Management of Pathology Practices
To Bill or Not to Bill, That is The Question
By Bernie Ness, B J
It was inevitable. With malpractice costs soaring and reimbursements shrinking, clinicians were looking for a new revenue source and they have found it, anatomic pathology. Direct billing at wholesale rates to clinicians is now in vogue and is being heavily promoted by many laboratories. The marketing pitch is that the clinical group can now take the margin that the pathology laboratory used to enjoy. Dermatologists have been doing this for decades as many of them read their own cases (“cut once and bill twice”).
I have read with
interest the outrage by pathologists about this “new” practice. The funny thing
is that I am senior enough to remember when this was standard in the industry
in most markets. My first sales call, in 1974 for a pathology laboratory in
I have heard from practice managers that as many as five (5) different laboratories have called on them to pitch the “wholesale to retail” sales approach. This did not even include Quest and LabCorp either. These were all anatomic pathology specialty laboratories with national sales representation. These practice managers concluded that there must be a lot of money to be made if five laboratories were out seeking business this direct billing way.
This direct billing scenario (“wholesale to retail” ) is under intense scrutiny in most states and the Office of Inspector General (OIG) is also looking closely at the practice. Recent federal indictments of former UroCor top executives for Medicare fraud and abuse in this area will prove the death knell of this billing practice. UroCor would offer certain high volume clinical tests to urologists for below their cost in return for the prostate biopsies. Medicare severely frowns on anyone getting lower priced laboratory work than they do, especially a single physician.
Besides the legal
brouhaha, there are practical issues as well. Many managed care organizations
will not reimburse clinicians at the same rates as they do pathologists. A
recent example I saw involved a urology group in the
There are several different scenarios being presented to clinicians. The first one is to direct bill (“wholesale to retail” ) for the global fee at a discounted rate. Since Medicare reimburses approximately $90 per biopsy, the laboratories involved in this practice really should not be offering direct billing fees below $72 per biopsy (Medicare fee less 20% for reduced billing and collection expenses). I personally know of direct billing fees much lower than $72 per biopsy. Competition will continue to drive down these offered prices. Any clinician and pathologist running this scheme are at risk of a Medicare audit. This scheme involves the highest financial and legal risks. The clinical practice cannot bill Medicare but can still run afoul of the guidelines on pricing.
The second scheme
promoted is to charge only for the technical component to the clinician. The
clinician then has to find a pathologist to read the cases for their group. I
first ran across this scenario about 5 years ago in
The third scheme is
to hire your own pathologist and set up your own pathology laboratory in the GI
or urology clinic. I was personally involved with a very large
Pathologists are at risk of losing their large volume GI and urology groups to these marketing arrangements. This economic phenomenon will not disappear. There are forces at work to try and kill it (i.e. pathology lobbies) and forces at work to keep it alive (GI and urology lobbies). There is just too much money on the table for this issue to ride off quietly into the sunset as most pathologists hope it will. Pathologists will need to develop strategies to survive to this market adaptation no matter how short lived or long lived it may be. If you maintain the relationship with these groups throughout this phenomenon and the laws should change back to pathologist only billing you will maintain the clients. Once you lose them, they are gone.
Bernie Ness is the President and CEO of B. J. Ness Consulting Group, whose goal is to provide the finest in innovative and cost effective solutions to management, sales, and marketing problems in the medical laboratory industry. You can contact him at firstname.lastname@example.org, toll free at 800-280-3785, website www.bjnessconsulting.com.