Medical practices around the country are offering ancillary services to their patients to help differentiate themselves from other practices, enhance patient services, and increase revenues. If your practice is considering offering ancillary services such as ultrasound, physical therapy, or imaging, you need to carefully think through the ramifications, costs, and work involved before you make a decision.

Pros and Cons

On the plus side, adding ancillary services that are properly structured and implemented can add to your bottom line and offer convenience and continuity of services to patients. However, the addition of ancillary services to a practice may not always live up to expectations. It sometimes proves to be a drain on financial resources and time while not achieving anticipated benefits. Financial projections using realistic revenue and cost figures will help you assess the profit potential in any ancillary services you are considering.

Is the Service a Good Fit?

First, identify the ancillary services your practice currently orders that are provided outside your group. Are there services that your practice would order if they were more readily available? What is the competition in your area?

Financial Concerns

Next, determine the cost of implementing a new ancillary service. Will adding the service require a major investment in personnel, equipment, or space?

Explore how you would pay for the hard assets that may be required to offer the ancillary service (such as equipment, fixtures, and software). Investigate financing and lease options carefully, and be sure to consider the potential tax implications. You also should consider taxes when reviewing the type of corporate structure your new entity will take. We can help your practice handle tax issues in the most advantageous manner possible.

Will your existing space be adequate to house the new ancillary service or will your practice need additional space? Look into what additional personnel and management costs the new ancillary service will require.

Reimbursement Estimates

Once you have tentatively identified the costs associated with adding the new service, project how much revenue the new service will generate. Review your own in-house data to identify the number of times your practice has made referrals for the actual ancillary service.

It is important not to assume that your practice will capture 100 percent of the new service you intend to offer to your patients. A percentage of your patients will continue going elsewhere to receive the service. You will be able to project revenues once you have estimated the number of referrals and the associated reimbursement.

Legal and Regulatory Issues

The addition of an ancillary service to your practice has to be structured properly and carefully so that your practice does not encounter legal or regulatory problems due to issues such as Medicare billing rules, kickback regulations, or the Stark law. Consult with an attorney as early on in the process as possible.

Contact Bob Baldassari, MCB’s Medical Practice tax and consulting leader, for a best practice review of your medical practice and tax planning and compliance services.

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