Cost Crunch of ancillary services

MGMA e-source released an interesting analysis of The MGMA Cost Survey for Single Specialty Practices:  2011 Report Based on 2010 Data entitled “Cost Crunch: Ancillary services can soften the impact of declining revenue and profits in some cases but not all”. This study serves as two compelling reasons to consider marketing for the specialty practice in 2011.

Matthew Vuletich, Senior writer/editor for MGMA reports that total medical revenue declined from 2009 to 2010 for most medical specialists except surgeons without ancillary services.  His findings which compare practices with and without ancillary services were as follows:

PCP and Family practice physicians:

• Those without ancillary service showed a decline in total medical revenue after costs, dropping from $167,114 to $96,421.

Non-surgical specialists:

• Those without ancillary services saw profits plunge by $77,379
• Those with ancillary services saw total medical revenue drop by $102,246

Surgical specialists:

• Those without ancillary services increased revenue by $12,000 and profits by $45,834
• Those with ancillary services saw a decline in both revenue and profits.

Multi-specialty groups:

• Those without ancillary services increased medical revenue by $50, 000 but this added just $8,000 in revenue after costs.

Now keep in mind that this study compares 2009 versus 2010.  We’re now another 2 years into this recession which has impacted patients and practices alike and it’s reasonable to expect that these numbers could be worse.  This may in part account for the significant changes in revenue for cardiology which are forcing many practices to sell to their local hospital.

In today’s environment very few practices can warrant the cost of ancillary services based exclusively on internal referrals.  Most are dependent on external referrals to drive the utilization and ultimately the resulting profit from such services.  But how many practices actively market the capabilities of their service?  Very few I’m afraid.

We recently marketed a neurology based sleep practice here in the Mid-Atlantic States.  On our first venture out into the community to meet with referral sources we stopped off at a large Cardiology practice right next door to the sleep center.  Every day the employees of this practice drove past our client’s office where he had a large sign identifying his sleep center.  Again, every day the cardiologists and staff drove right past our sign.  When we introduced ourselves to the doctors and staff everyone acknowledged the neurology practice next door but virtually nobody knew that there was an adjoining sleep lab associated with the practice!  This lab and sign had been in place for four years.

Physicians in today’s market should not ignore what surveys like are telling them; If you’re going to add ancillary services make sure you fully market them to gain external referrals needed to drive volume and profits in the early days before cuts in reimbursement.  If you are debating the addition of certain ancillary services perhaps you would be better served to take that money and market your core skills and training to the referral community.

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This entry was posted on Monday, October 3rd, 2011 at 2:18 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.