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Should You Add Ancillary Services to Increase Practice Revenue?

Posted by Angie Walters, CPA, CITP on Dec 28, 2018 7:29:00 AM

Just like any business owner who wants to increase revenue for his or her company, an increasing number of medical practice owners are adding ancillary services. In fact, in the most recent Medical Economics Physician Report, 73 percent of internal medicine and 84 percent of family medicine practices are offering EKG at a minimum, with lab services the second-most offered ancillary service.

According to a 2014 Medscape physician reimbursement report, only one-fifth of physicians were offering ancillary services. However, as physician reimbursements continued to decrease – or at least be in limbo – the report showed that ancillary services were on the rise. For example, family practices began to offer weight management programs and nutrition counseling, while dermatologists began offering cosmetic services and products. Other ancillary services today include alternative treatments like therapeutic massage and acupuncture. 

Weighing the Options

Are you thinking of adding a service to your practice? As you weigh options, the best place to start is with patient demographics. For example, when a practice sees a growing number of younger patients, it may add nutrition and fitness products and services. If a practice skews toward older patients, it might consider cosmetic or spa-like services. If you specialize in treating a specific condition, such as diabetes, it could make sense to add a counseling service that meets the special needs of your patients.

As you look at creative ways to diversify revenue streams, think about what your patients need. You might even seek their input either informally or through a questionnaire or survey. For example, wouldn’t it be easier for someone with back pain to receive therapy at the same time they see you or one of your physicians? Instead of going to a separate lab, wouldn’t most patients appreciate the convenience of having blood drawn during their office visit? 

Feasibility Study

You will need to determine the revenue potential of hiring specialists and/or purchasing equipment to offer services in-house. The best place to start is by working with your accountant or consultant to conduct a feasibility study.

Factors include the volume of patients who would use the new service and whether payer coverage would offset the additional costs you will incur. For example, if you need to purchase new machines, you need to know that you will have sufficient patient volume and can meet all compliance requirements. It is also critical to confirm that insurers will cover the service.

As an example, let’s say you are considering in-house physical therapy services instead of referring out to an out-patient PT facility. You would need to know what the potential income per patient is and weigh that against the need to create space, buy equipment and hire a physical therapist on at least a part-time basis. On the other hand, a weight management program has a built-in clientele (based on U.S. obesity rates) and costs little to implement. The result can produce a steady stream of income.

A feasibility study will provide valuable information in determining how much the ancillary service(s) you are considering will boost your revenue. You’ll need to understand regulatory requirements stating who can provide services, the competition from other providers and reimbursement rates. Also, how will the purchase of any large equipment leases affect the cash flow of your practice? 

Additional Considerations

Regulatory requirements change all the time, so it is essential to keep your focus on any that may affect reimbursement rates for your new service. You’ll need to be aware of the quality standards under Medicare’s new Quality Payment Program. Finally, you’ll also want to work with an attorney to make sure the ancillary service is not in violation of the Stark law, which prohibits physicians from referring patients for certain designated health services paid for by Medicare to an entity in which they have a financial interest.

Remember, adding a service to your practice is just like a commercial business adding a new profit center. Will the ancillary service improve your bottom line? Working with your team of advisors, you can make an informed decision.

Questions about the financial management of your medical practice? Contact Angie Walters at 214-635-2547 or you may fill out the form below.

Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article. 

Topics: Medical