5 Tips for Analyzing if Ancillaries Yield Profits
Physicians Practice – Oct 10, 2018
by Cheyenne Brinson, MBA, CPA
Many practices assume their ancillaries are profitable, yet often lack the systems needed to conduct a proper analysis. Here are five tips for analyzing if ancillaries are yielding promised profits.
1. Set up ancillaries as cost centers on the Profit and Loss (P&L) Statement.
The first step in analyzing the profitability of an ancillary is developing a mechanism to track revenue and expenses. Creating cost centers on the P&L is the most comprehensive approach. Regardless of the accounting system you use, creating cost centers should be a relatively straight forward process. For example, in Quickbooks, the use of a “class” is synonymous with a cost center. Set up cost centers for each ancillary (i.e. lab, DME, MRI, CT, EMG, allergy, audiology, satellite office, etc.). The goal is to create a P&L for each ancillary to analyze profit.