Your Career Guide

Make your practice more profitable

Doctors are finding nontraditional ways to supplement stagnant practice earnings—selling everything from pregnancy calendars to advice on aging. Here's what works.

By Deborah Borfitz

Faced with slimmer earnings and the hassles of dealing with managed care payers, more physicians than ever are looking for revenues beyond the traditional realm of clinical practice. Besides boosting income, they often want a change of pace and a lighter patient load, says Maureen Swan, a principal with the MedTrend Group in Minneapolis.

Clinical research, cosmetic surgery, product sales, and "premier" services such as executive physicals and heart scans top the popularity list, largely because the revenue potential is significant. Drug dispensing is also gaining interest, as is virtually anything that involves the Internet.

The most successful ideas address the needs of a doctor's current patient base—general surgeons offering prostheses and wigs to chemotherapy patients, for instance. Another example is the customized pregnancy calendar that Detroit-area obstetricians John R. Sanborn and Michael A. Genord are selling, usually for $29.95 a pop. Their patients receive it free, but sales to other expectant women bring in $7,000 to $10,000 monthly.

Clinical trials mean hard work, but big rewards

Around 35,000 doctors now serve as clinical investigators in studies regulated by the Food and Drug Administration, and the number is growing 7 to 8 percent annually. The number of studies physicians handle simultaneously varies, from no more than a handful to upwards of 80. Fees typically range from $1,000 to $5,000 per patient, about 60 percent of which is profit.

Richard F. Holub, 52, a neurologist in Albany, NY, has been comfortably mixing private practice and medical research for 24 years. "I was always interested in research," he says, "but I didn't want to be buried in a lab. I wanted to be with patients."

Until 1985, he did mostly gratis studies in neuroimmunology, working out of patients' homes and lab space provided free by the state. Then Holub decided to establish his own memory disorders unit in the building that houses his practice, to test drugs for treating Alzheimer's and related conditions.

Today, the unit is engaged in at least 10 double-blind, placebo-controlled studies, Holub says. These include a trial of an oral version of an MS drug developed in the aftermath of his earlier work toward a disease vaccine. Another 10 programs extend treatment, free of charge, for patients who have completed a trial and are awaiting FDA approval of the study drug. His income from drug trials is "almost fee-for-service," he says, and arrives on a fairly predictable schedule.

Ten employees, including six clinical research coordinators, make up the research staff. Two employed neurologists also have some research responsibilities. Still, research eats up about half of Holub's work time, which includes late nights, weekends, and drug-company-sponsored meetings once or twice a month. "This isn't like covering an extra day in ER to pick up a few extra bucks," he warns. "You really need to make an intellectual and time investment." Each study requires a commitment not just to produce results for the sponsoring drug firm, but to properly inform and care for study subjects, meticulously document findings and control medications according to a detailed protocol, and accommodate FDA reviewers.

Steering clear of potential conflicts of interest requires concentrating on patients, medicine, and the science. Drug firms respect that, says Holub: "They want a good, responsible principal investigator." For long-term success, it's also very important not to be identified with one company or another and to "gracefully stay away from" the politics of drug development, he adds.

The easiest money is in retail

In-office product sales provide an easier way for doctors to earn extra income, says Maureen Swan. Participants include dermatologists who sell skin lotions, internists who sell vitamins and books, and orthopedists who sell back supports. Some physicians work with distributors and have kiosks as well as shelf space in their lobbies, so they can get commissions on reorders. Others work with Internet-based companies and earn a 5 to 10 percent commission by directing patients, via their practice's Web site, to those companies' products. That way, physicians have no inventory to contend with, Swan notes.

Opinions vary on whether such deals pose ethical problems. Young doctors seem more willing to sell than their older colleagues, who are more likely to agree with the AMA's stance that selling products to patients compromises the physician-patient relationship. In any case, says Swan, "I've not seen any licensure issues materialize, and the activity has increased rather than dried up."

Consumers love the convenience, Swan adds, and doctors can earn a decent sum pleasing them. A typical five-doctor internal medicine clinic, after one year, receives $1,400 in additional net income per doctor each month. "It's not a hard sell; they don't have to do anything," Swan says. "Most sales take place while patients are waiting to see the doctor."

Supplementing income by dispensing drugs

A growing number of physicians view drug dispensing as a logical way to supplement practice income. Depending on payer mix and prescribing habits, they can make $40,000 to $200,000 per year dispensing medications out of their offices, according to Bill Janis, a regional sales director for Tulsa-based Physicians Total Care. His company provides services and medications to physicians who do their own dispensing. Cardiologists and neurologists, as well as other doctors whose patients are on maintenance medications, do especially well.

About 10 percent of doctors are currently dispensing, says Janis, and the number is increasing. One reason: Companies like PTC now offer programs that electronically connect physicians' offices to most HMOs' pharmacy benefit managers for immediate claims adjudication and confirmation of reimbursement. The programs also fully automate the dispensing process and inventory control.

With PTC's system, medications are prepackaged and sealed in counts commonly dispensed. Labels are printed when the drugs are dispensed and are easily modified. The system also tracks usage and automates reordering by modem.

"Some studies have also demonstrated significant increases in compliance and decreases in pharmacy error with point-of-care dispensing," says Janis. Malpractice rates are unaffected, though. Dispensing costs include $175 monthly in system support and connection fees, a one-time licensing fee of $4,000 that can be paid over time at $1 per medication, licensing fees as required by the state, and equipment costs of several hundred dollars.

More doctors would be dispensing were it not for fear of computers, says internist and emergency medicine specialist Richard D. Loew of Stuart, FL. He contends that the technological side can be mastered in 30 minutes. Patients like the convenience, he says, and he makes $4 to $6 per prescription. With 40-plus patients per day receiving at least two prescriptions per visit, revenues build quickly. Profits are $35,000 to $60,000 per year.

Loew dispenses 70 percent of the medications he prescribes and accepts the same insurance cards as Walgreens and Eckerd, with which he maintains cordial relationships. Loew pays nine cents per insurance transaction to Envoy, the central switching service that connects him to the pharmacy benefits manager.

Loew credits security features on the PTC system and his own policy against carrying narcotic pain medication for preventing employee theft and break-ins during his seven years in the dispensing business. Although his prescribing habits haven't changed, Loew says, there's little to prevent overutilization, beyond a doctor's own conscience and oversight by Medicare.

Boom times in the nip-and-tuck business

Cosmetic procedures have come to be viewed as perfectly compatible with the practices of dermatologists and GPs in search of a new revenue stream unaffected by managed care. Even gynecologists are getting in on the action, introducing services like microdermabrasion and laser hair removal, with revenue targets of $25,000 or more annually.

Maryanne A. Hannaney, an ob/gyn in Newport Beach, CA, now offers a full menu of cosmetic procedures—including breast augmentation, liposuction, and abdominoplasty—and will soon add hydrotherapy. Despite $400,000 in construction costs and over $9,000 in monthly equipment lease fees, profits aren't far off, now that the state has accredited her surgery center.

Hannaney currently sees about 50 patients a month for cosmetic procedures, generating a minimum of $30,000 in new revenue. Hands-on training was easy to come by from colleagues, conferences, and equipment manufacturers.

One of the busiest cosmetic surgeons in Austin, TX, is an FP who runs a clinic that does virtually nothing but self-pay dermatology and varicose-vein treatments. Steven E. Zimmet, 48, says he has always enjoyed doing procedures and finds it gratifying to see patients improving "literally before my eyes."

He made a gradual move toward cosmetic procedures about four years ago, at the same time technologies like laser tattoo removal and varicose-vein treatment with sclerotherapy were debuting. He leases most of the lasers and a duplex ultrasound for $1,500 to $4,000 monthly per machine. Zimmet's training came from attending meetings of the American College of Phlebology and the American Academy of Dermatology, reading literature, and tutoring—sometimes paid for, sometimes not—by experts in their offices.

Zimmet stopped accepting insurance two years ago, when he had enough cosmetic patients to allow it. Practicing medicine has "been a dream since then," he says. Zimmet Vein and Dermatology Clinic continues to be booked several months in advance, and his earnings are more than twice that of his best years with the multispecialty group he left in 1996. Other than a few "low key" newspaper ads, marketing is all word of mouth.

Creating a one-stop shop

Physicians can add a slew of other ancillaries besides cosmetic procedures. "A lot depends on the specialty," says Greensboro, NC, practice management consultant Barry S. Pillow. Many internal medicine and family medicine practices, and some pediatric offices, have sufficient volume to justify the cost of tooling up for their own laboratory.

It makes sense even for larger practices with multiple locations. "Under Stark regulations, they can have a central lab and share the costs," Pillow says. An orthopedic practice might instead place a physical therapist in the office and, depending on historical ordering patterns and certificate-of-need requirements, offer MRI.

These days, just about every cardiology practice does its own echocardiograms, stress tests, and Holter and arrhythmia monitoring. The eight-doctor Medical Associates of Central Virginia in Lynchburg has offered these ancillaries for about four years, says practice administrator David Middag. "This is all reimbursable stuff," he notes. But pay attention to access and referrals, Middag warns. "Those are the drivers of testing volume. Otherwise, you overtest" to pay for the technology.

Everett Clinic, a large multispecialty practice in Everett, WA, offers an impressive array of imaging ancillaries as a result of patient demand for one-stop shopping, says Barbara Oos, director of diagnostic imaging. It started decades ago, with conventional radiology and fluoroscopy in a single imaging center. Today the practice has two centers, and services include CT, MRI, ultrasound, DEXA scanning, nuclear medicine, mammography, urology imaging, and vascular ultrasound.

Each of eight Everett-owned primary care clinics also has a conventional radiology room and small blood-testing lab, where couriers pick up tubes for processing at a central lab. Radiology volume is about 450 procedures per day; lab volume is roughly double that. The satellite clinics are essentially small practices of seven-plus physicians, with radiology technologists cross-trained to do blood draws and save on costs, says Oos. "We tried it the other way around—cross-training the lab techs—and it didn't work."

In Everett Clinic's experience, the break-even point on MRIs and mammograms is about eight per day, and on CTs, about 10. "We have five mammography machines now and do 60 mammograms a day," Oos says. The extended hours don't hurt. MRIs are done from 6 am to 10 pm, and CTs until 7 pm. Mammograms can be scheduled for Saturdays, as many patients prefer, although the no-show rate is a numbing 30 percent.

Especially convenient for Everett's referring specialists, and for one unaffiliated neurosurgeon, is access to a Web-based image distribution system that allows them to pull up radiological images on their desktops, says Oos. The clinic places profits generated by the imaging centers in its general fund, indirectly benefiting, through profit sharing, its 180 physicians (most of whom are partners), as well as its employees.

Making more by promoting wellness

Physicians show considerable interest in wellness products and services of all stripes. "Demographics push this," says Lansing, MI, practice management consultant Gray Tuttle Jr. Anything that assists baby boomers over the next 20 years will be a good fit with private practice, he says.

Holistic medicine is potentially the most lucrative, offering 100 percent or more fee-for-service-equivalent revenue for the time spent, says Tuttle. Profits are possible even if doctors hire nutritionists, acupuncturists, massage therapists, and other alternative practitioners to do much of the work.

Lansing internist John F. Strandmark, with Mid-Michigan Physicians, is focusing on aging issues. The over-65 crowd accounts for 45 percent of his patient base, and most of the rest are over 40, an ideal time to start planning for the changes ahead.

The 54-year-old doctor started working on his Wednesday off-hours last summer, to take patients through each of three areas identified by The MacArthur Foundation as vital to successful aging: avoiding disease, maximizing mental and physical health, and connecting with people and the community. During an initial $200 consultation with patients, he covers such things as fears about aging, family disease history, current medications, coping with stress and a reduced energy level, exercise habits, sleep problems and eating habits, relationships with family and friends, and community involvement.

From that, he produces a narrative report that serves as sort of a master plan from which patients can choose problem areas to work on. He then tracks their progress through follow-up visits. "I'm hopeful that I'll be able to grow in my knowledge so there will be value in continuing to meet regularly," Strandmark says.

Many of the services are nonreimbursable, so Strandmark negotiates an hourly rate of $175 to $225 with patients. He's also providing at-home consultations to several patients and is exploring the idea of offering telephone consultations to frequent travelers. He's considering a quarterly, subscription-based newsletter, as well. Eventually, Strandmark believes, he could offer most services via camera-equipped computers and the Web. "I can eventually see myself transitioning to the point where I do this most of the time, because the overhead is so low," he says. "It's just so easy."

Promoting "premier" services to baby boomers

Internist Cliff Hale, 50, co-founder of Mid-Michigan Physicians, already devotes 30 percent of his practice to doing special exams and physicals that give him a generous allotment of time with patients, a near-perfect collection rate, and no on-call hours. Companies generally pay $350 for a one-hour executive physical that includes standard labs and a written report.

Hale began doing these physicals 19 years ago, when he helped run a hospital-affiliated program that he subsequently took over. Pilots seeking medical clearance to fly pick up the $65 tab for a flight physical, which Hale, who is himself a pilot, has been trained and designated by the Federal Aviation Administration to provide.

Visits with some pilots are lengthy, but "for an 18-year-old, I can knock out an exam in 10 minutes," he says. At night, he submits the reports via the Internet to the FAA. These activities, along with the pre-employment exams and drug screens he does for a national executive health broker, provide roughly one-fourth of his gross practice income.

In addition, Hale earns $150 per hour reading ECGs at night as medical director for a life insurance company. He also serves as CEO of Mid-Michigan Physicians, a job that takes up half his time and provides half his salary. "Financially, I'm better off than if I just did primary care," says Hale, adding that he'll go after the executive physical business more actively as he prepares for semiretirement.

Others in this broad category of premier services, says Maureen Swan, include cardiologists making "millions" in the radio-ad-driven heart-scan business—albeit for a sizable up-front investment in an electron beam CT. Similarly, she says, a California radiologist just opened a center that specializes in full-body scans for just under $1,000. "Most doctors will say that's crazy, but baby boomers don't care," Swan says. "They want to feel better."

Meanwhile, internists offering unlimited, 24-hour access to themselves—including by cell phone—are "popping up all over the place," she says. The fee: $3,000 or more annually. It's a rosy deal for doctors. They not only make more money, but also deal with fewer patients, who believe they're getting better care.

The author is a freelance writer in Vero Beach, FL.

Deborah Borfitz. Make your practice more profitable.

Medical Economics

2001;1:106.