Management of Pathology Practices

September 2008

Management Home Page


Collaborative Labs and the Underlying Cost to Pathologists

By Mick Raich, Vachette Pathology


In the last several years there has been an initiative driven by large hospitals to form collaboration type laboratories. †The concept here is that 100 hospitals in a given state will pool their labs and resources and then contract directly with the insurance plans. †These collaborative labs then act as a large state wide lab. †The goal seems to be to defend against losing volume to the large national labs.


Although this concept may have some merit there is a significant cost associated with this concept. †The costs are as follows.


First and foremost as these collaborative labs reach out and contract with insurance plans they take large discounts for services and pass this through to the participating pathology practices.  The pathology practices that are tied to this work are typically hospital based practices that are associated with the hospitals that sign as part of the collaborative lab.  In this case, these pathology practices see significant decreases in payment for their services. †Pathology groups that were making 200% of Medicare for these specimens may be lucky to get 80% of Medicare after the collaborative labs are done negotiating these contracts for them.


The real interesting thing is that the companies managing these collaborative labs are usually not insurance plans although they control numerous factors surrounding the payment of the claims such as filing limits, appeal limits and payment amounts.  Therefore, if there is a problem with a claim sent through this administrative arm, you cannot work through your state insurance commissioner.


The final straw in these types of collaborative plans is that they may charge an administrative fee on all collected revenue.  This is not a withhold that is paid back at the end of the year.  No, this is an actual fee they get to keep for managing the claim. 


Instead of billing the insurance plan directly you may be forced to bill to the collaborative plansí administrative company that will then take a percentage off your payment.  Who owns the companies that actually process these claims? 


Letís review:  Instead of having a simple direct contract with an insurance plan that pays you a negotiated fee, you have a contract with a collaborative lab that has its own administrative company that manages both your contracting and processing of claims, and you must pay this quasi-TPA a percentage of your own payment for service for this bureaucratic process.


These are just my thoughts and opinions, but what part of this actually makes sense to pathology practices?  It seems to me the only people this actually works for are the people who own the claim processing centers and the insurance plans.


If you have any questions or would like more information, please contact Mick Raich toll free at 866-407-0763 or e-mail


Mick Raich is the President and CEO of Vachette Pathology.† Vachette Pathology provides practice management and consulting services to over 50 pathology groups nationwide.† Contact: or call 866-407-0763.