Management of Pathology Practices

April 2007

Management Home Page


Pricing for Pathology Billing (part 2 of 2)

By Mick Raich


What are the typical pricing options for pathology billing?


There are several ways pathology billing can be priced.  The most common is pricing based on the percentage of collections.  Although there was some OIG rumbling on this, nothing has come to pass on this, and percentage of collections is the most common way to price pathology billing.  Typically, pathology billing is priced between 5% and 7% of collections, minus refunds.  If the rate is anything less, you should be suspect of the quality, reporting and level of service provided.  If the rate is higher, you may be paying too much.  Of course practice size, information availability and type of billing are all issues for consideration. 


Some billing entities are pricing their billing on a price per claim.  This may be somewhat antiquated.  However, in the right situation, it can work to your favor. 


Even more unusual are situations in which the group pays a tiered percentage for billing.  In this case, the group pays more if the billing agency collects more.  Only rarely should this option be used, as the billing effort is usually the same on the first dollar collected as it is on the last dollar collected.


What is a fair rate for billing your pathology services?  


There are several factors to determine a fair rate.  First, what is being billed?   Are you a typical hospital based practice that bills anatomic pathology only, or is clinical pathology being billed?  Is this an independent lab?  Are you billing professionally or globally?   Are there numerous sites?  All of these factors determine the pricing.  In addition, a paper environment is more labor intensive, and therefore more costly.


Next, some groups request that a biller have a local presence in their area.  I have reviewed these situations numerous times and have not found that a local presence is needed for effective billing services.  Many times, a local office is just an extra cost. 


To truly judge your billing cost and efforts, you have to look at the quality and depth of service provided.  Like any smart business person, you are looking for the best return on your investment.  If you are paying a 9% rate and getting mediocre service and quality, then it may be time to change.


You have to make the best deal for you and more importantly you have to decide what is of value to you.  There are some billers who collect revenue very well but have rather weak reporting packages.  Others have a great front end process yet deliver a rather poor collection rate.   You need a complete, effective package to provide desired returns and operational intelligence supporting sound business decision.


In summary, you must be continuously aware of trends in pathology reimbursement and how your billing service will meet your needs.  Your practice payments along with the gathered business intelligence are key elements for business continuation.  I have listed some rather generic benchmarks of pathology billing pricing.  See if your group fits within this model or if they are outside the curve.


Example One: a six man pathology practice billing AP only with electronic demographics.  The rate should be around 7% plus postage.


Example Two: a fifteen man practice billing AP and CP with electronic charges and demographics.  This rate should be around 6% plus postage.


Example Three: a two man group billing AP and CP with electronic charges and demographics.  This should be priced at 7.5% plus postage.


Example Four: a five man independent lab billing both AP and CP with electronic interfaces.  This rate should be 6.5% plus postage.


Example Five: a twenty-two man group doing their own billing with AP and CP and electronic interfaces.  This should be priced around 5%.


Only in very rare situations should a group be paying more then 8% for billing services. 


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