Management of Pathology Practices

March 2006


Managed Care Payment Shopping

By Mick Raich


As we audit pathology practices across the nation we are finding a disturbing trend.  Many managed care plans are tied into large networks that allow the managed care plans to “shop” their payment around to the lowest bidder.


You may spend a considerable amount of time and money re-negotiating a managed care contract only to find your plan has shopped your claim to a re-pricer. 


What are these re-pricers?  Often they are disguised as a network or a Third Party Administrator (TPA.) Their contracts are vague and often include a laundry list of plans they work with. These plans are listed as “possible business relationships, actual plan participation may vary.” The goal is for the network to get as many physician groups contracted as possible at a “usual and customary fee,” and then shop this low rate out to other providers. The network then takes a margin on the difference between what you are paid and what they have negotiated. 


You may think you have a good contract negotiated with a local insurance plan only to audit this plan several months later and find you are not getting the rates you negotiated.  Many times you will find that the volume of this plan has greatly decreased.   Conversely, you notice that your overall payments have slipped 3% over the same two months. In researching these cases we usually find that the claim has been sent to a TPA and re-priced.  


For example, you sign an insurance contract to pay $70.00 on an 88305-26, and the network / TPA has a rate of $50.00.  Your insurance plan then ships the case to the TPA who pays you $50.00 and keeps $10.00 on the transaction.  The original plan saves $10.00 also.  Everyone wins except the pathology practice.  In this case the plan simply found a lower bidder and took the lower rate.  You do not notice this until it is too late. 


How do you stop this payment shopping?  First and foremost you need to make sure you do not sign any network agreements or contracts without a complete understanding of how this will affect your income.  Many of these networks are actually TPA’s and do not actually pay any claims, but only re-price them. 


Second, you need to terminate these contracts. If you are not participating then your claim cannot be re-priced.


Third, you need to audit your EOBs and the contacts you have to ensure that you are getting paid at the rate you have negotiated. 


Often the only way out of this type of situation is to terminate all your network / TPA relationships.  In one case the group had to terminate four separate network agreements to reclaim their income. 


In summary, is it worth the time to do this work?  Absolutely.  Many pathology groups are losing money due to these contracts.   


It is critical to look at all your contracts and renegotiate the ones that are underpaying.  You should have strong contracts with good payment rates, strong filing limits, and a yearly CPI increase.


Mick Raich is the President of Vachette Pathology, a national pathology practice management firm.  He can be reached at 866-407-0763 or via e-mail at