Ancillary services boost revenue and customer service
Julio Garcia, a plastic surgeon in Las Vegas, has taken his practice to a new level. He is no longer just making his patients beautiful on the outside -- he has also established an anti-aging clinic to help them improve memory, reduce stress, and manage the symptoms of menopause.
Garcia is among a growing number of physicians who have expanded their traditional practices to include additional services, from alternative medicine to MRIs to executive physicals. While the primary motive for some physicians is to produce more revenue to compensate for dropping reimbursement rates, others see their expanded service lines as a natural extension of their practices, an opportunity to provide one-stop shopping as well as to give their incomes a shot in the arm.
"Adding services helps physicians increase productivity," says Mike Fleischman, a consultant with Gates, Moore & Co. in Atlanta, a firm that provides practice management, tax, and accounting services to physicians. "There are only so many hours in the day; so if you can do a procedure next door to your office, you can improve efficiency."
"Physicians can't make money practicing medicine like they used to, so they have become more entrepreneurial and bigger risk-takers," says Marshall Baker, of Physician Advisory Services in Boise, Idaho. He notes that physicians are turning to wellness product lines, ambulatory surgical suites, women's centers, and diagnostic tests to boost their bottom lines, and estimates that some practices may earn as much as 15 percent of their income from added services.
Garcia's anti-aging clinic, started in 1998, definitely fills a niche considering that the average age of his patients is mid-40s, and most of them visit him at least three times a year. He offers nutritional counseling, hormone replacement therapy, blood and saliva testing to check for vitamin and hormone levels, "smart drugs" to prevent memory loss, bone density screenings, body fat measurements, lung capacity evaluations, and a relaxation capsule heated to 104 degrees.
For a fee of $600, Garcia meets with patients for 20 minutes before the diagnostic tests and an hour afterwards, and provides a 25-page assessment with recommendations. Garcia attributes 20 percent of his revenue to the anti-aging clinic, and expects that it will climb to 50 percent in the next two years.
Deborah Harding, MD, splits her time between her own internal medicine practice in Orlando, Fla., and Rippe Health Assessment (RHA), founded in 1998 by cardiologist James Rippe. RHA offers a comprehensive medical, diagnostic, fitness, nutrition, and lifestyle evaluation geared specifically toward executives. Its client base in 2001 numbered 600, a growth rate of 67 percent since RHA's inception.
RHA offers four assessment levels, ranging in price from $1,400 to $3,400, each incorporating increasingly lengthy and specialized evaluations and personalized services. Patients also may request full body scans for $1,000 and lung and heart scans for $600 each. The exams and assessments are not covered by insurance but are often paid for by executives' employers.
"Our primary goal is to prevent disease before it happens, and if a problem already exists, we can pick it up more quickly," Harding says. "It is important to look at the whole person, but when you have to see more and more patients to compensate for lower reimbursement, that becomes difficult. I am fed up with insurance telling me how to practice medicine."
Ancillaries add value
When patients visit their OB/GYNs at Louisiana Women's Healthcare Associates (LWHA), an 18-physician practice in Baton Rouge, they can also take advantage of onsite lab tests, such as bone marrow density screenings, mammograms, hormone analyses, DNA testing, hepatitis and HIV screenings, and lipid profiles. When the lab expanded its test offerings in 2000, there was an 80 percent increase in production over its first year, 1998.
"The full-service lab brings tests closer and results more quickly to patients," says Thomas Schmidt, the practice's CEO.
LWHA also has an ambulatory surgical suite and a separate suite for performing ultrasounds. While Schmidt says the motivation to offer additional services is not revenue-driven, the surgical suite and sonography, mammography, and osteoporosis screenings account for 22 percent of all revenue.
Sandy Eckard, vice president of operations for KDV Orthopedics and Rehabilitation in York, Pa., calls that practice's ancillary services, which include MRIs, physical therapy, and physical medicine and rehabilitation, "a natural extension of orthopedic surgery. We wanted to offer a broader continuum of care -- diagnostic and therapeutic procedures -- to help our six surgeons decide what treatment to choose," she says.
"Having to refer patients for tests and screenings causes delays and prevents immediate attention to problems that require it. In addition, as we work harder for less reimbursement, our blend of services enhances our orthopedic surgery and our revenue."
David Edelberg, an internist with Whole Health Chicago, has blended his knowledge of internal and alternative medicine techniques by joining forces with a chiropractor, homeopath, psychologist, acupuncturist, massage therapist, and nutritionist, all of whom practice under one roof. As the group's solo physician, Edelberg became an alternative medicine convert after listening to patients tout its virtues.
"I was the medical director for a large group and became disenchanted with managed care," he says. Edelberg spends lots of time with each patient, seeing only 13 a day, all of whom pay on a fee-for-service basis.
The providers in the practice generate their compensation based on the number of patients they see, and 50 percent of that revenue supports office overhead. "We didn't initiate alternative medicine for the revenue; we're adding value by making many disciplines available in one place under the supervision of a physician," Edelberg says.
Getting up to speed
Promoting expanded services has remained low-key for most practices. Mark DeFrancesco, MD, chief medical officer of Women's Health Connecticut, an OB/GYN practice in Avon that sells nutritional supplements, says physicians hand out product brochures, but "patients don't have to buy from us; we just make recommendations and get them to think about good nutrition," he says. "We tone down the promotional aspect." In addition, the practice conducts FDA-approved clinical trials that bring in about $40,000 a year.
Page Sturgill, manager of client services and clinical research for RHA, says that the company's marketing budget is small, but that they do advertise in a few top-end magazines, produce promotional marketing materials and videos, and rely on testimonials and word-of-mouth. "I have a strong handle on the local community and have developed relationships with our clients' colleagues," she says.
Physicians agree that staffing is another critical component to the success of expanded practices. Many have either hired experienced staff members who share their expertise or train staff to manage the new services. "It's worth paying extra for staff who can teach you," says KDV's Eckard. "Our MRI chief technician knew more than the doctors, so he educated us."
Garcia, who is certified by the American Academy of Anti-Aging Medicine, praises his assistant, who formerly worked with an endocrinologist -- a boon for his anti-aging clinic.
LWHA has set minimum training and educational requirements for its staff. Its sonographers are registered and have an OB/GYN specialty, while staff attend courses to become certified to perform bone density screening and laser procedures.
Doing it right
According to Baker, offering additional products and services presents many of the same challenges of any new venture -- namely, ensuring the new initiative will make money and add value to the business.
Fleischman warns practitioners to adequately plan and calculate costs of adding new services before jumping in. "It may seem like a good idea until you realize that MRI equipment may cost as much as $2 million and that it requires qualified technicians. If there isn't steady use, it might not be worth it."
"We emphasize services that support our core competencies so that we are not perceived as entrepreneurial and it's not necessary to retool our offices," DeFrancesco says. He suggests adding services that make sense medically before anything else.
Perception is something Garcia also takes very seriously. "Many of my peers believe you should not slow the aging process and are not convinced my services are worthwhile," he says. "This forces me to back up my work with credible research and prove its value to both patients and other physicians."
Schmidt stresses the importance of meeting patient expectations. "You can't do it halfway; you have to dedicate yourself and be committed to incorporating new methodologies into daily practice patterns." Then the extra income that is generated from expanded service is just icing on the cake.
Mari Edlin can be reached via email@example.com.
This article originally appeared in the January/February 2002 issue of Physicians Practice.