Ancillary services: The prescription for a difficult business climate

August 9, 2013

Ancillary services can provide vital revenue enhancements for primary care practices.

Pressed by rising costs, lagging reimbursements, and growing regulatory pressures, many primary care physicians (PCPs) are searching for ways to boost their practice incomes. The method they often try is to offer an ancillary service, such as laboratory or imaging, or selling weight-loss supplements or vitamins.

Adding an ancillary service can help a practice’s bottom line, say consultants and practice management experts. But it requires some research and preparation-along with the willingness to spend the money and effort needed to market the service.

 The first step is to assess your patient population to determine if there is a need for a particular product or service and how many patients might benefit from it, says Rosemarie Nelson, principal at MGMA Healthcare Consulting Group in Syracuse, New York, and a Medical Economics editorial consultant.

Once you estimate the number of potential patients and the fee for the service, you need to factor in the additional costs to your practice, such as hiring more staff or leasing or purchasing equipment.

Know the market’s needs

The most important consideration in extending a practice’s scope of services is to be attuned to the needs of the marketplace, says Michael D. Brown, president of Health Care Economics, Inc. in Fishers, Indiana, and a Medical Economics editorial consultant.

“You’ve got to have the right hours, the right doctor combination and the right equipment combination. You’ve got to be able to accommodate the market as opposed to the market accommodating the doctors,” he says. “One of the key criteria of the market today is one-stop shopping. People don’t want to drive all over town. They want you to offer everything you can.”

The ultimate goal, he says, is to retain established patients and bring new ones in the door. Before you spend one dollar on adding a service, buying equipment, or hiring additional staff, contact your major insurance carriers and ask what they cover, the amount of the typical reimbursement, and what they don’t cover.

“I’d never buy any equipment or additional stuff to broaden my scope of services without checking with the carrier first,” Brown says.

While imitation is a form of flattery, it’s the wrong way to assess an ancillary. What works in one practice or locale doesn’t always translate to another. Do your homework, says Frank Cohen, principal and senior analyst of The Frank Cohen Group in Clearwater, Florida, and a Medical Economics editorial consultant.

What they should do is a feasibility study, he adds. “You do some research and find out how the ancillary works, make sure there are no compliance issues, talk to other doctors who have done it and find out what their experience has been. I don’t believe you should do anything until you can quantify it,” he says.

Physicians also have to feel comfortable with the services they are providing, says Judy Bee, a practice management consultant with Practice Performance Group, in La Jolla, California, and a Medical Economics editorial consultant.

 “When I ask primary care providers, ‘What kinds of things are you comfortable providing?’ one of the first things that comes up is laser hair removal, and that can be pretty dangerous,” she says. “You can hurt people with it if you’re not good at it. What physicians want to do is train a tech and turn him lose with this thing. So I’ll say, ‘Let’s think this through. Are you willing to take the risk?’ ”

Homework paid off

Joseph Ravid, MD, of GulfView Medical Institute in Punta Gorda, Florida, did just that. “I did a lot of homework before I invested in anything, especially big-ticket items,” he says. “I spoke to a bunch of colleagues who have been in the market here longer than I have, and they were nice enough to share some of their experiences.”

He recommends first determining what services you most often farm out. Ravid, along with his office manager, asked, “How much blood are we sending out? How many stress tests? How many skin procedures?” Then they looked at services that don’t take much time to attend to but still provide a good return. “That’s the niche I concentrated on.”

Ravid and two associates operate GulfView, a full-service family practice that offers balance testing, nuclear stress testing, abdominal aorta aneurysm scans, some dermatology procedures, and cryotherapy.

Some of GulfView’s ancillary services, such as nuclear stress testing,  are provided by outside companies. Representatives come to GulfView twice a month to perform non-urgent cardiac stress tests. They bring all of their own equipment-treadmills, cardiopulmonary resuscitation trays, and intravenous nuclear medications for those who cannot exercise. They are given two rooms to conduct up to eight tests every two weeks. That is all time will allow because the company travels to a different practice every day. Ravid pays them a set fee per patient. Then he charges the patient for the test and medications.

“It is a very nice ancillary income,” he says.

Another company comes in to conduct balance testing every two weeks. The representatives also need two rooms. On the days the companies are coming, GulfView doctors will see new patients. Those visits take longer so there isn’t a need to turnover the rooms quickly, thus the practice’s flow is not interrupted.

“I added these services as I saw the need for the community and for the population where I’m at,” says Ravid, whose practice is between Tampa and Fort Myers and is made up of 65% Medicare patients.

He recently added a fully functioning lab where he does an entire panel of chemistry. “I very rarely send a drop of blood out unless it is mandated by the patient’s insurance carriers,” he says.

Adding the lab was expensive, he says. A good lab can cost upward of $250,000, not including the cost of a full-time lab technician to ensure that the blood is being processed expeditiously, which can be another $55,000 and up a year. However, “just by adding the lab alone, I doubled my income.”

Medicine is a business, Ravid says. “Not only do you have to be a very good clinician, but in order for you to survive in today’s market and separate yourself from everyone else, you definitely have to be a businessperson as well.”

Additional information about ancillary services and primary care practices can be found at:

Uncovering the bottom line of ancillary services 
bit.ly/17bA2tX

           
Grow your practice with ancillaries
bit.ly/16v5xzU