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CPAs go slow in adoption of ElderCare/PrimePlus practices.

The projected aging of the United States population was among the "megatrends" identified by the AICPA Special Committee on Assurance Services. According to the U.S. Census Bureau, the size of the population age 65 and older is projected to increase in all 50 states and the District of Columbia during the 30-year period from 1995 to 2025, and the most rapidly growing age group is the "oldest old," those 85 and older. In addition, the amount of assets held by many elders has increased, while more dual-career adult children are living far from elderly parents.

Are the ElderCare/PrimePlus assurance services developed by the AICPA a significant practice opportunity for CPAs? The authors sought to investigate the extent to which CPA firms in Maine, a state whose population is aging faster than the national average, are adopting ElderCare practices.

ElderCare Practice Niche

In 1999, the AICPA first published an "Assurance Services Alert" on CPA-provided eldercare services. The AICPA proposed including traditional areas of CPA practice, such as tax preparation and estate planning, among a more specific suite of services targeted to older adults called ElderCare, the key component of which would be assuring the relevance and reliability of information related to the care of older Americans. The alert grouped ElderCare services into three categories: direct services (financial and nonfinancial); assurance services (financial and nonfinancial); and consulting services (such as fiduciary planning, family mediation, and evaluating financing options). ElderCare assurance services include measuring and reporting on care-provider performance against established goals, a nontraditional practice area for CPAs. ElderCare services also include such nontraditional services as visiting and reporting on elderly clients on behalf of children in distant locations, and arranging for transportation and housekeeping services. The AICPA reasoned that CPAs could provide trusted assurance to family members that elderly parents or other family members are being cared for properly, their assets are being managed appropriately, and financial predators are not taking advantage of them.

CPAs need not necessarily provide these services directly, but can coordinate services provided by others. The AICPA has suggested that the ElderCare practice niche can provide opportunities for small practitioners. The AICPA published a series of courses to assist CPAs interested in this practice niche to develop the necessary skills to do so.

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Adopting an ElderCare Practice

There has been little indication that significant numbers of CPAs are embracing the ElderCare/PrimePlus practice niche. In 2000, the chair of the AICPA Task Force on ElderCare noted that many CPAs were still trying to decide whether to participate in nontraditional ElderCare services (G.A. Lewis, "Getting Started with CPA ElderCare Services," CPA Journal, February 2000). In a recent survey (Wanda I. DeLeo, Angela C. Letourneau, and J. Gregory McCleymore, "Awareness and Potential of Eldercare Services," CPA Journal, November 2002), a majority of South Carolina CPAs expressed interest in a class on ElderCare assurance services and indicated there was a definite need for these services; however, at the time the survey was conducted, only 9% actually offered ElderCare services.

In the fall of 2002, the AICPA, together with the Canadian Institute of Chartered Accountants (CICA), rebranded the ElderCare practice niche by changing its name to PrimePlus. Despite the AICPA's statement that feedback it had received on the ElderCare services practice concept had been "generally positive," focus group studies revealed that many individuals between the ages of 66 and 80 did not think that "elder" applied to them and thought that "care" implied health care. The AICPA's rebranding initiative may indicate that offering ElderCare services may not be attracting clients and that CPAs may be hesitant to invest in the skills and marketing required to establish such a practice.

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Methodology

According to the U.S. Census Bureau, the proportion of Maine's population that is age 65 or over is projected to increase from 13.9% in 1995 to 21.4% in 2025, raising the state from 14th to 12th highest in per capita elderly population. CPA firms in Maine include a few relatively large regional and many small local CPA firms. Surveys were sent to all of the 15 largest CPA firms in Maine (except the single Big Four office in the state) and to 90 smaller firms selected at random from the list of 308 additional CPA firms in Maine obtained from the State Board of Accountancy.

Respondents were asked to indicate whether their firm offers each of a list of ElderCare services from the AICPA (Exhibit 1), or has plans to do so. For those that offer a service, the survey asked whether it is part of a specifically identified ElderCare practice. Respondents were also asked to indicate whether each service they offer is performed by CPA firm staff, or through a formally affiliated organization, or whether the CPA firm arranges performance by another service provider. Respondents that do not provide ElderCare services were asked why not and whether they plan to in the future. The survey also requested basic demographic information about the firm. Exhibit 2 describes the responding CPA firms.

Provision of ElderCare Services

Firms were more likely to offer traditional CPA services, such as income tax preparation and estate planning, than ElderCare services, regardless of whether it specifically identified the services as an ElderCare practice (see Exhibit 3). Most respondents provided at least some services grouped under direct tax-related services (88%) and estate planning services (80.5%). Yet, 35% or fewer indicated that they provided services that fall under any other ElderCare service categories. In fact, only 15% or fewer provided: any direct nonfinancial services or nonfinancial assurance services; the direct financial service of submitting claims to insurance companies; the financial assurance service of testing for asserters' adherence to established criteria; the family mediation service of arbitrating family disputes; and the consulting services related to evaluating the quality of housing and care alternatives, and providing an inventory of community services to the elderly. Only 7% currently provide--either directly by firm staff, or by arranging performance by others, or through affiliated organizations--any services categorized as nonfinancial assurance services.

Moreover, few firms specifically identified services as part of an ElderCare practice (see Exhibit 4). Only four specific services were identified as part of an ElderCare practice by more than 20% of the responding CPA firms: income tax planning and return preparation; gift tax return preparation; caregiver and household help employment tax return preparation; and estate planning. Among the firms indicating that they provide at least some ElderCare services, approximately 75% indicated that those services resulted from specific client requests and are not actively developed or marketed.

Few survey respondents arranged for services to be performed by other service providers. The most common were those in the categories of consulting on financial options (consulting on long-term care insurance, 20%; consulting on Medigap insurance and on HMOs, 20%; and consulting on annuities, 20%); fiduciary planning services (preparing living wills and advance medical directives, 14%); and consulting services (evaluating alternative costs of retirement communities and other housing options, 12%). Only one firm, a large one, indicated that it currently offers services as part of an ElderCare practice through a formally affiliated organization. As shown in Exhibit 5, a large number of respondents of all sizes do not offer or plan to offer nontraditional ElderCare services.

The majority of respondents indicated that many ElderCare services identified by the AICPA are outside the scope of services their firm can or wishes to provide. Only 7.9% of those surveyed that indicated a reason (or reasons) for not offering ElderCare services also indicated that there was not a market for an ElderCare practice; only 10.5% indicated that the profitability of beginning an ElderCare practice is too uncertain to offer such a service. Slightly more than 21% responded that other (possibly lower-cost) providers of ElderCare services were available in their practice area. Most of those firms that do offer ElderCare services do not market them as such. Furthermore, there appears to be relatively little interest in moving into the nontraditional areas of ElderCare practice.

Slow Adoption

Results of the survey indicate a low level of interest in adopting ElderCare services. Maine is largely a rural state, with only a few population centers; although the state's population is aging, its market for ElderCare services may not be representative of other areas. Because ElderCare services are most likely to be premium services targeted toward high-wealth individuals, Maine's relatively low per-capita income may also be dampening interest.

Only a small number of respondents indicated the lack of a market or of potential profitability as a reason for not developing an ElderCare practice. These results suggest that CPA firms are reluctant to offer the nontraditional services included in an ElderCare practice. Lack of expertise in some ElderCare services, lack of time to ramp up, and lack of interest appear to be significant factors.

Yet there is clearly a significant need for these services. Few CPA firms appear interested in adopting the role of centralized service organizer; a more attractive service model might be for other, lower-cost providers to establish ElderCare practices. These service providers could refer clients to CPAs that have indicated an interest in providing traditional tax, estate planning, and financial services in coordination with ElderCare agencies. This approach could also provide an opportunity for CPAs to provide some services on a pro bono or reduced-cost basis to individuals and families that meet established financial parameters.

EXHIBIT 1 ElderCare Services

Direct Financial Services

* Receive, deposit, and account for client receipts.

* Ensure expected revenues are received, and make deposits.

* Submit claims to insurance companies.

* Confirm accuracy of provider bills and reimbursement.

* Protect clients from predators by controlling access to checkbooks and other assets.

Direct Tax-Related Services

* Income tax planning; income and gift tax return preparation.

* Prepare employment tax returns for caregivers and household help.

Direct Nonfinancial Services

* Help arrange for transportation, housekeeping services, etc.

* Manage real estate and other property.

* Visit elderly on behalf of and provide reports to distant children.

Financial Assurance Services

* Review and report on financial transactions.

* Test for asserters' adherence to established criteria.

* Review investments and trust activity.

* Audit third-party calculations such as pension, insurance, and annuity payments, and review reports from fiduciaries.

Nonfinancial Assurance Services

* Measure and report on care-provider performance against established goals.

* Evaluate and report on performance of other outside parties.

Consulting Services

* Plan for housing; necessary support services; declining competency; and death or disability of spouse.

* Evaluate alternative costs of retirement communities and other housing options.

* Evaluate quality of housing and care alternatives.

* Provide inventory of community services available to the elderly.

Estate Planning Services

Fiduciary Planning Services

* Powers of attorney.

* Guardianship and trusteeship.

* Living wills and advance medical directives.

Family Mediation Services

* Mediation or arbitration for family disputes.

* Provide objectivity for emotional issues, and act as intermediary between parent and child.

Consulting on Financial Options

* Medicare and Medicaid, and long-term care insurance.

* Medigap insurance and HMOs.

* Annuities and viatical insurance settlements.

* Reverse mortgages, and sale or leaseback of home.

* Flexible spending accounts.
EXHIBIT 2 Descriptive Statistics

                                         Range        Mean     Median

Large Firms: Number of Partners          3-39         9.00        5
Large Firms: Number of Total Staff       5-130       29.25       18
Small Firms: Number of Partners          1-4          1.13        1
Small Firms: Number of Total Staff       1-5          1.45        1


Charlotte Pryor, PhD, CPA, is an assistant professor and John Sanders, MBA, CPA, is an associate professor, both at the University of Southern Maine, Portland, Me.
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Title Annotation:practice development; Certified Public Accountants
Author:Pryor, Charlotte; Sanders, John
Publication:The CPA Journal
Geographic Code:1USA
Date:May 1, 2005
Words:1902
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