James T. Krupienski, CPA

Given today’s Covid-19 economic climate, and restrictions on the ability to practice medicine due to patient safety concerns and state shutdowns, there are many new financial struggles present in owning and managing a medical practice. Expenses continue to rise while revenues decrease, and the government stimulus packages are only temporary. Additionally, many patients are now unemployed and will have trouble adjusting to their payment responsibilities in the world of increasingly common high deductible plans, or self-pay for those currently out of work and uninsured.

To the extent that your practice has maxed out collection efforts under your current infrastructure and expenses are being properly managed, practices must look to new and inventive ways to drive revenues. Some ways that practices are looking to do this is through the proper use of mid-level providers and the implementation of ancillary revenue streams. This article will provide some insight into reviewing the feasibility of these new revenue sources, proper usage of mid-level providers and keys to success with implementation of ancillary revenue streams.

Before a decision can be made to bring in mid-level providers or embark with new ancillary services, a feasibility analysis should be performed. In doing so, first it must be decided whether there is a strong enough need, or demand, for these services within your practice or geographic area. Second, is there sufficient physical space and an appropriate infrastructure, and if not, can it be obtained with limited disruption? Mid-level providers will require examination rooms to see patients and ancillary services are dependent on the nature of the services to be performed as well as equipment that may be required.

Additionally, financing of the new venture should be reviewed, analyzed and budgeted. While bringing in a mid-level provider should result in added revenues, there will be a lag between seeing the first patients and collection of revenues. There may also be added expenses relative to additional office or medical staff, which would need to be financed in some fashion before actual collection of revenue begins. While the same concerns hold true for ancillary services, there is also the added potential cost of equipment. It might not always be the case, however, many ancillaries require the use of new, high-tech equipment, such as lasers or laboratory equipment. And, it is not uncommon that this equipment can be expensive.

Common examples of mid-level providers include nurse practitioners, physician assistants, physical therapists and audiologists, among others. A practice may look to bring mid-level providers into the practice for numerous reasons. It might be that the current providers are stretched to their limits and are currently turning away patients, or the practice is looking to allow the physicians to have more availability to see more complicated patients. They also may be looking for help with taking call or with their rounding responsibilities. In each instance, a mid-level provider, if utilized properly, may help reduce these burdens.

First and foremost, mid-level providers must be supervised and utilized in accordance with all applicable federal and state regulations. In Massachusetts, for example, the Department of Health and Human Services has resources on their site dedicated to certain areas such as physician assistants and audiologists. Next, mid-level providers need to be kept busy and fully scheduled. They are income generators and should be utilized accordingly. Given the higher salary that they require, using them for office work or scheduling is not the most effective use of their time nor skills.

Finally, it is important that your mid-levels are compensated properly. Many practices will set a collection target, which is often around 2.5 to 3 times their level of compensation. To assist with setting these goals and targets, your local state associations and the Medical Group Management Association can provide industry wide data and benchmarks for analysis. In order to provide an incentive for improved outputs, many practices will implement a bonus plan for their mid-levels. Some practices will share revenues like a physician compensation plan, comparing collections to direct expenses and some share of overhead, while others will incentivize with a set percentage of collections over a pre-determined target. In either case, the chosen structure will depend on the nature and goals of the practice.

Adding ancillary services to your practice can often be a game changer in revenue generation. However, proper due diligence is required for it to be most successful. First, an analysis should be performed to determine if there is a need for the service. A poll of your patients or staff could be a good first step in determining what may be desired. The best fit for these types of services are those that are most complementary to the practice. Examples of these include, but are not limited to, skin care products within a dermatology practice, massage services offered by a chiropractor or audiological services offered within an otorhinolaryngology practice. Here, the practice is looking to provide a form of ‘one-stop shop’ for their patients, relative to services that they would otherwise seek elsewhere.

Second, it is important to understand the full array of costs that will be incurred in the new venture. While for some it is just a function of covering the costs of some additional supplies, other ancillary services will require the hiring of additional staff, adding to overhead and in some instances, purchasing additional pieces of equipment. Preparing a budget to actual analysis should be your starting point prior to moving ahead with any new services.

Finally, and potentially most vital based on the implications, is having a detailed understanding of the regulatory environment as it relates to any new services provided. The Stark Rules exist and must be adhered to. Often, there is a direct line between the practice and the offered ancillary services that runs right through the Stark Rules and Regulations. As a result, it is imperative that a healthcare attorney be consulted in all cases, so that no unintended violations of the rules are created.

With the current economic environment, it is essential that you have considered whether you are taking full advantage of all potential revenue streams, including those that you may not currently be offering. The use of mid-level providers and introducing ancillary services should, at a minimum, be discussed by each successful medical practice.

James T. Krupienski, CPA, MSA, Partner
Healthcare Services Niche
Meyers Brothers Kalicka, P.C., Holyoke, MA
Certified Public Accountants and Business Strategists
(413) 536-8510 • www.mbkcpa.com