A number of medical practices around the country are offering ancillary services to their patients to help differentiate themselves from other practices, enhance patient services, and increase revenues. If your practice is considering offering ancillary services, such as ultrasound, physical therapy, imaging, or some other option, you’ll want to carefully think through the ramifications, costs, and work involved before you make a decision.
Pros and Cons
On the plus side, adding ancillary services that are properly structured and implemented can add to your bottom line and offer convenience and continuity of services to patients. However, the addition of ancillary services to a practice may not always live up to expectations. It sometimes proves to be a drain on financial resources and time while not achieving anticipated benefits. Financial projections using realistic revenue and cost figures will help you assess the profit potential in any ancillary services you are considering.
Is the Service a Good Fit?
As a preliminary step, identify the ancillary services your practice currently orders that are provided outside your group. Are there services that your practice would order if they were more readily available within your practice? What is the competition in your area?
Next, determine the cost of implementing a new ancillary service. Will adding the service require a major investment in personnel, equipment, or space?
Explore how you would pay for the hard assets that may be required to offer the ancillary service, such as equipment, fixtures, and software. Investigate financing and lease options carefully, and be sure to consider the potential tax implications in your analysis. You also should consider taxes when reviewing the type of corporate structure your new entity will take. We can help your practice handle tax issues in the most advantageous manner possible.
Will your existing space be adequate to house the new ancillary service or will your practice need additional space? Look into what additional personnel and management costs the new ancillary service will require.
Once you have tentatively identified the costs associated with adding the new service, you will then have to project how much revenue the new service will generate. Look at your own in-house data to identify the number of times your practice has made referrals for the actual ancillary service.
It’s important not to assume that your practice will capture 100% of the new service you intend to offer to your patients. A percentage of your patients will continue going elsewhere to receive the service. You’ll be able to project revenues once you have estimated the number of referrals and the associated reimbursement.
Legal and Regulatory Issues
The addition of an ancillary service to your practice has to be structured properly and carefully so that your practice does not encounter legal or regulatory problems due to issues such as Medicare billing rules, kickback, or Stark law violations. Be sure to consult with an attorney as early on in the process as possible.
CIG Capital Advisors’ Business Advisory Services professionals can help you determine if adding ancillary services is appropriate for your medical practice.. Schedule a complimentary consultation with a CIG professional today to discuss the options that might best fit your practice’s unique needs and capabilities.