Should You Offer Your Patients More Services? How to Decide 

James F. Sweeney

Disclosures

October 01, 2019

Many physicians have faced this dilemma: They write a lab order or recommend a therapeutic service, then the patient has the test or service done elsewhere. The doctor loses potential revenue, and the patient may be frustrated that they need to spend more time on medical care.

Many practices have found that by adding ancillary services, they can bring in a new and profitable revenue stream. That's the success story that happened to Freedman Memorial Cardiology, a cardiology practice in Alexandria, Louisiana. Over the years, the practice added ancillary services, including cardiac PET scans, nuclear imaging, leg vein ablation, and coronary arteriography. The additional services have successfully boosted business.

"I tell the patients we're a one-stop shop," says Monique Clark, director of nursing and office administrator at Freedman Memorial. "We plan carefully, and we always do our homework."

But such success doesn't happen for every practice that starts a new service. Some physicians incur many expenses to add a service, only to find that there's too little patient demand, or the costs are so high they're not making a profit.

"Because insurers make only small increases in allowable payments for ambulatory care, physicians have been motivated to find other sources of revenue to improve the bottom line, bring added convenience for patients, and better manage outcomes when such services are done on site," says Judy Capko, healthcare management practice consultant with Capko & Morgan of San Francisco, California.

Still, if a practice adds the wrong services or doesn't do so strategically, the results can be dismal. "Adding services is not an automatic cure for financial problems and, if done incorrectly, can damage a practice financially and in other ways," says Capko.

If you're thinking of adding ancillary services, answering these 10 key questions can help you decide whether you're on the right path to adding ancillaries.

1. Are there legal obstacles to adding the services?

It's most important to find out whether a practice faces any legal obstacles to adding specific services, says Valora Gurganious, MBA, CHBA, a partner and senior management consultant with DoctorsManagement, who estimated that more than half her clients have added services. These can be found in the Stark antikickback law, as well as in zoning codes, state regulations, property leases, managed care agreements, and contracts with hospitals and healthcare systems. Knowing what's precluded can save a practice time and money while it narrows its options.

2. Does the service make sense for your specialty?

Practices should determine which ancillary services make sense for them, Gurganious says. Usually, that means they're related to the practice's primary mission or specialty.

For example, common ancillary services for a primary care practice include ultrasound, mammography, lab tests, diabetes education, and weight loss, whereas a pediatric practice would be more comfortable with allergy, telemedicine, nutrition, and an after-school walk-in clinic. And imaging, physical therapy, durable medical equipment, and wound care are good fits for an orthopedic practice.

3. Is the new service a good match for your patient base?

Multispecialty practices with ancillary services averaged $1,028,000 in total medical revenue per full-time equivalent physician, compared with $907,755 for multispecialty practices without ancillary services, according to 2019 data from Medical Group Management Association.

There's no simple, universal formula that can determine return on investment. Each practice's circumstances are unique and require specific calculations, says healthcare consultant Kenneth Hertz, of Roanoke, Texas.

Practices can begin by determining whether there is a need or appetite among its patients for the services it wants to offer. Are the services a good match for the existing patient base and expertise of the providers? Will they fit in with the practice's mission to improve care?

"It's got to make sense clinically," he says.

Practices also should examine their records to determine the most common services for which they're referring their patients, such as ultrasounds or blood labs, to explore whether the practice could offer them instead and keep the revenue in house.

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