Smart shopping: Ideas don't always equal income

The list of ancillary revenue possibilities may be tempting, but doctors would be wise to understand the risks before investing.

By Mike Norbut, AMNews staff. April 4, 2005.

In the age of rising costs and declining reimbursement, a physician might look at almost any ancillary revenue opportunity related to his or her specialty. Perhaps a storage room might be fitted for a new ultrasound machine. Maybe a salesperson stopped by last week to drop off information about body-scanning equipment that is promised to draw cash-paying patients. The group down the hall could be looking for investors in a new specialty hospital.

The possibilities for revenue might seem endless, but financial experts caution that ideas don't automatically equal income. Each investment carries risk, and doctors can be so cash-strapped that one failed investment, especially a big-ticket item, can ruin a practice.

Caution, and expert assistance, are the keywords for physicians seeking input on sinking money into a new ancillary service line. A trusted accountant or business expert can evaluate the proposal objectively, and an experienced attorney can make sure your plan is in line with federal regulations such as Stark laws.

While the ground-floor investors are the ones who make the most money if the idea is a hit, they're also the ones who take the greatest risks. And because it's difficult to salvage any money from a failure, experts say it's imperative for doctors to get their ancillary investments right the first time.

"You can have the greatest equipment, but if other physicians or the public hasn't accepted it, it's not going to help you," said Curt Mayse, a principal in the St. Louis office of LarsonAllen Health Care Group. "You have to ask yourself, 'How does it fit with the practice?' Does it make sense with what they're doing? What does demand look like?"