6 Tips for Physicians Who Want to Build Additional Business Lines

As physician revenues decline, and medical practices are feeling the pressure of the shift to value-based payment, more physicians are choosing to add ancillary services to their practices to boost revenue. Ancillary services are healthcare services provided by a clinician that are in addition to or complementary to basic medical or surgical services. Examples include medication dispensing, radiography, weight-loss services, in-office diagnostic testing, nutrition counseling, alternative treatments, such as acupuncture and massage, physical therapy, immunotherapy, mental health counseling, urgent care, cosmetic (“med spa”) services, and many more.

Ancillary services can increase revenue for medical practices, but the venture is not without costs. The investment required for different ancillary services varies, and so do the relative financial and legal risks.  Depending on the service, investments can be significant. And, given the tangled web of state and federal healthcare regulations and reimbursement protocols applicable to ancillary services, it is less than surprising that the majority of physicians have chosen not to spend their time and money on opportunities to grow their business by expanding available services. However, a careful and measured approach can yield large returns in the long run. Here are some tips for physicians considering adding ancillary services to their medical practice:

1. Perform an analysis of the services your practice most often refers to an outside provider. Adding an ancillary service allows you to retain revenue you would have otherwise sent out the door. So, dig into your practice’s EHR, or keep a strict log over the course of a month or two, and look at your referrals. Are you sending a large number of patients to physical therapy? To a radiologist? Are you sending a large number of specimens to an outside lab? To pharmacies? If there is significant volume, you may be able to provide that ancillary service yourself, retain the revenue, and save your patients another step.

2. Identify competitors and determine where you are losing market share. As new players enter the healthcare market, many independent practices are losing market share to specialty providers like ambulatory surgical centers and urgent care centers. In addition, in some places, patients are getting services through telemedicine services offered by payers and large health systems. What can you offer that would help you retain these patients?

3. Price out the investment, in time and resources, you will need to execute the ancillary services. When you have an idea of the types of ancillary services you are interested in (and qualified to provide), begin to consider what kind of investment is required. Do you need a separate facility? Or can you build out space in your existing office? Will you need to lease or buy expensive equipment? What kind of and how many staff will you need? Make sure you factor in legal costs. More on that in #6, below.

4. Dig into your practice’s metrics and consider your environment to determine if you are likely to have sufficient volume to support the services. Some ancillary services can be provided directly to your existing patient base. For example, a growing service offered by primary care physicians is allergy therapy. According to AHRQ, one in five Americans has environmental or food allergies, so it is likely that many of a primary care practice’s existing patients could use that service. For services that may not be supported by your existing patient base, consider your location and the saturation of these services in the market. For instance, according to Medscape, it is more difficult to launch cosmetic services in an urban market, where competitors abound, than in a more suburban area. Also, these services are more often sought by individuals of means. Therefore, it is likely more lucrative to launch cosmetic services in an affluent, suburban community.

5. Reach out to your payers to get a sense of reimbursement rules and rates. You will need this information to complete your risk-benefit analysis. Together with your estimation of potential patient volume, this information will arm you with the information to determine whether the investment is worth it. If your ancillary service is not logically linked to your specialty or background, you may also want to inquire about the “prerequisites” required before you (or a staff member) can bill for these services.

6. Compliance. Compliance. Compliance. Because many ancillary services are not performed by the physician him or herself, federal and state laws regarding self-referral, fee-splitting, anti-kickback, and corporate practice of medicine apply. Physicians must also consider laws and regulations related to licensing (e.g., for physician-owned labs), scope of practice, certificate of need (e.g., for ambulatory surgical centers), dispensing controlled substances, and billing. Any physician considering adding an ancillary service should consult a healthcare attorney early on in the process. An experienced attorney can assist in structuring the venture to minimize legal and financial risk. The consequences for violating the above laws can be financially devastating, due to penalties, legal fees and expenses, and reputational damage. In some cases, violation of these laws can carry criminal penalties, including jail time.

A broad range of ancillary services are available to physicians seeking to increase revenue. Turning the investment into a hefty return is possible, but takes careful consideration and preparation. Nixon Law Group helps practices that strive to innovate and grow their business. In addition, through our affiliation with Healthcare Solutions Connection, we partner with professionals who can assist in the operational planning and build-out of ancillary services. We’d love to speak with you about your practice, and ours. You can contact us at http://www.nixonlawgroup.com/contact-us/.

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