Dear Colleagues,

The 77th Annual Meeting atthe Resort at Squaw Creek inLake Tahoe, CA was a huge

success. The Resort at Squaw Creek proved tobe an exceptional host for our members andtheir families. Ellen Raney hosted a wonder-ful and educational meeting highlighted byengaging and thought provoking Presidentialand Howard Steel lectures. Participants hadthe rare opportunity to hear firsthand fromDr. Augustus White, orthopaedic surgeon,scientist, and author and Shankar Vedantam,science correspondent for National PublicRadio and noted author.

Dr. Raney’s Program Chair, Steve Morgan,and his Program Committee put together anoutstanding educational program. Not onlydid we hear a range of stimulating scientificpapers but we had the opportunity to learnfrom experts during symposia focusing ontrauma, hip and knee arthroplasty, sportsmedicine, shoulder & elbow and pediatrics.

NewsWestern Orthopaedic Association

The meeting was a success by all measuresand my gratitude goes out to all the WOAmembers who participated in our first-classeducational programs, our dedicated Boardand Committee Members, and the great staffat Data Trace.

Our plans are well underway for what prom-ises to be a great Annual Meeting in 2014 atthe Fairmont Orchid on the beautiful BigIsland of Hawaii. Bryan Moon and MelvynHarrington are hard at work on what I’msure will be an excellent educational programwith an ideal blend of expert symposia andscientific papers. We will once again offer ascored Self–Assessment Examination (SAE)with afternoon review sessions. This is anexcellent hassle-free way for you to fulfill the

I N S I D E

Meet WOA’s New Board Members p. 2

Congratulations to the 2013Award Winners p. 3

Recap of the 77th Annual Meeting p. 4

2013 Poster Award Winners p. 4

Thank You Annual MeetingGrantors and Exhibitors p. 5

Money Matters: A Common TaxMistake Could Cost You Millions p. 6

Practice Management Advisor:Taking on Practice Debt p. 7

Upcoming WOA Meetings p. 7

The Western Orthopaedic Association willpresent its next Annual Meeting July 30-August 2, 2014 at The Fairmont Orchid onthe Big Island, Hawaii. The Annual Meetingis one of the premier meetings for orthopae-dists practicing in the West. The ScientificProgram will be developed to present timelyreviews of practice-related techniques andclinical research findings in orthopaedic sur-gery through accepted key papers. Nationallyrecognized speakers will also be invited tospeak.

We invite you to submit one or more ab-stracts for the meeting, as this is an excellentopportunity to present a paper to your peers.

Call for Abstracts

In alignment with the mission of the West-ern Orthopaedic Association, to promote thedevelopment of residents, faculty and itsmembers, several residents and young inves-tigators were honored for their contributionsto the meeting. The complete list, with infor-mation about the named awards and win-ning papers, is now available on the WOAwebsite (woa-assn.org). The winners of theWOA/OREF Young Investigator Awardswere Raffi S. Avedian, MD, John G. Cos-touros, MD, and Reza Omid, MD; the winnerof the Lloyd Taylor Award was Scott Mont-gomery, MD; the winner of the VernonThompson Award was Jared A. Niska, MD;the winner of the Harold and Nancy Will-ingham Award was Timothy B. Alton, MD;the winner of the Sanford and Darlene AnzelAward was Calvin C. Kuo, MD and theResident/Fellow Award winners were Josh-ua S. Griffin, MD, Orrin I. Franko, MD andPhilipp Leucht, MD. The poster award win-ners were Mitchell McDowell, DO, StevenNishiyama, DO, PhD and Jason Jancosko,DO, MP.

The submission deadline is .Abstract applications may be submitted on-line through the WOA’s web site. Visit us atwww.woa-assn.org and click on the “Submityour Abstract” link.

We look forward to receiving yourabstract(s) and to seeing you in Hawaii nextyear.

continued on page 2

Winter 2013 Volume 16 Number 1

President’s MessageValerae O. Lewis, MD

www.woa-assn.org

78th Annual Meeting

July 30-August 2, 2014Fairmont OrchidBig Island of Hawaii

Western Orthopaedic Association News

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SAE requirement for your maintenance ofcertification (MOC).

New this year, we will host a combined andconcurrent meeting Allied Health Programfor Physician Assistants. This will be a greatopportunity for orthopaedic Physician Assis-tants to network and obtain their CME’s in aspecialty directed and interactive setting.

In keeping with the wonderful tradition ofthe WOA, there will be time for relaxing and

exploring the Big Island with family andfriends. I am sure Stacy Wald and the groupat Data Trace are making sure our free after-noons will have great opportunities for funand adventure. It will surely be a great meet-ing for you and your family!

I look forward to seeing everyone in Hawaii.

Sincerely,

Valerae O. Lewis, MD

President’s Message continued

Valerae O. Lewis, MD

Paul C. Collins, MD

William J. Maloney III, MD

Ellen M. Raney, MD

Brian A. Jewett, MD

Jeffrey M. Nakano, MD

Nitin N. Bhatia, MD

Patrick J. Halpin, MD

Omer A. Ilahi, MD

Basil R. Besh, MD

Michael R. Dayton, MD

Payam Tabrizi, MD

Jennifer M. Van Warmerdam, MD

Lawrence R. Housman, MD

Robert R. Slater, Jr., MD

Bryan S. Moon, MD

Melvyn A. Harrington, MD

WOA 2013-2014Board of Directors

Patrick J. Halpin, MD

Dr. Halpin has practiced inOlympia, Washington for 23years and is the senior partner at

Olympia Orthopaedic Associates. He re-ceived his MD at the University of Washing-ton, and his Orthopaedic training at theUniversity of Arkansas in Little Rock. Fol-lowing his residency Dr. Halpin opened asolo practice in Moses Lake, Washington,becoming the first orthopaedist to practice inthat area of the State, residing there for tenyears before relocating to Olympia.

He has served in many leadership positionsand on many committees at hospitals in bothMoses Lake and Olympia, and recently com-pleted six years of service as the ManagingPartner for his group. He will complete hissix year tenure on the AAOS Board of Coun-cilors this year, having served as well as theChairman of the Resolutions Committee. Hecurrently serves on the Resolutions Commit-tee for AAOS, and is the President-Elect ofthe Washington State Orthopaedic Associa-tion. Dr. Halpin and his wife, Wendy havefive children and welcomed their tenthgrandchild in October.

Meet WOA’s New Board Members

Basil R. Besh, MD

Dr. Besh was born in Cairo, Egyptand came to the United States at

the age of four. He grew up in Wayne, NewJersey, just outside of New York City. Hedidn’t travel far from home for college, at-tending Columbia University and complet-ing his Bachelor of Science in MechanicalEngineering in three years, earning the pres-tigious Illig Medal as Valedictorian of hisgraduating class. He went on to attend med-ical school at Georgetown University inWashington, DC.

Dr. Besh returned to New York City to com-plete his Surgery internship and OrthopaedicSurgery residency at the NYU Hospital forJoint Diseases. He stayed on with Dr. MartinPosner to complete the Emmanuel KaplanHand and Upper Extremity Fellowship and

subsequently earned the Certificate of AddedQualification in Hand Surgery and member-ship in to the American Society for Surgeryof the Hand (ASSH).

Dr. Besh spent a brief time working in NewYork City prior to relocating to the SanFrancisco Bay Area. He is currently in pri-vate practice in Fremont, California, special-izing in surgery of the hand and upperextremity. In addition, he is medical direc-tor for the FORM Hand and Upper ExtremityInstitute and Precision SurgiCenter.

In his spare time, Dr. Besh enjoys readinghistory and economics as well as playingchess and doing the New York Times cross-word puzzle. He lives with his wife Amirraand five young children, Dounya, Jenna,Leena, Sophia, and Adam, in Pleasanton,California.

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Lloyd Taylor Award WinnerScott Montgomery, MD, University ofCalifornia Los Angeles, Los Angeles, CA

Vernon Thompson Award WinnerJared A. Niska, MD, University of CaliforniaLos Angeles, Los Angeles, CA

Harold and Nancy Willingham AwardWinnerTimothy Alton, MD, Harborview MedicalCenter, University of Washington, Seattle,WA

Sanford and Darlene Anzel AwardWinnerCalvin C. Kuo, MD, The Taylor Collabora-tion St. Mary's Medical Center, San Francisco,CA

Resident/Fellow Award WinnersOrrin I. Franko, MD, University of CaliforniaSan Diego, San Diego, CA

Joshua Griffin, MD *Scott and White Memorial

Hospital, Temple, TX

Philipp Leucht, MD, Stanford UniversityMedical School, Stanford, CA

Congratulations to the 2013 Award Winners

Congratulations to the following 2013 WOA Resident/Fellow Award Recipients. The award winners were selected during the Annual Meetingin Lake Tahoe, California.

Western Orthopaedic Association News

Recap of the 77th Annual MeetingThe 77th AnnualMeeting was a won-derful success with ansuperb scientific pro-gram. Program Chair

Dr. Steven J. Morgan and the WOA ProgramCommittee did a terrific job of creating the2013 Scientific Program. Highlights includedthe thought provoking presentation “WhatDr. Martin Luther King Jr. Would Want Usto Know About Health Care Disparities” byPresidential Guest Speaker Augustus A.White III, MD, PhD; the Howard SteelGuest Lecturer, author Shankar Vedantam,presented his newest book “The HiddenBrain”; and the Presidential Address by Dr.Ellen Raney “Pediatric Orthopaedic Care inthe South Pacific Challenges and Triumphs”was eye opening.

The meeting kicked off with a spectacularWelcome Reception that began with a lei-surely ride in a scenic aerial tram to HighCamp. The panoramic views of the SquawValley, Lake Tahoe and the surrounding Si-

erra Nevada mountains made it a night toremember. The following evening beganwith the Exhibitor and Poster Reception be-fore everyone went off on their own to enjoyall the Lake Tahoearea had to offerfor the evening.The meeting wasbrought to a closewith a fantasticsunset Receptionfollowed by theFamily Gala Din-ner Dance.

It was a memorable meeting and we expressour thanks to all who attended. If you missedthe event, we encourage you to view the2013 Lake Tahoe pictures on the WOA web-site (www.woa-assn.org) and see what agreat time it was.

We look forward to seeing you next year atThe Fairmont Orchid on Big Island, Hawaii,July 30-August 2, 2014.

2013 Poster Award Winners

Congratulations to the following 2013WOA Poster Award Recipients. Theaward winners were selected during theAnnual Meeting in Lake Tahoe, California.

First Place - TieMitchell McDowell, DO

Steven Nishiyama, DO, PhD

Third PlaceJason Jancosko, DO, MPT

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Grantor & Exhibitor AcknowledgementsThe Western Orthopaedic Association would like to thank the grantors and exhibitors of the

Western Orthopaedic Association’s 77th Annual Meeting. Without the unrestricted educationalsupport of the companies listed below, we would not have been able to provide this conference.

GOLDCadence Pharmaceuticals Inc.

ConvaTecZimmer - Grantor

BRONZEMedtronic Advanced Energy

Stryker Orthopaedics - Grantor

COPPER

Auxilium Pharmaceuticals, Inc.BioMarin Pharmaceutical Inc.CeramTec Medical Products

DePuy Synthes Joint ReconstructionDePuy Synthes Mitek Sports Medicine

Exactech, Inc.Ferring Pharmaceuticals Inc.

Innovative Medical Products, Inc.Lima USA

MAKO Surgical Corp.

Maxx Health, Inc.Medtronic, Inc. — GrantorParamed Medical Systems

Quill™ AngiotechRTI Biologics, Inc.

Smith & Nephew, Inc.SuccessEHS

SunMedica Inc.Synthes

ACIGI RELAXATIONAmerican Academy ofOrthopaedic SurgeonsB. Braun Medical, Inc.

BiocompositesChartLogic, Inc.

Cobalt Health, Inc.ConforMISEmdat, Inc.

EOS ImagingExscribe, Inc.

Medical ProtectiveMEDSTRAT, INC.

OREFOrthofix, Inc.

Ortho-PreferredPacira Pharmaceuticals, Inc.

PlanmedProScan Reading Services

Simbionix-USAVirtaMed AG

Wright Medical Technology, Inc.

EXHIBITORS

Western Orthopaedic Association News

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Are you an owner of a medical practice taxedas a flow-through entity… such as an S-cor-poration? Most physicians are – in workingwith over 1,000 doctors, we would estimatethat 70% of medical practices operate as S-corporations. As such, you may be paid bothas an employee of the practice – receiving aW-2 – and as an owner of the practice –through a K-1 distribution. The key differ-ence between income earned as employeecompensation (W-2) and that earned as aK-1 profit distribution is that you pay FICA(Medicare and Social Security) tax on theincome earned as an employee but not nec-essarily on K-1 profit distributions. Whilethe large Social Security portion of FICAphases out after income of $110,100 in 2012,the 2.9% Medicare tax has no phase-out.Also, it is scheduled to increase to 3.8% in2013 under The Patient Protection and Af-fordable Care Act signed into law in March2010.

While this is only a 2.9-3.8% tax in 2012 and2013, we have seen poor advice here costphysicians $10,000 or more each year, everyyear of their career. Over one’s career, thiscan amount to nearly half a million dollars oflost capital… for no good reason!

Let’s look at two examples. Do you see your-self in any of these?

1. Dr. Smith is part of a 3-doctor cardiolo-gy practice. He earns about $400,000annually as a cardiologist. He calls the2 other doctors “partners” but techni-cally they are co-owners of the practice,an S-corporation. Each month, Dr.Smith gets paid $20,000. Then at theend of each six month period, he getsanother $80,000 based on the practice’sperformance. His accountant deemsboth the monthly and semi-annual pay-ments to be salary payments. Thus, hepays Medicare tax on all $400,000 for atax of $11,600. This, of course is inaddition to state and federal incometaxes, property taxes, etc. If he worksfor 25 years earning the same income,he will have lost over $550,000 in

Medicare taxes, assuming a 5% growthrate.

2. Down the road, Dr. Jones is in the exactsame economic situation. However, hisCPA treats the monthly payments asW-2 wages and the semi-annual pay-ments as K-1 distributions of the profitearned by the practice. Thus, he paysMedicare on $240,000 for a cost of$6,960. If Dr. Jones works for 25 yearsearning the same income, he will havelost about $330,000 in FICA taxes, as-suming a 5% growth rate – an improve-ment of over $220,000 over Dr. Smith.

Obviously, any of you reading here wouldnot want to be Dr. Smith. Yet, we are con-tinually astounded when see so many physi-cians come to us in the same position–having all, or most, of their income treatedas W-2 when in fact much of it is earnedbecause of the profitability of the practicerather than the doctor’s personal services.Wouldn’t all of us prefer to be in Dr. Jones’situation? If we are allowed to be – yes. So,the question really comes down to – what arethe tax rules that govern this situation?

In discussions with a number of CPAs withover 15 years of experience here, the consen-sus is that one should follow a simple rule ofthumb. That rule is basically that

The rest of your compensation canbe characterized as distributions. One CPA,practicing for over 20 years, commented“this is what I do for my clients, and whenthe issue has been discussed in audits overthe years, the IRS finds it very difficult toargue that our client should be paid more ontheir W-2 than a staff member doing thesame job.”

Looking again at the examples above, Dr.Smith could easily attract another cardiolo-gist to his practice paying $250,000 salary.This would allow him to avoid Medicare taxon $150,000 – saving over $4,000 annually.

Not coincidentally, Dr. Jones is in the rightsituation.

As hard as physicians work, throwing awayhundreds of thousands of dollars over a ca-reer – for no good reason – is a shame. Yet ithappens every day.

, is an attorney,author of five books for doctors, and princi-pal of the financial consulting firm OJMGroup. works at OJMGroup as a tax consultant. They can bereached at mandell@ojmgroup.com or 877-656-4362.

We encourage you to contact us at OJM for afree consultation to discuss your 2011 taxesand what you can do to reduce them. Pleasecontact David B. Mandell, JD, MBA at 877-656-4362.

:

A Common Tax Mistake Could Be Costing You Thousands AnnuallyDavid Mandell, JD, MBA & Carole Foos, CPA

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A short-term loan or line of credit is oftenthe solution to a medical practice’s tempo-rary cash flow problems. For an investmentin equipment or office space, longer termfinancing may be appropriate. Before youborrow, you’ll want to carefully evaluateyour practice’s needs and gather the financialinformation lenders will require when theyare reviewing your request for credit.

What’s Required?It makes sense that prospective lenders willwant to assess your practice’s ability to repaythe amount it borrows. Along with tax re-turns, prospective lenders may ask your prac-tice to provide formal financial statements.In some cases, lenders may require financialforecasts in addition to recent financial state-ments.

Collateral and GuaranteesLenders typically insist on collateral as secu-rity for any loans they make. In the case of amedical practice, acceptable collateral mayinclude practice equipment and accounts re-ceivable. With respect to accounts receiva-ble, prospective lenders will be interested inknowing not just the amounts recorded onyour books, but also the percentage of yourreceivables you expect to collect. Be preparedto substantiate your average collection ratewith historical data.

Don’t be surprised if lenders require you andyour partners to personally guarantee thepractice’s debt. You may even be asked toprovide personal collateral as security for aloan.

Look at Multiple Financing SourcesIt’s a given that rates and terms on most typesof loans vary from one lender to another. Ata minimum, you’ll probably want to contactthree lenders. Review their proposals andcompare fees, interest rates, and other terms.Some lenders whose terms may not seeminitially attractive may make a counterofferif they learn you are in discussions with otherlenders.

Pay careful attention to any proposed loancovenants that will require your practice tomeet certain requirements while the loan isoutstanding. For example, an agreementmight require your practice to submit period-ic financial statements to the lender andmaintain specified levels of working capitaland net worth. The lender will have the rightto take certain steps -- such as modify theloan’s terms or even call the loan -- if yourpractice fails to meet the covenants.

As an alternative to seeking outside financingthat demands collateral, some physicians optto loan money to their practices, backingtheir actions with a formal loan agreementthat specifies an interest rate, repaymentterms, and other particulars about the loan.We can work with you to determine yourpractice’s ability to carry the debt you areconsidering, ensure you have the necessaryfinancial information to give prospectivelenders, and evaluate the loan proposals youreceive.

Look at TaxesThe cost of acquiring new equipment foryour practice can be mitigated somewhat bytaking advantage of certain tax law provi-sions. For example, you can elect Section 179expensing for up to $500,000 of qualifiedassets acquired in 2013, with a $2 millionthreshold over which the maximum deduc-tion begins to phase out. After 2013, thesenumbers are scheduled to be reduced to$25,000 and $200,000, respectively. Also, aspart of its attempts to stimulate the economy,Congress has extended a provision allowingbusiness taxpayers to claim 50% “bonus”first-year depreciation for certain asset pur-chases placed in service through 2013.

Please contact us to learn how we can help.Call a member of our Health Care Team at317.472.2200 or email us atinfo@somersetcpas.com.

is provided by Somerset’sHealth Care Team for our clients and other interested

persons upon request. Since technical information ispresented in generalized fashion, no final conclusionon these topics should be made without further re-view. For additional information on the issues dis-cussed, please contact a member of our Health CareTeam This document is not intended or written to beused, and cannot be used, for the purpose of avoidingtax penalties that may be imposed on the taxpayer.

Taking On Practice DebtBrought to you by Somerset CPAs, P.C.

Upcoming WOA Meetings

July 30 - August 2, 2014Fairmont Orchid

Big Island, HI

July 29 - August 1, 2015Coeur d’Alene

Coeur d’Alene, ID

110 West Rd, Suite 227Towson, MD 21204E-mail: info@woa-assn.orgInternet: www.woa-assn.org

Member Incentive

Refer and sponsor new memberand receive 1/2 off the registration

fee for the next annual meeting.

Refer and sponsor new mem-bers and the registration fee for the

next meeting is waived.

Do You Know a Qualified MD or DOOrthopaedic Colleague Who Is Not a WOA Member?

Apply formembership

online at

or call

and ask foran application.

The Benefits of Being a Member:

1. 10-credit Self Assessment Exam developedaround the Annual Meeting program content

2. 24 FREE CME credits through the

3. Eligibility to participate in Ortho–Preferred®,a professional liability insurance programexclusively for orthopaedic surgeons

4. Meeting registration fee waived for newmembers’ first year

5. Free subscription to the

6. Annual meeting discount for members7. Substantial discounts to other regional society

meetings8. Diverse annual meeting content9. Awards and scientific recognition

10. WOA newsletter

Completion of an accredited residency program and privileges topractice as an orthopaedist in a local hospital are the

requirements for both MD and DO candidates.