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Choosing the Right Service Line to Grow Your Practice

The Doctor's Office, April 23, 2009

The healthcare market is more competitive than ever, and physician practices have a growing number of strategic options—from traditional ancillary services to retail service lines—to increase revenue and remain competitive. Choosing the right service line or project can greatly enhance a practice's financial stability, but the choice isn't always easy because each option comes with direct and indirect risks and rewards.

When examining the new business venture, practices should ensure that the new service maintains high quality while remaining economically viable.

"Assess that the venture that you are considering is feasible, develop a business plan, and by all means prepare a budget that goes through the economic ramifications," says Max Reiboldt, CPA, president and CEO of The Coker Group, based in Alpharetta, GA.. "Present this to your doctors; make sure they understand that there are risks."

Questions practice managers should ask include:

  • Will the service add to or detract from patient comfort and security?
  • Will patients be compliant with the care plan?
  • Will the physician be able to supervise delivery of services?
  • Will care be of comparable quality to the traditional way the service is provided?
  • Will the service be reimbursed by third-party payers?
  • What will be the revenue possibilities?
  • Is there the possibility of an acceptable return on investment?

"One of the underlying themes that we've looked at as we looked at various services that we have is how effectively can they meet the marketplace," says Jack Reed, president and CEO of ProHealth Physicians, Inc., a group practice in Connecticut that recently developed an ancillary sleep program. "We needed to take the community-based practices and enable them to go out and meet the marketplace based on consumer needs."

Reed suggests outlining metrics for business development and risk tolerance when developing the program so its success can be tracked effectively. "We found, too, in our initiative that it is important to have very specific goals for the program," he says. "This is really important in how you monitor its success."

A feasibility analysis can be very helpful as well. In this analysis, consider market competition, patient demand, and provider support for the service.

"One of the most important things to start your program or expand your program is to test how complementary it is to your core business," Reed says. "You have to take this opportunity to look at how much money you are willing to put into this particular initiative, what the timeline is, how you are going to get reimbursed, and how much profit will it actually generate."


This article was adapted from one that originally appeared in the April 2009 issue of The Doctor's Office, a HealthLeaders Media publication.

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