It wasn’t long ago that a primary care practice’s calculation of whether to provide an ancillary service, such as lab work or sleep testing, was relatively simple: would patients use it, would it improve their health, and would it generate additional revenue, or at least break even?
Those are still the main considerations for practices operating under the traditional fee-for-service payment model. But experts say that the growth of value-based models, which reward practices for reducing the overall cost of patient care while maintaining or improving outcomes, adds a new wrinkle to the ancillary service question.
“In a predominately fee-for-service environment, it’s a fairly straightforward financial calculation, where you look at the volume of patients who need the service, what it costs to provide the service and how much you get reimbursed for it,” says Russell Kohl, MD, FAAFP, a family physician in Stilwell, Kan., and chief medical officer with TMF Health Quality Institute, a Medicare quality improvement organization.
Under a value-based system, Kohl adds, with its focus on cost of care and outcomes, the financial return for adding a service is harder to calculate. He cites the example of whether to provide pulmonary function testing for patients with COPD. Not only does the practice have to decide if it can provide the service for less than a pulmonologist, it has to weigh whether in-house testing will reduce the number of its patients requiring trips to the emergency department or hospitalization, which would drive up the overall cost of caring for that patient.
“In a value-based world, it becomes a more nebulous calculation than it cost me ‘X’ dollars to do a pulmonary function test and I get paid ‘Y’ dollars for it,” he says.
Ancillaries remain common
Whatever their reasons for doing so, many primary care practices continue to offer some form of ancillary service. In the 2018 Medical Economics Physician Report, 91 percent of family, and 89 percent of internal medicine practices said they offer at least one of 16 types of ancillary services, with lab services and electrocardiogram being the most common. Among all non-surgical primary care survey respondents, 84 percent said they provide ancillary services.
Moreover, experts say, the growing role of alternative and value-based payment models doesn’t alter the fundamental questions of whether patients will benefit from an ancillary service and whether the practice can make money providing it.
Nick Fabrizio, Ph.D., FACMPE, now a principal with the Medical Group Management Association, previously spent 10 years as practice administrator for a large primary care group. “We had a lot of long, hard discussions around questions like, ‘is this service one that we feel comfortable in providing, can we provide a high level of quality in doing it, and is it more convenient for our patients to have it done by us rather than someone else?’”
The easiest way to determine if patients will use an ancillary service, Fabrizio says, is to ask them—either through a mail or online survey, or face-to-face at the end of an appointment. Another useful technique is to look at the services and procedures for which patients are most frequently referred out. Among the practices he consults with, the most common ancillary procedures include stress tests, ultrasounds, and blood labs.
A factor practices sometimes overlook when considering ancillary services is any laws and regulations governing who can provide the service and under what circumstances, says Owen Dahl, MBA, FACHE, principal of Owen Dahl Consulting in The Woodlands, Texas. For example, laboratory services have to meet the requirements of the federal Clinical Laboratory Improvement Amendments. “The encouragement there would be to check your state laws and federal regulations to make sure your staff and providers meet the necessary criteria for that service,” he says.
Impact of alternative payment models
While in the past ancillary services often were seen as a source of additional revenue, under value-based payment models, practices may find they need them just to maintain their current revenue, says Dahl.
“In a world of fee-for-value, the key is not necessarily to generate revenue, it’s to protect against loss of revenue,” Dahl explains. “That’s because you might wind up getting dinged financially for referring to a very expensive outside provider. So then you’d want to be able to control your expenses by offering that service at a lower cost than referring it out.”