As reimbursements fall and costs continue to climb, private practitioners across the country are adding an impressive selection of new products and services to their line-up — a direct attempt to diversify and enhance revenue streams.

Some sell pharmaceuticals and prosthetic devices. Others offer physical therapy and smoking cessation clinics, along with inhouse elective procedures such as vasectomies, Botox injections, and laser hair removal. Many supplement their income by conducting clinical trials or acting as expert witnesses in court. And then, of course, there are those who spend thousands retrofitting their offices to provide more lucrative laboratory services and diagnostic imaging. Indeed, specialty and small group practices resemble Wal-Mart more every day — positioning themselves as one-stop-shops for all their patient’s healthcare needs.

Proponents of the trend say the modern day business model amounts to a win-win situation, helping doctors revive shrinking profits while simultaneously improving the continuity of patient care. They also point to the convenience factor. Patients benefit by having a wider menu of services available from a single provider they can trust. “I think as long as the revenue side of our business stays flat or declines, which it has for insured services, and as long as expenses rise, you’re going to have to find new sources of income or go out of business,” says Bill Jessee, president and chief executive of the Medical Group Management Association. “Practices are scrambling to find new income streams.”

And so they must to survive in the challenging managed care environment. Yet, as the industry evolves, an obvious line of questioning unfolds: Are physicians at risk of spreading themselves too thin? What implications might continued diversification have on the business of medicine? And will it affect quality of care?

When bigger isn’t better

Judy Bee, a practice management consultant for Practice Performance Group in La Jolla, Calif., says she’s seen firsthand the effect entrepreneurial zeal can have on practices that push themselves too far too fast. “You’re not just at risk of losing your sense of direction,” she says. “You may lose a pot of money.”

One client, for example, came to Bee for advice after his second business venture went awry. The physician, trained in physical therapy, initially opened a weight-loss center where he referred existing clients struggling with obesity. He sold calorie-controlled food and his physician assistant drew blood panels where necessary. “It made a lot of sense and he was able to market the idea commercially as a medically supervised weight loss center,” says Bee. Emboldened by his success, the physician then invested in space to open a medical treatment spa, which never took off. “There weren’t many of his patients that were a natural entrée to support the spa and he had to hire a facialist and two more nurses to support it,” she says. “When he came to me, he was losing $30,000 a month.”

According to Bee, practices that add new services often fail to consider the impact it will have on paperwork, personnel and existing patients. “It’s amazing to me how many doctors say they have this great idea and they’re going to market it, but they’re constantly behind in the office,” says Bee. “If you’re not staffed up enough to answer phone calls and you’re not able to see patients on time already, you need to fix that first.”

Such was the case with an ear, nose, and throat specialist Bee counseled, who was looking to bring cosmetic surgery into his fold. The practice already suffered huge wait times and an overworked staff. “They wanted to find a way to buffer their reduced revenue stream and from that standpoint they were absolutely right,” Bee says. “But I said to him, ‘You’ve got a month wait for patients already and referring physicians who are angry that they can’t get their patients in. What are you going to do if this marketing plan works?’”

Beyond the requisite financial analysis of any new ancillary service, Bee suggests doctors looking to broaden their business plans consider patient complaints, phone answering delays, and wait times to determine whether they’re ready to expand. Look, too, she says, at seating availability in the waiting room and the number of parking spaces reserved for patients. “When those service areas go down it’s not just the new patients that are inconvenienced,” she says. “It’s everybody. You’re likely to lose your patients of record who will eventually get sick of it.”

Patient safety

Indeed, practices that overwhelm their resources can compromise performance on multiple fronts. Overworked staff, for example, may be more likely to make mistakes that can cost a practice big, says Nick Fabrizio, senior consultant for MGMA Health Care Consulting Group. On the clerical side, billing clerks who are running to catch up might gather inadequate documentation and enter incorrect billing codes — both of which contribute to an increased incidence of rejected claims. Physicians, meanwhile, who are struggling to squeeze more patients into an already hectic schedule, may be more likely to make incorrect diagnoses, prescribe the wrong medicine, or overlook negative lab results.

“If you’re using existing staff to perform new services, there’s not only an increased chance for errors, but you’ll likely experience internal operating problems, including patient processing delays.” Fabrizio says. “You have to ask yourself if you can perform this service and maintain the same quality of care.”

While little data exists on the underlying cause of medical errors in doctor’s offices, the effect of fatigue on hospital nurses and physicians is well documented. The landmark 1999 Institute of Medicine report, titled, “To Err is Human,” estimates that up to 98,000 people die in U.S. hospitals each year as a result of medical errors. Sleep deprivation was among the list of contributing factors, along with antiquated paper records systems and systematic problems within the healthcare field.

Hospitals, of course, are staffed around the clock, which necessitates shift work from sleep-deprived doctors and nurses. They are also more likely to juggle an onslaught of emergency patients at once. Both of these can contribute to human error. But it’s no great leap to assume that physicians (and their staff), scrambling to supplement their income, may experience their own brand of burnout due to increased workloads, which could affect patient safety.