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Creating outpatient clinics for ancillary services

By Tony Zingarelli

How can physicians increase their compensation without sacrificing lifestyle or running afoul of government regulation? Are physician-controlled outpatient ancillary service clinics an answer?

Outpatient opportunities are a popular topic these days at many physician conferences. In the new medical world dominated by managed care and the so-called “legislators of cost containment,” it is becoming increasingly difficult for physicians to maintain an adequate level of compensation. Physicians are working more hours than in the past and realizing less revenue for their efforts. Surgeons are seeing more patients and performing more procedures. But the only thing physicians have to show for it is less time for themselves, their families and their friends.

A physician can work only a finite number of hours and a surgeon can operate on only a finite number of patients. The rational way to increase revenues is to identify revenue streams that do not involve an inordinate amount of incremental time on the part of the physician. Ancillary services can assist the physician in his ultimate goal of providing quality medical care (often in his own office setting) while producing a profit for his efforts.

We are finding more and more physicians open to incorporating various outpatient ancillary services into their practices, including physical therapy, diagnostic testing (e.g., imaging and laboratory services), diabetes management programs and weight management programs. Within the walls of its practice, a group can offer any service that fits its specialty areas and is provided to its patient base. For surgeons, ambulatory surgery centers are an investment that can generate additional revenue while giving them their own outpatient setting for performing same-day procedures.

In the search for solutions, however, physicians still grapple with the professional perception that it is not proper for a physician to make money from the delivery of care in outpatient business ventures. There is also a fear that physician business ventures carry significant risk relative to government regulation.

The words “business acumen” and “physician” are seldom used in the same sentence, but if any physician today has the misconception that medicine is a profession and not a business he will be working for someone else and not himself in the near future. If medicine is a physician’s “business,” why shouldn’t a physician with an entrepreneurial orientation be allowed to design a plan for ancillary service delivery, execute it and make a profit?

Physicians considering outpatient business ventures can consider the following, as well. Will a physician controlled, on-site setting enhance or detract from: Patient comfort and security? Patient compliance with care plans? The physician’s ability to supervise the delivery of ancillary services?

Physicians see the opportunities that exist in outpatient ancillary service delivery, but have become wary of taking creative entrepreneurial steps in light of current legislation and regulation such as Stark. The Stark laws serve an important purpose, addressing issues of abuse in the medical delivery system. But for entrepreneurs, who find no greater joy than turning a profit on a well thought-out and properly executed idea, they can create the impression of high risk, and the risk may be only perception if a business venture is properly structured and operated.

Physicians have choices and opportunities in today’s market, and should pursue them with this caveat: never cut corners in due diligence, management, and legal compliance, and start with a clear plan.

Due diligence, management and legal compliance must include solid financial planning (a properly thought out and executed budget!), an experienced professional team (to structure the transaction and to operate the business), knowledgeable legal counsel schooled in health care law and a good certified public accountant familiar with the complexities of an outpatient medical practice. With these elements in place, a practice can focus on excellent service delivery and quality of care.

A business plan begins with a product line and an idea on how to capitalize on that product line. For a physician practice contemplating ancillary services options, two key components of the formula for a successful outpatient clinic are:

• Designing it to serve a specific medical need of a target population whose profile shows a high demand for that service.

•Locating it in an area whose demographics identify it as having a high density of that target population.

Following is a case study showing how this strategy works:

A large primary care physician group with multiple locations and a sizable patient population found it rewarding and practical to offer physical therapy as an additional service in its practice. This was accomplished by allotting space in one of its offices and equipping it with state-of-the-art therapy equipment. The group staffed the center with therapists that were known to deliver excellent care under a primary care physician’s supervision. It also negotiated with area managed care plans to be designated as an in-network provider of physical therapy services.

The result: Patients with diagnoses that previously would have required a referral to an independent physical therapy outpatient clinic are now handled in-house by the group’s own therapists; they receive therapy in the same office where they come for diagnosis and in an environment where they are comfortable and secure. The physicians are able to assure themselves that their treatment plans are being followed because they can confer with the therapist on a daily basis and monitor their patients’ progress. And, last but not least, the practice bills for the services, benefiting financially in the process.

This group was willing to invest its time and expertise, as well as accept additional responsibility and expense, to accomplish its goal. Some physicians may not be comfortable with this level of complexity and responsibility, but can still find ways to explore business opportunities, such as:

• Joint venturing an ancillary service with another party who has experience in the delivery of care in a particular medical area.

• Hiring a management group to set up and run an ancillary clinic within the practice location, with physicians in the group providing input into the treatment plans.

• Having a member of the group become the medical director of a facility convenient to the group’s patient population so the group can have input into the treatment plans.

The latter not only allows the group to have input into patient care but in most cases teaches physicians new methods offered by the facility and how these services could better be used in patient treatment. Also, medical directors are compensated for their time and expertise and add value to the facility.

Tailored strategies such as these help our physician clients pursue opportunities to enhance their compensation. As noted, every practice is different, and should always consult the appropriate health care professionals and attorneys before proceeding with the development of an outpatient ancillary service.

Tony Zingarelli is a director of ZA Consulting in Jenkintown, Pa.

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