Management of Pathology Practices

May 2005


The Basics of Auditing Your Pathology Billing (III)

by Mick Raich, Vachette Pathology


This article will cover auditing your pathology revenue generation strategy, which includes Part A contracts, managed care contracting and marketing.


The first item reviewed when auditing revenue generation from a typical pathology practice is the group’s Part A plan(s).  Most hospital based practices have a Part A contract.  The wording in this contract can greatly affect the practice’s revenue.  For example, if the contract has punitive managed care terminology, this can suppress revenue generation opportunities.  Usually the wording is as such: “group must maintain contracts with all the managed care plans in which the hospital or health system participates.”  This one clause can be very destructive. 


Remember, if the managed care entities know you are forced to sign with them their rates will reflect your loss of leverage.  There are effective ways to negotiate around this clause. 


The next area we review when auditing a practice’s revenue generation is a complete review of all managed care plans.  There are numerous pathology practices that cannot even find their managed care contracts and furthermore have never attempted to re-negotiate these contracts.  This often leads to lost revenue dollars.  We have seen those losses as high as $100,000 or more on some occasions.  When performing a managed care audit it is important to review the actual contracts, get actual fee schedules from each plan, build a matrix of these plans and payments and then audit against actual patient explanation of benefit forms (EOBs).  Often you will find that there have been higher paying plans assigned to lower paying plans via a third party administrator (TPA) which leads to fewer dollars for the practice.  We have numerous testimonials from practices that have gained significant income by reviewing, re-negotiating and re-aligning their managed care contracts.  Sometimes being non-participating (non-par) with a managed care company may be the best choice for a practice. 


Finally when you audit a practice’s revenue generation you must consider the group’s marketing efforts.  Many pathology practices do not have a focused marketing arm and only have the efforts of their hospital or health system to rely upon.  Unfortunately, the hospital’s marketing plan is usually not in the best interest of the pathology group. 


There are numerous practices that have strong, aggressive marketing plans and personnel going after the outreach market.  Furthermore, the number of companies prospecting for outreach anatomic pathology tissues seems to be ever expanding.  This outreach market is only going to grow as the population ages.


It is important not to over look the marketing efforts of the practice.  Each practice should have a monthly referring physician report that details not only the referring physician volume but the variance for the month, the charge dollars for the month and the collected dollars tied back to the month billed by specific insurance plan.  This report should also note the collection percentage for each referring practice and have a charge summary listed by CPT for a 12 month period.  With this type of data you can start understanding where your outreach revenue is generated and who is responsible.


In summary, these three areas are the most important when a practice looks at their revenue and how it is generated.  Failure to keep track of and maintain these points can lead to a weakening of the practice.  Usually this is seen over a period of time as the practice starts to lose monthly revenue.  Finally, the practice reaches a point where their volume of work is increasing yet their actual revenue is decreasing.  At this point they usually contact us.


Mick Raich is the owner of Vachette Pathology, a pathology specific practice management firm.  The firm provides practice management, billing auditing, managed care negotiations and marketing services to pathology practices across the nation.  You can contact him with questions at or toll free at 866-407-0763, website