What Are Ancillary Services?

Whatever a patient is dealing with, their medical treatment plan doesn’t end when they leave a hospital. Post-care treatment—from physical therapy to at-home healthcare—is a crucial part of the complete patient experience. And patients look to their primary care doctor every step of the way. But if hospitals or medical offices don’t offer what the patient needs, what can they do?

This is where ancillary care comes in. By partnering with an ancillary service provider, hospitals can offer a wider range of healthcare services to their patients. This system has been so effective, ancillary care has become central to the American healthcare system for the diagnosis, treatment, and support of patient health.

As one of the fastest-growing sectors in the healthcare industry, ancillary service costs represent roughly 30% of all medical spending today. This number is only growing as healthcare costs continue to rise.

To understand why, let’s first break down what are ancillary services. 

What are Ancillary Services?

Ancillary services refer to a variety of offerings that both supplement and support the work of primary physicians. Generally, this can be broken down into three categories:

  • Diagnostic Services

  • Therapeutic Services

  • Custodial Services

These services can be performed within hospitals, but are sometimes outsourced to external facilities. For instance, a primary physician may run tests in their own lab, but most physicians refer patients to a department that specializes in a certain field to get faster and more accurate results. Financially speaking, ancillary care services constitute anything done for a patient that is not related to room-and-board costs or direct care given by a nurse or physician. 

While these categories are broad, they tend to encompass a spectrum of related services. 

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Diagnostic Services

Diagnostic services are a realm of ancillary care dedicated to providing information to physicians necessary for their diagnosis and treatment. More often than not, diagnostic ancillary services are performed in hospitals to supplement the work of primary physicians or medical offices. These services revolve around testing and imaging tools to procure necessary information, making them short-term (rather than long-term) service options. Diagnostic ancillary services include:

  • Laboratory tests (blood test, urinalysis)

  • Radiology (X-rays, CT scans, MRI scans, ultrasound)

  • Genetic testing

Therapeutic Services

While diagnostic services focus on providing immediate information on a patient, therapeutic services encompass longer-term treatment options to enhance overall health and well-being, encompassing both physical and mental health. These include:

  • Physical Therapy

  • Occupational Therapy

  • Language and Speech Therapy

  • Psychotherapy

As these fields are typically practiced by allied health professionals, physicians are often not present nor required for therapeutic services. They are often used as a secondary treatment after a hospital stay.

Custodial Services

The longest-term types of ancillary care, custodial services support patients while keeping them as independent as possible. Custodial services provide solutions when at-home care is not enough. These include:

  • Hospice care

  • Nursing facilities

  • Home health services

  • Rehabilitation facilities

Custodial services are also referred to as care-delivery services, as they include urgent care and EMTs, as well as financial and legal specialists.

Problems Facing Ancillary Care

As mentioned, ancillary healthcare services are one of the fastest-growing sectors in the medical industry. This growth breeds problems of its own. With so many options available, many ancillary providers are seeing a decrease in patient access. This isn’t merely an issue of numbers—hospital executives are rethinking patient recovery, with some opting to keep them at home as much as possible.

In this environment, independent ancillary care providers have the potential to revolutionize the treatment and recovery of patients but instead, they are being cut out of the picture. Why is this the case?

What Providers Look for In Ancillary Care (and What They Avoid)

Studies point to the fact that ancillary care providers offer lower costs to payors. One study shows how patients using these laboratory services saw a 23% reduction in the total cost of care. This begs the question: why aren’t hospitals embracing the list of ancillary services in healthcare?

There are four primary issues:

  • Standards of quality and care

  • Consumer choice

  • Shared billing information

  • Independence of ancillary care providers

Standards of Quality and Care

When a provider is looking to provide ancillary services and form a relationship with an ancillary service provider, quality and care are two of the most pressing factors. Hospitals and physicians have standards that must be upheld—partnering with ancillary care providers is no exception.

This is where issues of supply and demand play in. Ancillary service providers, like any other for-profit business, must maximize savings without compromising quality. This can get tricky. Unfortunately, smaller hospitals with fewer available resources depend on utilizing ancillary services to meet demand and provide assets they can’t readily offer their patients. 

Consumer Choice

Deductibles largely dictate the care choices patients make regarding their personal health. They need to have access to treatment at a certain price without compromising value—yet it’s often assumed all care will result in the same service.

Hospitals need to focus on providing the best quality and selection of services possible while retaining patient choice. When there are plenty of high-quality ancillary services to choose from, this isn’t a problem. When they feel forced into a partnership, this can leave hospitals and their patients in a tough bind.

Shared Billing Information

One of the biggest issues contributing to a lack of usage of ancillary services comes from the need for shared billing information. As anyone who works in healthcare payor contracts knows, systems of billing between providers and payors are fraught with complications. 

Effective utilization of these services depends on both the primary provider and the ancillary provider to access the same information. However, HIPAA restrictions complicate access to this, slowing down the process even further. One loose thread (i.e., one loose patient health record), and both providers face detrimental legal and financial trouble.

Independence of Ancillary Service Providers

Ancillary service providers maintain a relative degree of independence, which worked in the past but is now losing efficacy. For these services to remain useful to the healthcare industry as a whole, they should begin moving towards a collaborative partnership model. Why is this the case?

In spite of differences between how hospitals operate and independent ancillary services function, they maintain the same goal: maximizing the best patient outcomes. By using collaborative methods, ancillary providers can:

  • Provide access to better health services

  • Pay less for materials

  • Access better business solutions

Best of all, by combining service offerings, they bring more to the table when it comes time to negotiate with insurance companies.

Benefits of Effective Ancillary Service Utilization in Contract Negotiations

A major step in negotiation practices revolves around performing a SWOT analysis. This identifies, as per the acronym, Strengths, Weaknesses, Opportunities, and Threats. Effective integration of ancillary services provides benefits to each of these categories.

  • Strengths and Opportunities – Offering ancillary services provides lower costs to patients and greater access to treatment. Smaller hospitals have more tools at their disposal to help in the diagnosis, treatment, and long-term care when partnered with ancillary groups. When it comes to negotiation in ancillary contracting, this holistic care capability can be leveraged to argue for higher rates. 

  • Weaknesses and Threats – A lack of differentiated ancillary services or sub-specializations can be a major threat during contract negotiations. Ancillary services can provide a salve for this deficit.

Having a reputation for quality health services and satisfaction is critical for getting the best reimbursements from payors during the contract negotiation process. Utilizing as many tools as possible, including ancillary care, will help establish your position.

Negotiating Strengths in Contract Negotiations with PayrHealth

When it comes to forming contracts with payors, providers struggle with several issues. Most providers have one primary objective: keeping the doors open and providing patients with the best medical services available. For many of these organizations, contract negotiations are a secondary problem with first-order consequences.

According to a PayrHealth survey, more than 55% of provider organizations say they lack adequate resources to handle payor contracting. Many healthcare organizations struggle due to these reasons:

  • Lack of Resources – Many providers are already stretched to the limit with how many resources they have at their disposal at any given time. This can lead to inefficiencies, like specialists assigned to contract negotiations when their talents lie in other fields.

  • Failing to Negotiate Best Contracts – Without the resources and manpower available to analyze their own strengths and weaknesses, organizations lack the tools to come to the negotiation table prepared.

  • Lack of Internal Support – Managing a team is costly, requiring training, management, hiring, and upkeep costs. Utilizing outsourced services not only makes up for these deficiencies but provides a second set of eyes to catch things that wouldn’t normally be spotted from inside a healthcare organization.

How Payrhealth Nets the Best Contracts

Utilizing ancillary services is an extremely effective method of ensuring your organization is offering the best service on the market. But just as healthcare is rarely a straightforward process, contract negotiations are often more complicated than they seem on the surface. Ancillary care alone will not guarantee the best contracts.

Enter PayrHealth.

With over 25 years of experience, PayrHealth is an industry leader in negotiating payor contracting. By providing an unbiased perspective, our negotiation experts can help you earn lucrative, rewarding contracts and drive growth. Want to know how? Contact us today

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