Ancillary Services Can Increase Revenues - …

1 Ancillary Services Can Increase RevenuesPhysicians are finding that adding Ancillary Services can helpmaximize practice profitability and better serve patients like the convenience of getting medications inthe medical office and having laboratory or diagnostic servicesdone by the physician who is ordering them. Patients don t haveto drive all over town for tests, and results come back quickly. Physicians not only like to provide patients with the added con-venience, but see these added serv-ices as a way to help boost practicerevenue. Stagnant practice earn-ings and insurance claim hasslesas well as reimbursement delaysare leading many physicians toconsider adding Ancillary servicesto help Increase revenue . As professional reimbursementgoes down, the way to try to en-hance practice Revenues and prof-itability is by maximizing the uti-lization of the practice often means delivering ancil-lary Services that are legal, appropriate, within quality-of-carestandards and are needed by patients, says Bruce A.

2 Johnson, , a consultant for the Medical Group Management Associa-tion (MGMA) and a healthcare attorney with the Denver officeof Faegre & Benson, LLP. Depending on the type of practice, physicians are adding manynew Services , with some falling outside of insurance coverage sothat patients pay for them out-of-pocket. There is great demandfor many of these Services . For example, between $36 billion PRACTICE PROFITSB etween $36 billionand $47billion was spent on comple-mentary and alternative medi-cine (CAM) therapies in 1997,according to the National Cen-ter for Complementary and Al-ternative Medicine. Of thatamount, between $12 billionand $20 billion was paid out-of-pocket for the Services ofprofessional CAM providers,says 3/15/05 3:47 PM Page 82 MAXIMIZING PRACTICE in Do Not , , stress testing, imaging (OB) stress testing, : Includes only active member respondents of the American Academy ofFamily : American Academy of Family Physicians, Practice Profile II Survey, May of Diagnostic Procedures in Family Physicians Offices, May 2004 DocDig 3/15/05 3:47 PM Page 83$47 billion was spent on complementary and alternative medi-cine (CAM) therapies in 1997, according to the National Centerfor Complementary and Alternative Medicine (NCCAM), part ofthe National Institutes of Health.

3 Of that amount, between $12billion and $20 billion was paid out-of-pocket for the Services ofprofessional CAM providers, says NCCAM. These fees repre-sented more than the public paid out of pocket for all hospital-izations in 1997 and about half of what it paid for all out-of-pocket physician Services , NCCAM , $ billion was spent on physicians fees for cos-metic procedures by board-certi-fied plastic surgeons in 2003, ac-cording to the American Society ofPlastic Surgeons. Of this amount,over $3 billion was spent on mini-mally invasive procedures such asBotox injections, chemical peelsand laser hair removal servicesgenerally not covered underhealthcare plans. Primary-care physicians are of-fering a wide range of ancillaryservices. They include point-of-care medication dispensing,weight-loss Services , in-office diagnostic tests such as Dexascanscreening and X-rays, CT scans, physical therapy, nutrition coun-seling, cosmetic Services such as Botox and chemical peels, andalternative treatments like acupuncture and massage.

4 It is esti-mated that some practices may be able to earn as much as 15 per-cent or more from Ancillary Services . Mr. Johnson says it is a good idea to look at Ancillary servicesthat complement your practice. If I m a cardiologist, I am go-ing to start looking at the procedures and Services that I orderelsewhere that I might be able to deliver through my practice, he says. Pay attention to the classic business adage: start withwhat you know and then branch out from there, he adds. From his work with medical practices, Mr. Johnson has foundthat gastroenterologists, general surgeons and orthopedists arenow looking at starting ambulatory surgery centers. Orthopedistsalso are expanding their businesses by offering physical therapyMAXIMIZING PRACTICE Bruce Johnsonsaysit is a good idea to look at an-cillary Services that comple-ment your practice. If I m acardiologist, I am going tostart looking at the proceduresand Services that I order else-where that I might be able todeliver through my practice, he says.

5 DocDig 3/15/05 3:47 PM Page 84and MRI Services . Cardiologists are starting CT centers, nuclearmedicine Services and different types of outpatient diagnosticclinics. Internal medicine and family practice groups, rheuma-tologists and pulmonary medicine groups are offering bone den-sitometry addition, he says, you can also focus on offering the ser-vices your patients want and would use if you delivered the ser-vices. For example, some ob/gyns have started offering laser re-moval of hair and veins and laser skin resurfacing. Many womenpatients are pleased to be able to utilize these types of serviceswhen visiting their gynecologist. What You Need to ConsiderBefore you move ahead with your plans, there are a number offactors to consider. If you don t intend to add staff, are the cur-rent people you employ willing to be trained to take on new re-sponsibilities? You will also have to spend time training billingstaff to handle Ancillary claims. In some cases, you may have to hire experienced techniciansand therapists for the Services you want to offer.

6 What about of-fice space to support this new enterprise? Will you need addi-tional space or will you compromise your core business? It is also important to incorporate each service into a coherentbusiness plan. This will help you make sure that you have thenecessary resources to launch these Services and the right staffin place to support them. Thoroughly assess the feasibility of adding Ancillary servicesbefore you actually take the plunge. Forecast Revenues and de-termine what your costs are likely to be. Take the time to look atthe market in your area for the Services you want to launch. Ifyour area already is saturated with X-ray centers and Services ,this may not be the best Ancillary service to start. Don t just consider the best-case scenario for the Services youintend to add, but also outline a worst-case scenario. Practicemanagement experts say you should have an exit strategy or con-tingency plan in place in case your Ancillary Services projectisn t successful.

7 There are a number of other points you need to consider as partof this assessment. For example, do you have a good idea aboutMAXIMIZING PRACTICE 3/15/05 3:47 PM Page 85what your service volume is likely to be? Your aim is to drawenough volume to make the venture profitable. Too often physi-cians tend to overestimate the volume they are likely to achieve,which could end up causing the venture to be a losing proposi-tion. It is best to come up with some hard data that projectanticipated volume. As part of this analysis, study the payer situation. For exam-ple, if insurance plans have negotiated contracts for diagnostictesting with a local hospital, you and other physicians in the areamay be restricted to referring patients to that facility. Determinehow many patients you can actually refer to your Ancillary ser-vice. It is best to focus on yourown practice and not assume thatother medical groups will start re-ferring Services to you.

8 In addition, part of your busi-ness feasibility assessment andanalysis is to determine whetherthe Services you will offer will bereimbursed, says Mr. Johnson. Ifyour Ancillary service is likely tobe paid by a third party, deter-mine how much will you actual-ly receive in reimbursements, he explains. You can contact twoor three of your payers that account for most of your reim-bursements and find out how much they are likely to pay foryour service. It s also a good idea to check your contracts with insurers tosee if they indicate that certain screening or diagnostic testingwill be considered in network when performed through a grouppractice. This type of language will help you get reimbursements. Getting insurance reimbursement for your Ancillary service isimportant. When you do the financial analysis that is part andparcel of developing a good Ancillary service line, you might as-sume you can bring in $100,000 to offset the $80,000 worth ofexpenses you anticipate, when in fact you can t get any of thisfrom the insurance company and as a result you have to do en-tirely self-pay, says Mr.

9 Johnson. In addition, when looking atthe expenses of the new venture, be sure you factor in both di-MAXIMIZING PRACTICE is a good ideato check yourcontracts with third-party pay-ers to see if they indicate thatcertain screening or diagnos-tic testing will be considered in network when performedthrough a group practice. Thistype of language will help youget reimbursements for yourancillary Services . DocDig 3/15/05 3:47 PM Page 86rect and indirect expenses. To get an accurate idea of your costs and likely revenue , youmay want to hire the Services of a consultant to draw up the fi-nancial analysis, help supervise space planning, hire the rightstaff members and acquire the necessary state and Medicare li-censes. Be prepared to pay $10,000 or more for these Services . Many physicians are now starting to look into opening ambu-latory surgery centers (ASCs). If you own the center, you are like-MAXIMIZING PRACTICE volumepaymentsMedicaregrowth,category(pe rcent(percentpayments2001 of total)of total)(millions)2002 Cataract removal and lens $ eye procedures gastrointestinal ambulatory procedures procedures , : Medicare Payment Advisory Spending on Services by Ambulatory Surgical Centers, 2002 DocDig 3/15/05 3:47 PM Page 87ly to be reimbursed a facility fee for Services performed therein;these fees will be much higher than the physician s fee.

10 Be sureyou find out what the payers will pay for the procedures you in-tend to perform. There also are turnkey operations that will set up and assist inrunning the ASC for the physician, but they generally take a per-centage of the earnings. One company, PainCare ( ), began offering physician practices a comprehen-sive turnkey electro-diagnostic program in early 2004. Under theprogram, practices receive all equipment, technical training andsupport necessary to introduce electro-diagnostic medicine intothe practice. Physicians in the program supply the necessary of-fice space and manage all medical billing and collection activity. While it is always better to have an insurance company pay forpart of the service you plan to offer, it doesn t mean you can t of-fer the service if they won t pay. In this situation, be sure to fac-tor into your business plan that the service will be paid out-of-pocket by patients. It is also important to determine if the type of Ancillary ser-vices you want to offer are considered legal under federal andstate laws.