New technology adds revenues, patients; many groups cautious for safety reasons

Physician Compensation Report, April, 2003

New technologies--tests, medicines, surgeries, procedures, equipment--add revenue streams and patient flows for medical groups. But physicians in many practices pride themselves on rarely being the first to try new techniques, preferring to wait and be sure the techniques are genuine advances for patients in effectiveness and safety.

"There are a zillion new products that come out all the time," says Mark Ross, administrator of seven-physician Plastic Surgery Center in Sacramento, Calif. "We're pretty conservative...almost never the first ones" to try a new procedure, he adds.

Physicians eager to be among the first to try new procedures tend to be at academic facilities or to need business, Ross says. As the oldest and largest plastic surgery practice in the Sacramento area, his group is very busy.

Several services that Ross's practice has introduced in the past two years are not big money makers for the group. This has been true of laser hair removal, which the group introduced mainly as a convenience for and method of keeping existing patients. It also has been true of BOTOX injections, which have drawn in quite a few new patients, he says. BOTOX injections have to be repeated once or twice a year, he adds, and that allows the group to strengthen its relationship with those patients.

Purchase Deals Can Improve Profits

With some innovations, buying necessary equipment rather than renting it can make the difference between a profitable and a break-even operation--provided the group has sufficient volume to support the purchase. That's been the experience of many ophthalmology practices with LASIK eye surgery (PCR 11/8/00, p. 2).

In conjunction with hiring a new physician last year, six-physician Skin Cancer & Dermatology Institute of Reno, Nev., acquired laser hair removal and iriderm laser (for spider veins and small brown and red spots) equipment through lease-with-option-to-buy contracts. The physicians were very careful to choose equipment with a strong safety record, notes practice administrator Kathleen Goicoechea.

With a "buy price" of about $80,000, the hair removal equipment should pay for itself in a little less than a year, Goicoechea says. That figure does not take into account the cost of physician time. The practice has been averaging about 44 services per month on the equipment, she says. The iriderm equipment costs about $20,000.

Some purchases are made without hope of attracting new patients and revenues, because the equipment simply updates existing equipment. To provide better diagnosis and care for its regular glaucoma patient load, 16-physician Vistar Eye Center in Roanoke, Va., recently purchased "HRT" and "SLT" equipment, says administrator Kathy Cowan. A willingness to invest in recent technology can reinforce a group's referral stream.

In some cases, technological innovation is needed just to keep patients coming. Many ophthalmology practices have noted a slowdown in the demand for LASIK surgery, Cowan says. She adds that a technology just winning FDA approval this year, called wave front surgery, "could create excitement for physicians and patients" because, for some people, it allows improvement of vision to better than 20/20. "It's a step further than LASIK," she says.

Cowan's group opened an ambulatory surgery center in February 2001 that's been "well received by patients," she says, because of its one-story, nonhospital environment. The physicians perform cataract, glaucoma and some cosmetic surgery there, she notes.

Ross explains that some formerly obese patients who have had bariatric surgery want to tighten loose skin and make other changes consistent with their lower weight. Surgeons in his practice use a recently developed "total body lift" procedure that allows these changes to be made at one time, instead of needing three or four operations.

David Bennett, FACMPE, administrator of Northwest Surgical Specialists in Vancouver, Wash., says that a neurosurgeon hired last September is performing endovascular neurosurgery to detect and treat aneurysms before they burst. One procedure, akin to stents for the heart, keeps blood vessels in the brain open, while another puts a coil on aneurysms that prevents them from growing. Financially, these procedures add revenue streams not only for the group but also for the hospital, Bennett says.

Payback May Not Be Clear

Bennett's group, which has 15 orthopedists and five neurosurgeons, made three major upgrades to its imaging capabilities last year. The largest was PACS (Picture Archiving and Communications System), which allows filmless transmission and storage as well as measurement and image adjustment techniques to derive more meaning from images. The second, for the group's largest office, is digital X-ray, which takes pictures directly into computers. The third, for two smaller offices, is computerized X-ray, which takes pictures to cassettes and then to computers.

Despite the "hype" from product salespeople, Bennett says, the payback from such large investments is not entirely clear. "You can't quantify higher physician productivity with any clarity," he adds.