In today’s evolving healthcare environment, physicians are seeking to broaden their services to increase revenue and improve the quality of care. This idea of expansion into ancillary services within the healthcare industry is sought as practices are seeing a decline in patient reimbursements and a rise in everyday operational costs.
Eric Flores, CPA
Christopher Davis, CPA
Before any time is spent considering ancillary services, a practice should first review its current utilization of physician assistants (PAs) and nurse practitioners (NPs) in the current mix of patient treatment. PAs and NPs bring value and provide multiple benefits to physicians by providing the opportunity to expand the number of patients a practice can see, especially for practices that have physicians required to be out of the office on a weekly basis for surgery and other job functions. PAs and NPs can implement the treatment plans, monitor patients in follow ups and take care of the less serious patient needs, such as sore throats and coughs.
The generational shift taking place in the patient population has led to the evolvement of healthcare practices as patients are now seeking convenience from their physician. Many patients are in search of one-stop shopping and need to see the value of their healthcare provider. Patients are pursuing practices that engage in their overall care. For the practice, the idea of providing ancillary services will not only help to retain patients, but it will also generate new revenue from existing patients while attracting new patients.
The concept of providing ancillary services sounds deceptively simple, but it can be endlessly complicated if not navigated properly. There is no shortage of services to choose from, but adding an abundance of services may not be the right move for every practice. In preparation for this article, we reviewed articles from Medical Economics and spoke with several medical practice consultants about the more popular types of ancillary services pursued by practices, which include:
- Allergy testing
- Nutritional counseling and weight-loss management
- Cosmetic and aesthetic services and procedures
- Imaging services
- Implantable contraception
- Molecular and genetic testing
- Pain management, including counseling and alternative therapies such as acupuncture
- Pharmacy services
- Sleep medicine
- Stress tests
With regard to research as an ancillary service, several companies will do much of the work by locating and starting a particular research project. Often, these companies can help staff the office to assist with the paperwork and documentation required. Research can enhance many practices, especially considering the fact that new medications are constantly being developed. Some of the other types of ancillary services, molecular and genetic testing, for example, provide opportunities to run more accurate tests for illnesses like the flu, RSV and strep that can generate higher revenue amounts than traditional swab tests. Genetic testing also allows for the practice to sell supplements to the patients after the results are delivered.
In general, internal care, family medicine, pediatrics and OB/GYN practices could see 7% to 12% of their revenue coming from ancillary services. Other disciplines, cardiology for example, could expect to see up to 23% of their revenue from ancillary services.
A thorough assessment must be performed before considering ancillary services. Take the time to evaluate issues, such as legal and Stark Law issues, patient needs, payment of service, competition, qualification of staff and available office capacity. Implement a patient needs assessment and fully understand all patient demographics. Calculate the costs associated with the implementation of these services, such as equipment and supplies, staff labor, and professional labor. Take into account the return on investment in terms of patient volume. Physicians within the practice must fully analyze whether using these services can generate revenue in a very business-minded approach.
Some ancillary services should be performed under a separate and distinct legal entity, separate from the existing medical practice. As an example, research work is often done under a separately created limited liability company. The medical practice’s tax advisor may suggest that this limited liability company elect to be taxed as an “S” corporation. Advice from the tax advisor and legal counsel should be considered before engaging in any new ancillary service.
As the healthcare industry continues to develop, successful physicians may need to alter their activities from delivering health services within their practice toward an extensive range of services that will meet their patient expectations as well as practice income goals. At the end of the day, a medical practice is also a business that needs to develop and change with the intent to make a profit as healthy as it makes its patients.
Christopher Davis, CPA, is a Senior Tax Manager with Sol Schwartz & Associates PC and has been practicing public accounting since 2008. Davis practices in various areas of public accounting including tax compliance and consulting for individual, corporate, S corporation and partnership taxation. He is a member of the firm’s Healthcare niche that specializes in identifying and implementing solutions to achieve the goals of the physician clientele we serve. You can contact Davis at 210-384-8000, ext. 118,or via email at firstname.lastname@example.org.
Eric Flores, CPA, is a Senior Tax Associate with Sol Schwartz & Associates PC. Flores is a member of the firm’s Healthcare niche and enjoys helping individuals, corporations, partnerships and trusts with their tax issues and franchise tax matters. You can contact Flores at 210-384-8000, ext. 136, or via email at email@example.com.