Julie Miller was the former Managed Healthcare Executive Editor in Chief until May of 2014.
Faced with rising operational costs and declining reimbursements, internal medicine practices are looking to diversify in ways that result in enhanced income.
Faced with rising operational costs and declining reimbursements, internal medicine practices are looking to diversify in ways that result in enhanced income. Experts say that adding ancillary services is one of the best options for physicians to consider to increase practice income.
Ancillary services-such as point-of-care labs, prescription dispensing, electrocardiogram (ECG), imaging, spirometry and others-can provide opportunities for added revenue while also benefitting patients. For example, offering mammograms in the office will save the patient a separate trip to the radiology lab. An immediate hemoglobin A1C test can help clinicians make better-informed treatment decisions during the visitWhen administered by clinical support staff rather than the physician, the menu of services can be especially valuable. And the possibilities are extensive. Internists have dozens of ancillary-service options-many of which are becoming easier to adopt thanks to digital technologies.
“It’s not at all surprising to me that a lot of practices are providing a more comprehensive set of services within their own practices,” says Ann Greiner, president and CEO of the Patient-Centered Primary Care Collaborative (PCPCC). “There are positives and negatives, and it depends on the practice and the population served whether it makes sense.”
In the 89th annual Medical Economics Physician Report, 73 percent of internal medicine and 84 percent of family medicine practices indicate they offer ECG-the most-cited offering. Lab services were the second-most popular offering, with 53 percent of internal medicine and 69 percent of family medicine practices providing them.
With overhead costs eating up a significant portion of revenue, practices need to be thorough in assessing the potential of each ancillary service. Physicians should approach the decision with the same data-driven mindset that they might use for any major investment.
“The most important step of making any change in your practice is understanding what the practice is going to look like when you come out on the other side,” says David Zetter, CPC, CHBC, founder and lead consultant with Zetter HealthCare in Mechanicsburg, Pa. “Nobody tends to do that. Really, it’s like getting into a car without GPS or a map and just driving. You have no idea where you’ll end up.”
Some of the data required to evaluate the potential of a new ancillary service might include: how often the practice currently refers out the service; total investment costs, including staff and training; and the amount of reimbursement expected. Practices should also know in advance what qualifications their payer contracts specify, such as Clinical Laboratory Improvement Amendments certification, which may be required for lab services.
A fact-based approach will quantify the return on investment, Zetter says, but it must be examined with data from the practice, rather than general information from outside sources. Too many physicians adopt a new service only because they see someone else having success or because an equipment manufacturer has talked them into it.
Zetter says those that fail to take their own practice’s differentiators into account are less likely to earn the bottom-line impact they hope for. Each practice is unique, and the discrete factors must be accounted for in detail.
He compares the adoption of ancillary services to the initial adoption of electronic health records (EHRs). In haste, many practices signed on to the same system installed in other local practices or perhaps one that had been recommended by a colleague. However, the majority regretted getting locked into a system that ultimately didn’t meet their needs. Evidence seems to indicate as many as 75 percent of practices weren’t happy with their initial EHR choice, according Zetter.
“Everybody wants to move quickly, and they skip this step,” Zetter says of the due diligence process. “And that’s why you see so many fail.”
Upfront costs for equipment can range from just a few hundred dollars to tens of thousands. However, practices might size up the return on investment in terms of patient volume.
A Holter monitor, for example, could cost $2,000, including the software, while reimbursement for each 24-hour monitoring procedure might be less than $200. Additional supplies, such as batteries and prep pads will add to the price tag, as will the staff time for setting up each test. All told, a practice might see a return on investment after completing just 25 studies.
In the Medical Economics survey, 18 percent of internal medicine and 21 percent of family medicine practices report that they offer Holter monitoring.
Imaging is a service that typically calls for comparatively larger upfront costs for equipment as well as recurring costs to pay trained technicians to capture the images in the office. Larger practices with multiple physicians and favorable insurer contracts have the most potential to profit from adding imaging services, but even then, volume is the key variable. More than 30 percent of practices responding to the Medical Economics survey say they offer radiology or imaging services.
In Frankfort, Ky., Steven Crum, MD, has been providing lab services, x-rays, mammograms and CT scans. Many of the services were adopted in his practice as long as 20 years ago. He says the lab has been one of the more profitable ancillaries, but reimbursement has declined for imaging.
And there’s a significant discrepancy between the office-based and hospital-based providers when it comes to imaging reimbursement, Crum says. For example, a simple x-ray that might bring his practice $40 in reimbursement might yield $250 for a hospital.
“Hospitals charge way too much for their imaging services,” Crum says. “There needs to be a middle ground. We need to be paid more for x-ray, and they need to be paid less to control medical costs.”
On a long-term basis, the maintenance contracts with the CT supplier have presented the biggest financial cost within the practice’s ancillary business, he says. Meanwhile, CT scans often require the added administrative burden of obtaining prior authorizations.
Crum’s practice contracts with Medicare, Medicaid and commercial payers. He advises other physicians to consider the reimbursement proposition before committing to new services. In some cases, improved patient care can result in bonus payments, so a service that seems less profitable could still provide an indirect financial advantage.
Experts also caution that billing and coding for ancillary services can’t be an afterthought. This includes some wariness about the Medicare Access and CHIP Reauthorization Act’s (MACRA) impact on ancillary services as payment moves from fee-for-service to quality-based reimbursement.
“It doesn’t do you any good to add reimbursable ancillary services if you undercode them,” says Keith C. Borglum, CHBC, a healthcare business consultant in Santa Rosa, Calif.
Borglum is especially concerned about payers denying modifier -25 codes (separately identifiable evaluation and management service by the same physician on the same day of a procedure or other service), potentially resulting in nonpayment for ancillary services. Many payers, including Medicaid, don’t recognize the modifier. Physicians should review the specific requirements of modifier -25 as they relate to each payer in a practice’s mix.
Zetter anticipates that MACRA ultimately will set the payment standards nationwide.
“All payers look at quality, cost and outcomes, so you need to determine if this would increase the chances of your looking like a costly practitioner by adding these [ancillary] services in-house,” Zetter says. “If the cost to the patient and the payer is less when you refer out, you want to pay attention to whether you’re going to raise that cost by bringing it in-house. That eventually will affect your reimbursement, not only with Medicare, but all the commercial payers.”
A practice’s patient panel can be an important consideration in choosing an ancillary service that has the most potential to improve care. Diabetes and dementia are conditions that are increasingly being met with new digital tools that help the medical team better care for the patient between visits.
Crum anticipates he might begin offering 24-hour glucose monitoring for his patients with type 1 diabetes. Generally, the monitors record real-time data and track patterns. The data can be used to see how food, activity, and medication impact glucose levels, potentially predicting highs and lows so the patient can proactively manage issues.
The approxiamate cost for four monitoring kits is about $4,000, with a breakeven point at 20 patients. The practice is still in the process of quantifying the reimbursement, but it’s more about improving patient care, he says.
Seniors comprise a growing share of the patient population for many practices today, and future considerations might include ways to serve their primary care needs.
Jeffrey Kagan, MD, an internal medicine physician in Newington, Conn., and a member of the Medical Economics editorial board, provides a number of ancillary services, including a brief cognitive impairment assessment known as the Memory Orientation Screening Test (MOST), which he says is similar to the Mini-Mental State Examination (MMSE). The test is useful in detecting dementia in clinically unevaluated patients age 65 and older.
“The MOST test reimbursement can double the money you get from an office visit, while it only takes your medical assistant five to 10 minutes,” Kagan says. His practice pays a nominal licensing fee with each use of MOST, but the fee is reduced with higher volume. It’s reimbursed about $48 with CPT code 96120. By comparison, he says the MMSE test isn’t reimbursed for primary care.