Indeed, adding new patient services can be pricey. While some ancillary services (such as physical therapy) cost little to implement, others require a major capital investment. Full-body MRI machines, for example, can cost anywhere from $800,000 to $3 million, while CT scanners can start at $200,000 and climb to more than $1 million.
And then there’s the price of training current staff to provide the new service, hiring new employees to meet demand, financing expenses for equipment loans, higher insurance fees, and the cost of lost business while the office is being retrofitted. For imaging services like MRIs, Gans says practices can spend hundreds of thousands of dollars in building modifications alone. “You can’t just put these machines in any building,” he explains. “You have very serious shielding and insulation issues there.”
Matt Nussbaum, executive director of Chester County Cardiology Associates (CCCA) in West Chester, Penn., says his practice has added numerous imaging services in recent years with varying degrees of success: “It does have the potential to increase income, but if the cost of purchasing the equipment is very high it can ultimately amount to a loss.”
So far, CCCA’s nuclear cardiology service has been the most lucrative, but even that has taken a hit due to rising technician salaries and increasingly stringent insurance precertification requirements. Data from the Bureau of Labor Statistics reveals that professional and technical workers saw their salaries rise nearly 7 percent between 1995 and 2003, after adjusting for inflation. “Nuclear cardiology used to be an extremely profitable service five years ago,” Nussbaum says. “But this year, it really wasn’t.”
Nussbaum’s specialty group of nine physicians has been contemplating adding CT angiography services for years, but insurance carriers in Pennsylvania don’t reimburse for those claims, so the $2 million to $3 million investment it would require is difficult to justify. “We do a lot of due diligence these days,” says Nussbaum. “A lot of our decisions used to be made on a gut feeling. We’d talk to the vendors, and we trusted their numbers. We don’t do that anymore.”
Is that legal?
The last major consideration for practices exploring adding ancillary services is the legal implications they may entail. Federal Stark regulations prohibit physicians from referring Medicare or Medicaid patients for designated health services to an entity with which the physician or a member of the physician’s immediate family has a financial relationship. “This is probably the biggest risk that physicians worry about when they’re considering pursuing supplemental income,” says Holm. “If set up properly, some of these services are legal; others are not.”
Under the convoluted Stark regs, the “in-office ancillary services exception” generally allows physicians to operate ancillary services within their medical practices provided they meet certain requirements, says Mark Lewis, a partner with Boult, Cummings, Conners & Berry, PLC, a law firm in Nashville, Tenn., that specializes in healthcare issues. “If two or more physicians are going to bring a service in house, the key thing to consider is how they’re going to share the revenue,” he explains, noting that physicians are not permitted to share what they bring in from added services in a manner that directly reflects precisely who referred the service. Physicians can, however, divide their total net gains from ancillary services evenly among the doctors in the group, and they are permitted to pay productivity bonuses to individual physicians based on patient encounters or professional work relative value units (RVUs).
However, surgeons who invest in ambulatory surgical centers (ASCs) are not bound by Stark rules, since these are not among the designated health services to which Stark applies, says Lewis. But such surgeons do need to steer clear of the anti-kickback statute, which prohibits healthcare providers from receiving or paying anything of value to influence service referrals covered by federal health programs. To further complicate things, an anti-kickback “safe harbor” does work to protect physicians who invest in ASCs. “Failure to fall within the safe harbor does not necessarily mean an investment is illegal,” says Lewis, “but physicians should attempt to structure their ASC investments to satisfy as closely as possible the safe harbor’s requirements.” Notably, the terms of individual investments should not be related to previous or expected referrals, and returns on investment should be directly proportional to a physician’s outlay.
Finally, groups that open laboratories within their practices must consider the Clinical Laboratory Improvement Amendments, which regulate quality control for all laboratory testing on humans for the purposes of diagnosis and treatment. All clinical laboratories must be properly certified by CMS, whether or not they seek federal health plan reimbursement.
Due to the complexity of the Stark regulations and anti-kickback legislation, Fabrizio recommends that practices consult an attorney to examine any potential legal ramifications before they even begin a feasibility study. “I always tell groups that’s some of the best money they can spend,” he emphasizes. “It’s not that expensive, and it avoids a lot of problems down the line.”
Financing it
Of course, few practices possess the financial means to purchase expensive medical equipment outright. Those looking to obtain costly imaging and diagnostic technologies have several options. For starters, many vendors, including GE Healthcare and Siemens Medical Solutions USA offer loans and leasing packages at competitive rates for a range of products in most specialties. GE Healthcare also supplies on-site support services, helping physicians select the equipment right for them, providing staff training, insulating exam rooms (when necessary), and conducting performance analyses. “Leasing is not a bad idea if it’s a technology that gets substantially updated every two or three years,” says Fabrizio.
A handful of lenders also specialize in healthcare equipment loans, including Bankers Healthcare Group in Weston, Fla., which can process loans in about a week and offers 100 percent financing. Many private banks require a down payment when financing medical equipment loans, sometimes up to 25 percent.
If you are ultimately unsure that you will attract enough patient volume to justify your purchase, or if capital is an issue, there’s also the option of renting medical equipment. Many companies, including Coast to Coast Medical Inc. and Freedom Medical, will rent surgical support services such as EKGs, stress systems, and C-arms on an as-needed basis. C-arms, for example, rent for between $3,000 and $15,000 per month at Coast to Coast Medical. Purchasing them new can cost from $120,000 to $200,000. “Physicians don’t always want to make a large upfront investment,” says Kevin Blaser, vice president of sales for Coast to Coast Medical. “In some cases, it’s a surgery center that wants to experiment with pain management services but wants to try the technology first. Or, they may be unsure whether the doctor who uses the equipment is planning to stay on board.”
