How to Increase Physician Clinic Profits While Enhancing Patient services

January 2, 2018
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Physician offices face ongoing challenges with reimbursements. Often-changing policies impact clinics’ profitability because some services are no longer eligible for reimbursement or are reimbursed at a lower amount. As a result, providing profitable services is more important than ever. 

The good news is that with the right strategy and expanded offerings, physician clinics can grow their business, improve profitability and better meet their patients’ needs. Facilities can offer additional services such as lab testing, medical spa (med spa) treatments and an in-house pharmacy. They can also make money selling previously used equipment. The services should align with the clinics’ overall business strategy. This may require updating the strategic plan.


Expanding a physician office to include an in-house laboratory can serve more patient needs. A physician office lab (POL) can provide many services similar to a hospital, such as testing for diabetes, lupus, infections or Lyme disease. A POL can, if properly equipped, provide a comprehensive range of tests in a doctor’s office setting for immediate results. 

An in-house lab enables:

  • A doctor to perform a test, deliver a quick diagnosis and provide patient treatment. 
  • Early detection of health risks, which decreases hospitalizations, reduces healthcare costs and improves outcomes.
  • Faster results than using an outside lab.
  • A reduced chance of a sample being lost or damaged. 

Lab services and point-of-care testing are critical parts of healthcare. The compact size of many lab instruments has made a POL easier than ever for even small offices to implement. The testing has shifted from equipment-based, which required machines that needed regular calibration and skilled users, to product testing that requires only a small amount of office space. 

Even with an in-house lab, some tests will still need to be outsourced. Doctor offices can work with—and even brand with—an outside lab. For example, some physician offices work with a reference lab. In this case, a sample is taken and billing is handled by the physician clinic, which pays the outside organization a contracted fee for the test. The patient or insurance company is billed according to the doctor office’s pricing structure. 

Startup costs are about $50,000 for a single practice, with potential revenue up to $400,000 per year, according to Concordis Practice Management, a medical management firm.

“Lab services and point-of-care testing are critical parts of health care and where treatment begins. The compact size of many lab instruments has made a POL easier than ever for even small offices to implement.”


A med spa allows people to get medical-grade treatments and procedures for well being and body enhancements under the care and supervision of a medical doctor. Services can include Botox®, skin rejuvenation, acupuncture, laser hair removal and more. 

According to a report from Marketdata Enterprises, med spa:

  • Was a $3.6 billion industry in 2016.
  • Is expected to grow 18% per year. 
  • Has an average profit margin of 14% of net sales. 
  • Offers average revenues per facility of $924,000.
  • Sees about 80% of revenue from procedures and 20% from retail product sales.

Startup costs can be $465,000 or higher because of the high cost of buying or leasing laser machines. This technology changes rapidly, causing machines to become outdated quickly. Another large expense is training staff to provide the services. However, physician offices can expect a return on investment (ROI) in just six to nine months, depending on the number of patients seen. This is based on startup costs of $465,000 and average revenues per facility of $924,000 per year


In-house drug dispensing is a value-added service for patients, saving them from having to make a separate trip to a pharmacist. Receiving prescriptions at a doctor’s office also increases patient adherence. With up to 31% of new prescriptions never filled, adherence is increasingly important. Plus, patients appreciate having their prescriptions filled within the professional and compassionate setting of a physician’s office. 

According to the National Center for Health Statistics:

Offices that want to add an in-house pharmacy typically need software, sometimes from multiple vendors, to assist with adhering to regulations and dispensing drugs. Startup costs vary by practice, but physicians can realize bottom-line benefits. Profits can be as much as $60,000 per year, according to Physicians Practice


Physician clinics with a closet or back office full of equipment can turn it into cash. Offices looking to upgrade medical equipment or furniture can also trade in their existing capital equipment for credit.

A robust market exists for x-ray machines, ultrasound equipment, CT scanners, MRI technology and other equipment. Refurbished exam tables, office chairs and even surgical equipment are also in demand. 

According to market research company Research and Markets, the refurbished medical equipment industry: 

  • Is expected to reach $12.4 billion by 2022, up from $6.45 billion in 2016. 
  • Will increase at a compound annual growth rate (CAGR) of 11.5%. 

Real estate in a doctor’s office is expensive. Getting rid of unneeded items, and getting paid for it, frees up valuable space for revenue-generating services, like a lab, med spa or pharmacy. 

“In-house drug dispensing is a value-added service for patients, saving them from having to make a separate trip to a pharmacist. Receiving prescriptions at a doctor’s office also increases patient adherence.”


Adding new services allows physician offices to tap into new revenue streams and be one-stop shops for patient needs. Before embarking on the services, facilities need to be aware of the investment costs and the capabilities needed to provide the services, such as office space, equipment and trained staff. Physicians also need to know applicable laws and regulations, which can vary by state. For example, providing prescription drugs is highly regulated by state boards of pharmacy. 

To get started, physician offices should talk to their supply chain partner. Supply chain partners have consulting expertise, extensive portfolios and scalable solutions to help physicians successfully expand their offerings. This helps doctor offices identify pain points, tap into the best contracts for their needs and make the new venture profitable.
Julie Baker Headshot

About the Author

Julie Baker is a national accounts executive for Provista. She has broad experience and expertise in all aspects of the supply chain, operations, contracting, pharmacy and physician office structures. She focuses on improving operational efficiencies and revenues for healthcare facilities. 


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