Physicians should rethink their revenue streams
Ancillary services can boost practice revenue and be a major convenience for patients, but regulatory challenges and competition from hospitals and other players mean that physicians need to think more strategically than ever about their service menu.
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Dallas internist Neal Sklaver, MD, FACP, has been providing ancillary services for 25 years and believes patients get better, faster care with in-house lab work and other on-site offerings like bone density scans and nutrition consulting.
Using in-house labs, he can have some results within an hour and others by the end of the day, allowing him to make decisions and get back to patients quickly, and at less cost to the patient.
Increasingly, however, payers are steering physicians to large third-party facilities for traditional ancillaries such as lab work as the insurers chase economies of scale. Regulations limiting the types of providers who can offer certain services, along with increasing competition overall also threaten margins for these ancillary businesses.
“The convenience more than warrants doing it, but we’re continuing to get squeezed,” Sklaver says.
The “squeeze” practices like Sklaver’s are feeling may be why independent physicians are putting fewer resources toward some of these services than others, notes David Gans, MSHA, FACMPE, senior fellow for industry affairs for the Medical Group Management Association (MGMA).
For example, primary care single-specialty groups brought in $59,745 per full time-equivalent physician for lab procedures in 2015, roughly flat compared with 2011, according to MGMA’s 2015 DataDive for Cost and Revenue Report. During the same period, charges for radiology procedures more than doubled and revenue from non-procedural activities such as the sale of supplements, allergy antigens and onabotulinumtoxinA (Botox) rose substantially.
The growing number of regulations affecting lab standards and billing procedures have kept some physicians from continuing them, says Gans. At the same time, he says, the prospect of flat overall Medicare reimbursement rates in coming years–as well as its 20% cut to reimbursements in 2017 for analog X-rays–has some physicians diving more deeply into ancillaries that are either reimbursed at higher rates or for which patients pay out-of-pocket.
Other physicians are becoming more cautious about adding ancillary services as they await changes under Medicare’s new Quality Payment Program, says Nick Fabrizio, Ph.D., FACMPE, a principal consultant with MGMA’s Health Care Consulting.
“Physicians are having a hard enough time managing the new healthcare of today, getting their arms around quality requirements,” he says, leaving little time or money to hire the appropriate care coordinators who can maximize the value of an investment in care management procedures.
Experts and those utilizing ancillaries offer the following considerations for physicians.
Consulting an experienced attorney is a must for avoiding legal problems associated with ancillaries, including possible Stark law violations, experts say.
Laws governing the level of professional who can perform the work vary widely by state, as do reimbursement rates That makes it crucial to calculate your own return on investment rather than relying on estimates from a product or service vendor, notes Keith Borglum, CHBC, CBB, a veteran healthcare business consultant and broker. (See accompanying worksheet.)
Even within states, he says, rules are often unclear regarding the required qualifications for administering various types of ancillary services, so getting a clear sign-off from practice attorneys is highly recommended.
Another cost of doing business is keeping up with pending changes to licensure rules, says Borglum. If a practice has been paying one type of professional $30 to $40 per hour to operate a laser, a change to the required qualifications for the position might double the cost of providing the service, he says.
Likewise, if an independent contractor is performing the service and splitting profits with a practice, that could run afoul of Stark-law and other legal requirements, he says.
Other challenges include inadequate reimbursements, which has long been a problem, notes Maria Ciletti, RN, a practice administrator for a one-physician, largely Medicare-based primary care practice in Niles, Ohio.
The year after starting up a lab unit, costs tripled for the practice under new Medicare rules. Later, the practice purchased a mobile radiology unit for bone density scans and ultrasound. Insurers denied claims because the practice didn’t have a licensed radiologist, and though the equipment provider promised a workaround, the practice wasn’t comfortable with the suggested solution.
“You have to be careful before investing a lot of money in these things,” says Ciletti. “My advice is to start small and go from there.”
Start at home
The best place to start when considering which ancillary services to provide is by bringing services in-house that patients already use regularly, Borglum says.
“Look at the testing, services and therapies you are referring out to others,” he says. “Are you having enough quantity to justify bringing that in-house?”
Echocardiography is a good example. Two providers with many seniors in their patient panel can easily add $50,000 to $100,000 in total revenue by bringing echo back into the practice, Borglum says.
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Next, physicians should consider services that their current patient base would view as natural add-on conveniences. Office-based dispensaries of prescriptions and over-the-counter remedies are also logical extensions, he says.
But doctors need to be aware of the risks. Borglum recently got a call from a physician looking to start a pain management specialty, mostly to offer the use of topical cannabis in California, a business Borglum considers high-risk and unproven. Also, if practices are opening a dispensary, they should not offer opioids, because they are frequent targets for theft, he says.
In addition, they should stay alert for new opportunities, particularly chronic care management incentives, experts say. Another area to explore: noticing procedures your payers reimburse well, and developing a specialty in one of them.