid Services (CMS) website:

Provider Reimbursement Manual 15-1

Questions? Please contact Marie White at 612.253.6546 or mewhite@eidebailly.com.

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