Practice Strategies

Ancillary Services: Expanding Reach And Revenue

Facing stagnant earnings and increasing challenges with managed care payers, more and more physicians and dentists are tapping into new revenue streams. The good news is that, while ancillary services can certainly boost the bottom line, they can also improve patient satisfaction.

Why Ancillaries Make Sense

Americans are getting more of their health care from freestanding clinics and physicians' offices, and less from university and community hospitals. And they are looking for the same one-stop-shopping experience that the nation’s retailers are providing them.

Whether or not ancillaries make sense for your practice depends not only on ethical and regulatory issues, but also on how your office is set up, the nature of your practice and your marketing approach. But, at the very least, consider some of these ideas for expanding practice reach and revenue:

Conduct clinical trials — Some 35,000 doctors now serve as clinical investigators in studies regulated by the Food and Drug Administration, and the number is growing 7 percent to 8 percent annually.

Upside: Fees typically range from $1,000 to $5,000 per patient, about 60 percent of which is profit.

Downside: Each study requires a commitment not just to produce results for the sponsoring drug firm, but to properly inform and care for study subjects, meticulously document findings and control medications according to a detailed protocol, and accommodate FDA reviewers.

Go retail — From dermatologists who sell skin lotions in lobby kiosks to internists selling vitamins and orthopedists selling back supports, physicians are beginning to see the light of retail.

Upside: Consumers love the convenience, and doctors can earn a decent sum pleasing them. Plus, the Internet has opened new opportunities (some practices earn commissions by directing patients to partner Web-based companies via their practice Web site).

Downside: With in-practice retailing, you have inventory to contend with. And opinions vary on whether such deals pose ethical problems. (The AMA's stance is that selling products to patients does compromise the physician-patient relationship.)

Promote Wellness — Anything that helps aging baby boomers maintain their health over the next 20 years is bound to be a hit. Holistic medicine is potentially the most lucrative, offering 100 percent or more fee-for-service-equivalent revenue for the time spent.

Upside:Profits are possible even if doctors hire nutritionists, acupuncturists, massage therapists and other alternative practitioners to do much of the work.

Downside:Hiring and managing specialized staff to provide these services can present challenges.

Offer premier services — Internists offering unlimited, 24-hour access to themselves —including by cell phone and e-mail — isn’t the kooky idea it once seemed. As time has shown, premier providers have found a ready market of patients willing to pay $3,000 or more annually for premium access.

Upside: In addition to the money,premium service providers also deal with fewer patients who believe they're getting better care.

Downside: 3 a.m. phone calls!

Will It Make Money?

Keep in mind that not all services are big moneymakers. Some will earn only a small profit, and others may lose money. But the right combination of winners and losers will make a strong showing. Many practices, in fact, hold onto even marginal moneymakers. For them, the additional services remain a marketing tool — a way to attract or retain patients.

Consider staff. There's a tendency to think that a practice's current staff can take on a lot of the work involved in ancillary services. That's usually an illusion. Be sure to staff adequately.

Consider space. Even simple ancillary services require additional square footage. If you try to squeeze a new service into your existing office, you may end up squeezing out something that's more profitable.

Consider leasing vs. buying. Sometimes a manufacturer will give a practice a better price if it buys rather than leases equipment. In these days of rapid obsolescence, however, buying might be impractical. Every three years, when your lease ends, you can update to state-of-the-art equipment.

For more information about our services to the healthcare industry, Contact:
Maxine Lawyer, Director of Healthcare Services at 972.448.6905.

The articles in this newsletter are general in nature and are not a substitute for accounting, legal, or other professional services. We assume no liability for the reader's reliance on this information. Before implementing any of the ideas contained in this publication, consult a professional advisor to determine whether they apply to your unique circumstances.
© 2004