Ancillary Services: To Add or Not to Add?

November 13, 2017
Dylan Fisher

Health care experts weigh in on the important questions practices need to ask before adding ancillary services.

There are no shortage of ancillary services primary-care physicians can choose to add to their practice. From imaging services to sleep studies, the ability to provide patients with convenient in-house services can be an appealing one. But, as healthcare consultants warn, adding services may not be the right move for every practice.

"If practices don't have an advisor or a strong businessperson in their practice they need to take the time to understand what the service is, what it offers, and how it can help the patient and practice," says Doug Graham, a practice consultant at DoctorsManagement in Knoxville, Tenn.

Here are some important questions practices need to ask themselves before adding ancillary services.   

How will adding ancillary services help the bottom line?

At the end of the day, a medical practice is a business that needs to make a profit. Physicians at small practices often have to spend time thinking from a financial perspective to succeed, something that they rarely do, says Sean Weiss, also a practice consultant with DoctorsManagement.

"Physicians are horrible at business. Physicians make the worst business decisions that you can imagine. They don't do the proper homework," says Weiss. He recommends a strengths, weaknesses, opportunities, and threats (SWOT) analysis prior to adding any services. A few of the questions Weiss suggests practices ask during the analysis include:

• Is the practice doing things well enough that if it adds additional services, it won't have a negative impact?
• Does the practice have the right staff?
• If not, what is the cost to bring in the qualified staff to render the services?

Alti Rahman, a practice administrator at Oncology Consultants, a Houston, Texas-based healthcare consulting firm, says a physician looking to add ancillaries needs to be a businessman first. "You want every square foot of your practice to be generating revenue," says Rahman. He suggests taking the square footage of the building and splitting it into how much is producing revenue and how much is not.

"Then, ask if some of that non-revenue generating square footage can be used for ancillary services," he adds.

Graham stresses the importance of practices keeping revenue in-house if it makes sense. "Some of my clients have ultra-stenographers scheduled inside the practice a day or two a month. They read the images inside of the practice so the practice keeps the revenue," says Graham, who also says neuropathy and vascular testing are options for practices to keep revenue streams in-house.

Physicians once had to bring expensive equipment into their offices in order to offer ancillary services, but Graham says this is no longer the case, allowing bottom lines to avoid a massive hit. "The companies providing these services have gotten more creative. They offer physicians better leasing options," says Graham. Another way for physicians to save is having the necessary software added to their already existing technology, he adds.

Which services make the most sense to add?

It can be difficult to choose which services, if any, a practice should add. Weiss suggests physicians look into preventative ones first. "Insurance companies are moving toward a value-based evaluation model with physicians. If you're being rewarded for keeping patients healthy, preventative services are important," he says.

Weiss has seen success with practices that add mobile mammography specifically. "It's a preventative service all women can use. I would also suggest practices add chronic care management, transitional care management, and ultrasound." he adds.  

A practice should also look at its work flow prior to adding any type of ancillary service. "Can the practice fit the service into its work flow? [Good] ancillary services don't add an inordinate amount of time to the patient visit," says Graham.

Graham also suggests looking to add services that may be hard to patients for access otherwise. "For example, allergists are few and far between, so a patient may have to drive a long way if not provided at their primary doctor's office," he says.

Will the service be useful to the patient population?

Ancillary services can often save patients time, while providing added convenience and incentive for patients to remain or join a practice. "Your patients don't need to go to an outside lab where they don't know the staff. It creates a nice environment for the patient," says Rahman, who adds patients benefit from a practice's ability to control the cost of in-house ancillary services.

"Think of it this way, if you're a standalone imaging center, you're going to maximize your revenue because there's nothing else coming in to support the business. But if it's a supporting service line, the fees [for patients] can go down," he says.

When it comes to choosing ancillaries, Graham preaches the importance of knowing not only a practices population size, but also their demographics.

"Practices need to determine whether or not they have the requisite demographic to truly benefit from the service. Obviously the service needs to be a reasonable and necessary one, something the practice wants to provide to its patients, and that the patients want," says Graham.

A practice that adds ancillary services also has the ability to gain new patients through word of mouth, explains Ken Hertz, a principal consultant with MGMA. "If [a practice] has a dispensary and I can get my meds right there, I am going to tell my friends," says Hertz.

Weiss has another straightforward rule when it comes to practices that are thinking about adding ancillary services. "Take a look at what your most popular referrals have been. Access the demand," he says.

How does the practice code and get paid for the service?

Prior to adding ancillary services, practices need to look at both the payer and coding components. Practices need to be sure payers are going to cover the costs of performing the services, Rahman says. "Is [the payer] going to pay the costs you need per procedure? You need to call and explain which codes you are going to bill and see what you will get [reimbursed] for them," says Rahman.

Graham says coding is the most important part of adding an ancillary service. A practice needs to know what the true reimbursement will be before adding an ancillary.

"Even though Medicare says they will pay for [a service], a doctor should always check with their local coverage determination. Some of these ancillaries will have a global CPT charge, a professional fee, and a technical fee," says Graham.

Practices also need to realize the risk they are taking on when adding ancillaries. The physician is ultimately responsible for billing out the services and making sure the procedure is done properly, which is why Hertz emphasizes the need for physicians to think "before they plunge."

"Adding a service is adding a new business line, this has to be thought through from the ground up. Not thinking through the entire process is the biggest mistake I see," he says.  

Similarly, Graham warns of potential issues between practices and outside contractors performing the ancillary services. "Physicians and practice owners need to vet the contract between the practice and the company performing services. There are billing intricacies involved. Practices can get in trouble with the billing being more intricate," says Graham.

Lastly, if a practice's new ancillary service turns out to be a financial detriment and not a boon, the best thing to do is to identify the problem and move on, according to Ken Hertz, a principle consultant with MGMA. "If for some reason it's not successful, shut it down and move on. Some practices hang on...no, it's a business proposition, take an honest assessment and move on."