ElderWeb

Choosing Eldercare Services

Practical Accountant, January 1998

By Howard Wolosky

"There is no revenue growth in the traditional services." This has become a mantra bombarding accountants in public practice. If you asked them if it is true, many would probably say yes, but add quickly that these services still make up the bulk of their practices. Last year, the AICPA released the Report of the Special Committee on Assurance Services and identified more than 200 service areas where accountants can apply their accounting and auditing expertise to develop new sources of revenue. The report can be found at http://www.aicpa.org/assurance/scas/index.htm. The dilemma facing many accounting firms and sole practitioners today is in deciding whether they need to branch out, and so, how and in what new practice areas? The report contained business plans for six assurance services that the AICPA identified as having the greatest growth potential: The aging U.S. population and the need of the elderly for specialized professional assistance can be a golden opportunity. Electronic commerce assurance, Health care performance measurement, Entity performance measurement, Information systems quality, Comprehensive risk assessments and Eldercare assurance. The Institute is moving quickly with respect to these six areas. In fact it recently unveiled its CPA WebTrust program developed for electronic commerce assurance. (See the November issue of The Practical Accountant, p. 18.) In such an engagement, a CPA firm is licensed by the AICPA to review an Internet site to assure users that it conforms to prescribed standards for business practices disclosures, transaction integrity and information protection. As with this or any other new service area it is considering, a firm must evaluate the skill level of firm members, the investment needed to develop the practice area, competition, potential market, anticipated revenue and profitability as well as determining its comfort level and the liability risk. For example, a larger accounting firm, or one that does a lot of technology consulting, might get involved in electronic commerce assurance. Smaller firms, including those who don?t feel comfortable with technology consulting, might find a more natural fit with eldercare assurance. Why It's Needed The opening paragraph of section in the AICPA report on eldercare assurance services explains what is driving this practice area. "The population of the United States is aging. The U.S. Bureau of the Census estimated that by the year 2000 16.6 million people In the United States will bej5 years of age or older, approximately 4.3 million will be 85 years of age or older. Many of these people will be widows who didn?t handle finances while their spouses were living. It also estimated that persons 65 and over controlled between $11 trillion and $13 trillion of wealth." The report pointed out this growth in the older population means more individuals are living to an age where assistance is needed for remaining in their own home or for institutionalized care. It goes on to say that children usually cannot provide the necessary assistance because they don?t live near their parent or the child and the child?s spouse both have full-time jobs. The conclusion is that the accountant can provide a valuable service in combination with, and as coordinator of, other professionals. Although the elderly individual can be the client, quite more often, the children will be the clients. The report provides examples of the typical functions that would be performed such as: Receiving, depositing and accounting for the elders? income. Paying bills and conducting routine, ongoing transactions. Accounting for routine financial transactions and reviewing them for reasonableness and for adherence to established criteria. Overseeing investments including the supervision of bank trust departments. Investigating and providing information for handling of unusual or unexpected situations, such as home maintenance and repair or medical emergencies. Inspecting logs, diaries or other evidence to determine if care givers are meeting performance criteria. Periodic reporting to family members including accounting of financial transactions and the details of the care being provided. Meeting with third parties and clients to establish expected standards of care. Assisting in the selection of care providers and the monitoring of the care itself. These services are primarily aimed at those elderly who want to remain in their homes. It is intended to provide an alternative so as to defer the necessity for entering an institution or other formal assisted-living arrangement. Market factors. In the report, the special committee estimates that the average fees will be from $250 to over $1,000 per month depending on the level of work being done. And assuming 10% participation for those over age 75, it is expected that the annual fees nationwide will reach almost $2 billion. As for competition for accountants, no one appears to dominate the market. Welfare agencies, geriatric specialists, trust officers and lawyers currently provide some of these services. The report identified eldercare assurance services as being particularly well suited for small practitioners because the elderly might already have a very good working relationship with the practitioner and the children usually have experience dealing with accountants and understand the independent role that they can play. Task Force?s Efforts The AICPA has created the ElderCare Plus Service Development Task Force to develop and communicate guidance for providing eldercare assurance services and to perform other actions to develop this as a practice area. A list of the committee members may be found at http://www.aicpa.org/assurance/on_going/tfm.htm. The task force is closely examining social, medical, financial, legal ethical, professional standards, liability and marketing issues. It is expected to formally unveil the service area later this year. Basically, it is envisioned that the accountant will be acting to protect the older individual, to ensure that he or she receives proper care, making sure the finances are in order, that there is adequate insurance coverage and to provide financial and estate planning advice. The role is to "act as eyes and ears of person?s family members," according to George A. Lewis, chair of the task force and retired partner with Brossard Poche Lewis & Breaux in Lafayette, LA. Karen Stevenson Brown, a task force member and manager with McGladrey & Pullen, LLP in Bloomington, IL, said those who provide eldercare assurance services must make "a commitment to learning about what is going on in the industry. Some of it is not traditional accounting. You have to understand how the health care system works, You have to know about Medicare and Medicaid, estates, trusts, living wills, etc. You can?t really dabble in this." Brown maintains a very good Web site at http//www elderweb corn that contains a large huge collection of eldercare links and resources on the Worldwide Web. It was a developed by Brown when she was a consultant to healthcare providers prior to joining McGladrey. Ann Elizabeth Sammon, another member of the task force and technical editor with AICPA?s Professional Development Division, noted that the services provided "are probably going to vary greatly depending on the client, the CPA and other circumstances including the resources that are available in their community." She said the task force expects accountants to actively work with geriatric care managers, if they are available in their locality. Geriatric care managers would be closely involved in the assessment and monitoring of the health and abilities of the elderly. However, it should be pointed out, according to Sammon, that there are only about 1400 members of the National Association of Professional Geriatric Care Managers. Brown sees a number of strategic alliances in this area. Besides those with geriatric case managers and social workers specializing in eldercare, she contemplates working relationships with attorneys and insurance agents. Lewis explained that initially there will probably be a certificate of education program for eldercare assurance service and there will probably be education, experience and CPE requirements as well as an exam. The task force is also considering asking the AICPA to develop a accreditation for this service In addition, as with the use of the CPA WebTrust, a brand name will be used to identify the service being offered by CPAs. Lewis is said there is a plan to have an AICPA Internet listing of accountants who provide eldercare assurance services. He felt this would be particularly helpful for interested family members who don?t live near their elderly relative. Brown sees eldercare assurance services as an evolving practice area that will develop with input from practitioners She postulated that "the task force will be putting out the service out there and based on people?s experience find out what?s working, what?s not working and what needs to be clarified." A TYPICAL CLIENT Marketing push. The AICPA is developing as much marketing support as possible for this service area. Sammon pointed out that Practitioners Publishing Company (a RIA Group subsidiary of Thomson Corporation, also the parent of Faulkner & Gray, the publisher of The Practical Accountant) has coverage of eldercare assurance service in their Guide to Nontraditional Engagements There is also an AICPA CPE course solely devoted to eldercare assurance services. Furthermore, there is planned Assurance Service Conference, jointly sponsored by the AICPA and the Canadian Institute of Chartered Accountants, to be held in Las Vegas on June 4-5, 1998. It is scheduled to have a separate track on the eldercare assurance services practice area. W. Britt Smith, president of the accounting firm of Smith & Just, P.S. in Seattle, WA, wrote an article on how accountants can best market services for the elderly. "Reaching the Older Generation" appeared in The Practical Accountant, June issue, p. 64. "Insecurity and anxiety is a real big issue for the elderly" observed Smith, "and if someone can take over the management of the financial end. I can see it would be really easy to sell." In Operation Some accountants are already providing this service. For instance, Stephen B. Cohen, an accountant in Aventura, FL, provides various services that enable elderly individuals to remain in their homes for as long as possible. One example of a service that he provides is the paying of expenses. This is typically done by Cohen writing checks on a revolving "impress" fund which is replenished by family members on a monthly basis up to an agreed upon amount (normally $3,000). Cohen also does the individual?s tax returns, monitors the investments and takes care of the payroll and accounting for home care providers. He also provides financial planning and keeps family members informed. Cohen?s wife, a geriatric case manager plays an extremely important role with regard to the social and medical aspects. Her participation ensures that the elder?s quality and dignity of life is maintained. "When a home aide sees someone coming on a regular basis representing the elder?s interest, the aide becomes a better one and provides more than just custodial care." She pointed out a geriatric case manager can also assist the accountant in evaluating the elderly individual?s needs as well as the various agencies and institutions servicing the elderly. If the person is institutionalized, the geriatric case manager can regularly visit the facility to see that the treatment plan is being followed, concluded Cohen. Brown explained that the accountant?s financial acumen is particularly important It goes beyond financial and estate planning. She gave the example of possible residence in a continuing care retirement community. "In addition to planning how to pay for the stay, the accountant must analyze the possible significant upfront investments and the possible buybacks if the elderly for some reason leaves the facility to live somewhere else As part of the engagement, Cohen sits down with both child and parent to develop a checklist of the services that are to be provided. He also helps the family plan how to pay for necessary expenses. Cohen normally advises that a family member should have a durable power of attorney to use if the elderly individual is unable to handle their own affairs. Although this service is anticipated for elderly individuals with wealth, Cohen?s experience is that an accountant might end up working with attorneys on Medicaid planning especially if a married couple is involved and there is a desire to protect the assets of a functioning spouse and the other spouse needs institutionalized care. Brown said Medicaid will also come into play if the money runs out or possibly when the child is the client and the parent has little money. Particular care must be taken with regard to Medicaid planning as there are possible criminal penalties if improper advice is given on transferring assets to qualify for Medicaid. There is a great deal of interest in eldercare assurance services. At a recent Virginia Tech University Accounting & Auditing Conference, there were 200 attendees at a concurrent session on that subject conducted by James A. Yardley, an accounting professor at Virginia Tech and Karen A. Roberto, the director of Virginia Tech?s Center on Gerontology. Four practitioners said that they were already providing such services to clients. Potential client base. Accountants in states that have a large number of retirees such as Florida, Arizona and North Carolina and in major metropolitan areas, might at first glance might seem to be the most likely to develop this specialty. But a closer look would show that elderly individuals throughout the country need this service The reasons are that the children don?t live near by, there are no children or the family members are incapable or unwilling to care for an elderly family member. For accounting firms with an established practice, a review of their client list can identify those who would be interested in these services. Lewis? firm became involved because of the needs of some of their older clients. In this regard, Yardley opined that the service is easier to sell to someone who has experience in dealing with accountants. Special Considerations There are some unique concerns in this practice area. Besides the breadth of knowledge that must be acquired, you must be fully aware of how to deal with elderly individuals. Cohen explained that you have to be patient and understand how they think and try always to maintain their dignity. Smith warned that in evaluating whether or not to enter this practice area, accountants must "test themselves and see if they are able to relate in the necessary fashion to the kind of people that they are dealing with. Are they going to inspire the right kind of confidence? Are they going to make these people feel comfortable? Are they going to be able to understand what their real needs are? On a more technical side, are they intimately familiar with insurance vehicles, extended care facilities and up to speed on Social Security and Medicaid planning." Yardley said that an accountant must also be careful that that the elderly individual doesn?t view him or her as taking the place of a family member. Brown pointed out that one of the reasons why this service is needed is that many elderly people transfer affections easily and can be very trusting if they are lonely and isolated. "An accountant can act as a buffer that the individual doesn?t get taken advantage of by unscrupulous people who prey on the elderly." You also must understand many elderly are in deteriorating health. Brown explained that "You are going to have to wrestle with the fact that the elderly often don?t remain stable. Even if the person is your client initially, there may be a point in time when they are no longer competent to make decisions. She cautioned that this should be planned for, including who to communicate the change in condition and what other actions should be taken. In this regard, quite often a family member will have a durable power of attorney to act on the elder?s behalf. Accountants also must be aware that the interests of the children and the elderly individual might divulge so they must always be aware of who is the client. The task force, according to Brown, is keenly aware of this concern. She advised that you must delineate exactly who is the client and what is your responsibility to the client and the other people involved. This should be done upfront in the engagement letter Smith said this is particularly important from an estate planning perspective as disputes might arise on spending money or transferring assets. In some situations, Smith explained that a conflict might force the accountant to advise a party to seek competent legal counsel. "Family conflict isn?t an unusual thing. All you have to do is put money on the table if you want to see people fight." Unique Rewards Because eldercare assurance services is relationship driven, many practitioners will be extremely comfortable with it. Also, their financial management and financial and estate planning abilities make them well suited for this work. "It is an area that interestingly enough a lot of practitioners have been doing but have never recognized it as a product that they can market," observed Lewis. On a human level, the work can be very satisfying knowing that you are ensuring the best possible care and main-taming the dignity of life. Two more added bonuses are the alleviation of the anxieties of family members and the prevention of abuse of the elderly. HOWARD W WOLOSKY, JD, LL.M, is associate publisher/executive editor of The Practical Accountant.