New Revenue Sources for Your Medical Practice

Until 2011, Washington Radiology Associates, a multi-location practice in the nation's capital and suburbs, offered the same basic two-dimensional mammograms as most of its peers.

So when the practice decided to invest millions in more than a dozen 3-D mammography units (plus related software upgrades and workstations), it bet on the premise that patients would be willing to spend extra money out of pocket for a service not yet covered by commercial payers.

"We invested in [them] because we believe it's the best technology available for patients," says administrator Patrick Waring, noting that patients pay a $50 fee to undergo testing with the 3-D machine, a process also known as breast tomosynthesis. Waring declined to specify exactly how much the group spent on the technology.

Fewer than 18 months later, the investment has started to pay off in both tangible and intangible ways. To date, 35,000 patients have opted for 3-D scans, opening up a new revenue source for the practice and increasing the frequency of related breast-care services such as biopsies.

Best of all, the machines, which work by rotating around the breast in an arc to create images at up to 70 different angles, help physicians detect cancer sooner.

"This allows the radiologist to see past architectural distortions," says Waring. "It gives them better information for detecting cancers and reducing false positives."

Breast tomosynthesis is cutting-edge diagnostic medicine. But for Washington Radiology, it also represents a way to grow its business: by offering its patient base an in-demand service, and asking them to pay for it. What the practice has found is that patients are not only willing to pay for services they value - they're happy to.

Your practice can follow this path, too. Driving new revenue through ancillary service lines can be a bulwark against the declining revenue and increasing overhead common to modern practice, and the services can be big patient pleasers.

But be warned: Not every ancillary service is right for every practice. The key is to pick services your patients want and need, that provide them a legitimate benefit, and that you can perform without major disruption to your regular operations.

Traditional revenue streams

Before you rack your brain for an ingenious instant-millionaire idea, consider some of the less-glamorous, traditional ways to make a little extra money.

Former anesthesiologist William Dirkes is president and chief research officer of Cincinnati-based Sentral Clinical Research Services, LLC, which helps office-based physicians conduct pharmaceutical drug trials. Dirkes estimates that only about 5 percent of practicing physicians conduct drug trials in their practices, due to worries about the process, the potential startup costs, or the ethics. The upfront work includes researching the drug trial and getting patients signed up, among other tasks, and some physicians are uncomfortable with allowing their patients to be part of an experiment.

"It's not just something you can slap onto your practice," says Dirkes, adding that initial training on ethical issues and research on the drug and disease can take about five hours. Physicians will also have to spend 15 minutes or so a week to keep up with what's going on. "It's not a lot, but it's not like just writing an order for a test."

But if you can invest the time, you'll reap the benefits. -Your patients can benefit, too. If physicians are looking to improve outcomes for a particular population - say, diabetes patients - offering a cutting-edge medication might make a huge difference.

"I had a couple of physicians last year who increased their income 10 to 20 percent," says Dirkes.

Bone density testing is another common, and seemingly easy, revenue opportunity. But be careful: Experts say this service works as an add-on only if it can be done for a high volume of patients.

"Bone density testing used to have a fairly high reimbursement, and therefore the investment in the bone densitometer used to have a fairly high [return on investment], but the bone densitometer tool is very, very pricy," says Nina Grant, vice president and agency managing director for Practice Builders, and managing partner for Ancillarypractice.com.
Because insurance typically covers bone density testing only once every few years for patients in a certain age range, the patient base would have to warrant it. To get the maximum financial benefit, a practice would probably want to consider marketing bone-health testing as part of a larger, exercise- and nutrition-based program, says Grant. In such a program, practices can ask patients to pay out of pocket for more frequent testing, can offer the testing to a wider range of patients, and can offer additional ancillary services within the context of an overall wellness program.

Moreover, practices starting such a program might want to refer the bone densitometry out until they see a large enough volume to justify the capital expense.

Before upgrading all 15 machines to include the 3-D software, Waring says his practice installed software on two machines for a four-month trial period at one location. "What if only 20 percent of our patients decided they wanted this technology? We would have only needed one 3-D machine at each office."

Thinking creatively

Miami-based primary-care physician Oliver Di Pietro has spent more than 20 years offering a wide variety of ancillary services - including abdominal ultrasounds, pelvic ultrasounds, bone density tests, and nuclear stress tests.

But, according to Di Pietro, the additional revenue from these ancillary offerings paled in comparison to his latest venture: a ketogenic enteral-nutrition weight loss program called the "KE Diet."

"The most lucrative endeavor that I did has been my fight to reverse obesity in my practice," says Di Pietro. In 2011, he began offering the 10-day program, in which patients receive calorie-controlled nutrients through feeding-tube infusions. "I've seen a dramatic improvement in diabetic control, reversal of metabolic syndrome, improvement of cholesterol level, and a healthier appearance and lifestyle of the patients."

The practice charges patients $1,500 for the program, and so far 200 patients have completed it. The costs include equipment, nutritional formulas, lab work, three office visits per week for monitoring, and training on how to use the tubes. As an added bonus, he is earning additional revenue by licensing the weight-loss program to other physicians.

Finding your natural fit

Making money is great, but most physicians need to do something they're happy with and that fits their personality, says North Charleston, S.C.-based, solo doc Craig Koniver, a self-described "organic medicine physician" who now makes at least one-third of his income from products and services that are complementary to basic patient visits.

A few years ago, Koniver stopped taking traditional insurance and made the switch to a direct-pay, membership-based practice focused on natural health and medicine. In addition to practicing medicine, Koniver offers a number of ancillary services, from nutritional IV therapies to consultations with docs who want to incorporate natural-health ideas into their practices. He also sells his own branded nutritional health supplements online.

"I'm a big believer in nutritional supplements and how they have a huge benefit to health," says Koniver. "It has provided a tremendous revenue stream that's consistent year after year, and it helps the patients."

Experts advise doctors to offer new services that add value to their existing practices and that their patients actually want. It turns patients off when practices just seem to be trying to make a buck, says Grant.

"Clinicians need to follow dollars that are already in the market, and … choose niches that are clinically relevant, rather than investing in, say, a hair removal laser because an eloquent equipment rep convinces them to do so," she says. Grant recalled seeing a poster for a gynecologist offering eyelash enhancement. "I was confused and put off, wondering 'Why would my gynecologist help me with my eyelashes?'"

Fiveideas

Still not sure which service to add? Grant says the following are among some of the most profitable service additions for physician practices that don't require a lot of investment.

1. Hormone testing/balancing. Today, there are a number of supplemental hormones that can ease patients into menopause or andropause, ease depression, or improve other health conditions. As such, testing for hormone deficiencies is a growing area of medicine, says Grant. But as with any test, make sure offering these has a purpose. "The doctor really has to know what they're going to do with the information," says Grant. "You don't want a doctor adding tests just for the sake of adding tests. That's not ethical."

2. Cosmetic enhancements. While most physicians know about Botox, there are other cosmetic enhancements (such as body contouring) that a growing number of consumers are interested in. These services might make sense for some primary-care physicians, so long as the appropriate safety protocols are followed, and physicians have the market demographics (middle- to upper-income patients) to support it.

3. Pharmaceutical dispensing. If the patient base warrants it, and your state's medical board doesn't prohibit it, offering pharmaceutical dispensing might make sense for your practice. In-office dispensaries are more convenient for patients and may improve patient-compliance rates. Practice administrators should be warned that some physicians might see adding a dispensary as a conflict of interest. "Some physicians may be concerned that their prescription behavior may be influenced by the potential income," says Grant.

4. Weight-loss/nutrition programs. Want to make your practice more whole-health focused? Consider adding a nutrition counselor to help design weight-loss programs (including meal planning, monitoring, and counseling) with patients. Offering medical food (such as snack bars that help ease hunger and lower cholesterol) is another potential revenue source. This is a good opportunity for physicians to use clinically proven, science-based methodologies to help patients lose weight and get healthier. "Too much of the money in the weight-loss sector is going to non-MDs," says Grant.

5. Clinical laboratory. Adding a clinical lab allows your practice to offer the convenience of on-site lab testing to patients, and brings in additional revenues for offering the service. "This allows the practice to, instead of sending patients off with a lab slip, do testing on site," says Grant, adding that practices that have three or more physicians, and a greater volume of patients, will benefit most. "They can often bring this niche into their practice for very little money."

Legal considerations

Before you start offering any new service, it's important to check for possible legal conflicts at the local and national levels.

The most important law to consider is the physician self-referral law, commonly known as Stark Law, which governs certain referrals for services from one entity to another, if both entities are owned by the same physician (or an immediate family member) and the practices accept Medicare or Medicaid. There are 12 designated health services specified in the law, including clinical lab services, parenteral and enteral nutrients, radiology and imaging services, and some exceptions as well, such as those for in-office ancillary services.

So, for example, "if a radiologist wants to add services such as CAT scans and they own a separate entity, they could run into violation of Stark Law if they referred patients from their practice to get an MRI or advanced CT services," says Trisha Lotzer, a partner with Phoenix-based Lotzer Law Group and CEO of Physis, Inc.

The good news is that there are a number of exceptions that a practice could meet to be compliant with the law. An attorney would want to check to make sure their ancillary service arrangement meets the criteria for an exception, says Jana Kolarik Anderson, a Washington, D.C.-based attorney with Nelson Mullins Riley & Scarborough.

Penalties for violating Stark are stiff, starting with claim denials for all claims submitted pursuant to an arrangement that does not meet an exception. There might also be penalties of up to $15,000 for each service, plus double the reimbursement claimed. You can even be excluded  from Medicare and Medicaid.

If Stark weren't enough to worry about, physicians must also take into account the federal Anti-Kickback Statute, a criminal statute that prohibits physicians from offering something of value to referrers or to patients in order to get a referral for a service covered by Medicare or Medicaid. "The Anti-Kickback Statute comes into play when physicians are contracting with an outside ancillary services provider like a [durable medical equipment] or orthotics company or outside lab," says Anderson. Practices that want to offer services inside their practice by an outside vendor should seek legal counsel, she says.

"Structuring arrangements so you are compliant with Medicare enrollment standards as well as the Stark Law, state mini-Stark laws, and state and federal anti-kickback laws should be the focus when you bring any ancillary service into your practice," says Anderson. "It does not cost a lot of money to [check with an attorney] to ensure what you are planning is appropriate. You want to ensure compliance on the front end, so you are not paying penalties on the back end.

Launch tips

Are you ready to launch your new service? Follow these suggestions for getting off the ground and keeping up with your venture:

• Find a mentor. Look for someone who has a track record of success. "When I see physicians, I encourage them to go to networking conferences," says Mike Woo-Ming, a family physician who now spends most of his time helping other doctors build and market their practices, including adding ancillaries. "If you are starting an age-management clinic, talk to doctors starting successful age-management clinics. If you can, try to work for those clinics. Do some volunteer work."

• Look at market demographics. Your actual patient demographics - age, income range, education level, and inclinations - should all be factors in your choice of ancillaries, says Grant. This way you avoid buying technology for a service patients can't afford or don't need.

• Hammer out financial parameters. Unless you're a solo physician, you need to be clear about who gets what, revenue-wise. "You have to make sure you have discussed that with your CEO of your medical practice," says Woo-Ming. "Are you representing yourself or are you representing your practice?"

• Integrate the new niche. After making an investment in new technology that will be the catalyst for a new revenue-generating service, it's time to start marketing the new service and using the new equipment. "A lot of practices will get a hair-removal laser and it will sit in the corner gathering spider webs," says Grant. "You need to educate patients about new services."

In Summary

Find the right ancillary medical services to offer and your practice will boost its bottom line. A few points to consider:

• Make sure your patient population justifies any high-tech purchases.

• Make sure you choose a service that is clinically relevant.

• Before you start offering any new service, it's important to check for possible legal conflicts.

•Take your patient demographics into account in your choice of ancillaries.

• If you invest in new technology, make sure you market your new service to patients.

Marisa Torrieri is an associate editor at Physicians Practice. She can be reached at marisa.torrieri@ubm.com.

This article originally appeared in the April 2013 issue of Physicians Practice.