Profiting from a New Service
Like many physicians, you may be
considering adding an ancillary service, such as diagnostic testing or
medical imaging, to your practice. The potential benefits in terms of
improved patient care and enhanced profitability may be easy to envision.
But successfully integrating a new service into a medical practice takes
careful planning and execution.
First Steps
Assuming your attorney has confirmed that the service you are
considering does not create a legal problem—with the Stark regulations or
otherwise—begin your consideration of a new service with an overview of your
“marketplace.” Does anyone else located near you offer the same service? Is
there room for another provider?
You may expect most of the patients for your new service to come from your
practice’s current patient list. If not, look for signs that the
competition’s capacity is under stress, which would help you attract new
patients. Be careful about relying on an advantage from advanced equipment
that a competitor may be able to easily match.
Next, look at the new service’s likely effect on your practice. Will it let
you improve patient care? Do you personally have the time to oversee both
the start-up period and the ongoing delivery of the service? Does your
present staff have the knowledge and time, in addition to their other
responsibilities, to provide the new service—or will you have to add full-
or part-time employees?
Working the Numbers
After identifying a service that you believe could mesh well with your
practice, you’ll want to put together some realistic financial projections.
Profitability depends on your ability to cover all the costs of providing
your new service for less than the revenues you receive.
Projections that an equipment seller provides may overstate the likely usage
of the new service or the time that it will take to reach a profitable
volume. As a result, you should make your own estimates based on your
practice’s referral history and other relevant factors.
Project the revenue you are confident you will receive from private
insurers, Medicare and patients and the costs you anticipate, including
investment in equipment, financing, additional space, labor, insurance,
supplies, etc. Be sure you also look at how well your practice will be able
to cover any anticipated losses during the start-up period.
Ready To Assist
The Somerset Health Care Team can help you estimate the realistic profit
potential of a new service—or
provide an objective second opinion on your plan. Please
contact us
before you make a commitment.
Health Care Commentaries is
provided by Somerset’s
Health Care Team
for our clients and other interested persons upon request. Since
technical information is presented in generalized fashion, no final
conclusion on these topics should be made without further review. For
additional information on the issues discussed, please contact a member
of our Health Care Team. This
document is not intended or written to be used, and cannot be used, for
the purpose of avoiding tax penalties that may be imposed on the
taxpayer.
Somerset CPAs,
P.C.
3925 River Crossing Parkway, Third Floor
Indianapolis, Indiana 46240
317.472.2200 • 800.469.7206 • FAX 317.208.1200
http://healthcare.somersetcpas.com
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