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The South Florida healthcare market is ripe for physician group expansion. As I mentioned in my previous column, there is a lot of opportunity in the industry today. But how should you expand your practice and what are some of the most important factors to consider as you formulate your growth strategy?

Offering ancillary services
Expanding services can be a huge source of revenue, especially for general practitioners. These services may include in-office diagnostic tests, hormone-replacement therapy, nutrition counseling, cosmetic procedures, and even alternative treatments such as acupuncture and massage. More medical practices have been adding ancillary services, with some physicians even reporting that revenue from these services has surpassed their primary care income.
 
But before you start offering allergy screenings and ultrasounds, remember it’s crucial to consider whether a new service is strategic and to analyze the potential profitability of the service before adding it. Forecast the associated costs (staff time, medical equipment, physical space, etc.) and weigh that against expected revenue gains.
 
Adding providers
New physicians can bring a book of new patients to your practice, enable you to expand services and spread capital costs, but how will they change the dynamic in your office? Adding mid-level providers such as nurse practitioners and physician assistants is sometimes a more cost effective option and can help to increase operational efficiency at your practice. No matter what types of providers you add to your practice, you will want to calculate your expected ROI.
 
Acquiring competitors
The trend of consolidation in the industry looks set to continue; however, successful mergers and acquisitions don’t happen overnight. They typically require months of planning, from industry analysis and target identification to due diligence and business integration. Determine whether an M&A transaction is the right move for your practice before you invest time and resources.
 
Questions to ask yourself may include: How much will we be able to increase our market share and grow our practice? Will we be able to offer new services? Do we have a transition and integration plan that includes change management for both culture and technology? How does our fee structure compare to the other group’s? What is our financial risk tolerance?
 
Participating in alternative payment models
Almost 60% of medical practices participate in at least one alternative payment model, according to a new American Medical Association (AMA) report.
 
Although there has been a lot of buzz in recent years about accountable care organizations (ACOs), physician groups should keep in mind that this is still an unproven model and many have failed. There are benefits to affiliating with an ACO, but there are also significant financial risks. If you are considering joining an ACO, you should conduct adequate due diligence to fully understand your risks.
 
Other considerations
No matter what growth strategy you choose for your practice, don’t underestimate how much expanding your physician group may affect your practice.
 
Do you have adequate policies, procedures, infrastructure and internal controls in place to handle growing needs related to technology, staffing, scheduling, physical space, operations and finances? Remember that as your practice grows, even seemingly small issues may become compounded, so it’s important to address them before that happens.
 
If you’re thinking about expanding your medical practice, contact an accounting and consulting firm with healthcare expertise for assistance with financial projections, M&A strategy, due diligence and everything else you need to seize future opportunities.