Client Billing Experience

[Path2009]

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I work in a small group in a rural setting with most of our specimens originating from hospital affiliated providers. We have been in talks with a GI group from a metropolitan area which has a client billing arrangement with a well-known laboratory. They spoke with us because they want to set up their own histology lab - they think they are leaving a bunch of cash on the table with their current deal with said lab. Their current deal was keeping 70-75% of the global bill for private insurers. The lab was getting only 25% for the entire TC/PC. Is this in line with what you all see out there? I was surprised.

 

[AZpath]

Your not explaining this very well. How do you expect to make money?
The original lab was getting only 25% of take ??
Or was the GI group only getting 25% for giving a seat to a pathologist?

 

[itsthepleats]

I work in a small group in a rural setting with most of our specimens originating from hospital affiliated providers. We have been in talks with a GI group from a metropolitan area which has a client billing arrangement with a well-known laboratory. They spoke with us because they want to set up their own histology lab - they think they are leaving a bunch of cash on the table with their current deal with said lab. Their current deal was keeping 70-75% of the global bill for private insurers. The lab was getting only 25% for the entire TC/PC. Is this in line with what you all see out there? I was surprised.

This is a good explanation of what client billing arrangements are like in pathology. Clinical group (GI/uro/derm most commonly) bills insurance directly for the pathology services (in this case global path services) even though they do *none* of the pathology services in-house; not the technical work, not the professional work. There is no in-house pathologist. The clinical group contracts with an un-affiliated outside pathology group who receives the tissue, does *all* the pathology work including the cost of that work (pays their employees to gross/process the specimens, staff to transcribe reports, IT to shoot reports back to the clinician, etc) but does not get to bill insurance directly for the pathology work because the clinician already did. Instead, the clinician group gets paid for all the pathology work and pays the pathology group a set price, in the above example, 25% of global charges. This means the clinician group keeps 75% of the reimbursement for the pathology work for doing NOTHING. Don't forget they also get to bill insurance for their own work--billing for the patient encounter and biopsy procedure done during the office visit.

Yes, this is as grotestque as it sounds. Yes, this means clinicians are making hundreds of thousands or millions of dollars per year for pathology work they have no part in doing. Yes, I know of pathology groups who have to accept these extortionate arrangements in order to get any outreach business at all. Yes, I know of groups who have gotten paid 25% or even less than that to do TC/PC work. In states where client billing is legal, this is reality. Pathology groups have to undercut one another (i.e. give more and more of the pathology billing to clinicians) in order to get specimens.

For some clinicians, getting paid free money (and 75% or more of the global pathology charges at that!!!) isn't enough. They want all the pathology money. So they bring a histology lab in-house so they can keep all the TC and negotiate with a pathologist either in-house or not a fraction of the PC billing to read the cases so they can keep even more money. It's appalling, but legal. If you are a pathologist performing TC/PC work and you get to bill globally for those services, consider yourself lucky. You have a dream job.

 

[coroner]

For some clinicians, getting paid free money (and 75% or more of the global pathology charges at that!!!) isn't enough. They want all the pathology money. So they bring a histology lab in-house so they can keep all the TC and negotiate with a pathologist either in-house or not a fraction of the PC billing to read the cases so they can keep even more money.

I thought in-house labs mainly exist to circumvent client billing in states where it is illegal? If the clinicians are already making 75%+ profit on billing globally, then the pathologist is still making just a fraction of the TC/PC whether it's done in their lab or a clinician's in-house lab.

 

[itsthepleats]

I thought in-house labs mainly exist to circumvent client billing in states where it is illegal? If the clinicians are already making 75%+ profit on billing globally, then the pathologist is still making just a fraction of the TC/PC whether it's done in their lab or a clinician's in-house lab.

In general, I think that's true. But even in states where client billing is legal, some clinical groups bring pathology in-house to skim even more money from pathologists. I interviewed for a job in one such practice just to see what the situation was and what they would be willing to offer--high volume specialty group that traditionally had client billed for pathology services and made a killing without having to do any of the work. It wasn't enough for them. They brought TC in-house and wanted a pathologist to come sign out cases for a contracted rate.

The number they quoted me per 88305 read was approximately 10% of global charges. 10%. If you did any special stains or immunos, those charges went entirely to the practice. And keep in mind this was for a 1099/independent contractor rate, so no benefits at all were included in this number. No health insurance/malpractice insurance/retirement plan contribution/CME. Nothing. I politely walked away, but they did hire someone shortly after that. Maybe that person negotiated a better rate. Maybe they were desperate and needed to be in the area. Maybe they were fresh out of training and didn't even understand what global charges vs TC vs PC for 88305 generate in that geographic area and the money sounded great compared to what they got paid as a resident.

 

[turtle1966]

.....Their current deal was keeping 70-75% of the global bill for private insurers. The lab was getting only 25% for the entire TC/PC. ....

There are 3 types of insurances :

(a) Government sponsored, as Medicare - no client billing is allowed
(b) Private insurances that do not allow client billing
(c) Private insurances that allow client billing.​

Advantages of client billing for pathology groups:

(a) less of brown-nosing, because you are the "cow" being milked.
(b) no need for fancy reporting or fast turn around time.
(c) no marketing cost
(d) no billing cost
(e) no deadbeat loss
(f) often, private insurances will reimburse better clinicians than pathologists billing as "commercial" labs.
(g) blocks new competition into the area.
(i) often the cost is the lab's "marginal cost" and not the "full accounting cost."
(h) helps clinicians in "financial distress" (hah, hah!).​

So, a quick calculation, assuming the worst, i.e., (b) = zero.
Medicare = 40% paid at 100%, 70.00 global;
Private =60% paid at 25%, average of 70.00 global;

So, 40%*100% + 60%*25% = 55% of the FULL potential; 55%*$70.00 = $38.50 per biopsy, not counting special stains.

Presuming, the employee pathologists in (a) commercial and (b) tiered private group labs are paid 10-15.00 per biopsy, the net gross income would be between $23.50 and $28.50 per biopsy.

If a Lab can do this at a marginal cost, this can be profitable for the Owners.

If you are a large clinical group, you may want to bring TC and PC in house, in order to collect that potential 55% left on the table.

The final figures will obviously depend on individual circumstances.

Pathology, a unique field that accepts, trains and board certifies talented M.D.s and calls them unqualified, on their back, because they cannot find non-existent jobs.

May be should there be a pre-Residency candidate qualifying Exam, so that the training programs can be held responsible for their work.

 

[univlad]

We had a clinical group in town who asked us if we wanted read their biopsies about 6 years ago. They were having the biopsies processed off site and wanted us to read them in their office. We said we'd read them only if we could bill our own professional component--was not really worth it for us otherwise.

 

[Pathbusiness]

In business its all about leverage. The party who holds the client has better leverage generally. It gets to an extent of exploitation when there is something wrong with the business model. In Clinician vs Lab business model its the truth. Both parties have only one objective, "overbilling" by virtue of more biopsies, more stains, more molecular testing etc. In this scenario the party who has the client is the King and someone will be ready to provide service at a bare minimum margin. That's what is going on in outpatient consolidated lab market. We have to clean our side of the street first. Only then you can look into the eyes of the referring physician and dictate your terms.

 

[wholeheartedly]

is there a list somewhere of which states client billing is illegal in?

 

[Path2009]

Your not explaining this very well. How do you expect to make money?
The original lab was getting only 25% of take ??
Or was the GI group only getting 25% for giving a seat to a pathologist?

GI group got 75%. Lab got 25%.

 

[Path2009]

There are 3 types of insurances :

(a) Government sponsored, as Medicare - no client billing is allowed
(b) Private insurances that do not allow client billing
(c) Private insurances that allow client billing.​

Advantages of client billing for pathology groups:

(a) less of brown-nosing, because you are the "cow" being milked.
(b) no need for fancy reporting or fast turn around time.
(c) no marketing cost
(d) no billing cost
(e) no deadbeat loss
(f) often, private insurances will reimburse better clinicians than pathologists billing as "commercial" labs.
(g) blocks new competition into the area.
(i) often the cost is the lab's "marginal cost" and not the "full accounting cost."
(h) helps clinicians in "financial distress" (hah, hah!).​

So, a quick calculation, assuming the worst, i.e., (b) = zero.
Medicare = 40% paid at 100%, 70.00 global;
Private =60% paid at 25%, average of 70.00 global;

So, 40%*100% + 60%*25% = 55% of the FULL potential; 55%*$70.00 = $38.50 per biopsy, not counting special stains.

Presuming, the employee pathologists in (a) commercial and (b) tiered private group labs are paid 10-15.00 per biopsy, the net gross income would be between $23.50 and $28.50 per biopsy.

If a Lab can do this at a marginal cost, this can be profitable for the Owners.

If you are a large clinical group, you may want to bring TC and PC in house, in order to collect that potential 55% left on the table.

The final figures will obviously depend on individual circumstances.

Pathology, a unique field that accepts, trains and board certifies talented M.D.s and calls them unqualified, on their back, because they cannot find non-existent jobs.

May be should there be a pre-Residency candidate qualifying Exam, so that the training programs can be held responsible for their work.

***************************************************

This is exactly how we/they are looking at it. One of the biggest wildcards is how many private insurances do not allow client billing, and as of right now, I don't know that answer. To me, it made a lot more sense to see how much value Miraca had lost just 5 years between acquisitions. There's no room to make money on this.

 

[AZpath]

***************************************************

This is exactly how we/they are looking at it. One of the biggest wildcards is how many private insurances do not allow client billing, and as of right now, I don't know that answer. To me, it made a lot more sense to see how much value Miraca had lost just 5 years between acquisitions. There's no room to make money on this.

I suspect if they want to build there own lab to capture CMS business.
If the GI practice is truly getting 75% of the net collections for most commercial insurance under a client bill then they are doing really well at this.

Remember they have no skin in the game. They are getting free milk and now they want to buy the cow. There might be more money in it for them if there is a high % of CMS business. The con is now they invest and don't manage well.

The question to them is how much are they going to pay you.
Master slave relationships will not be stable nor will their management of the lab.

 

[AZpath]

is there a list somewhere of which states client billing is illegal in?

You find a list of states with laws against it. CAP may have this on there web site if you search.

 

[AZpath]

In business its all about leverage. The party who holds the client has better leverage generally. It gets to an extent of exploitation when there is something wrong with the business model. In Clinician vs Lab business model its the truth. Both parties have only one objective, "overbilling" by virtue of more biopsies, more stains, more molecular testing etc. In this scenario the party who has the client is the King and someone will be ready to provide service at a bare minimum margin. That's what is going on in outpatient consolidated lab market. We have to clean our side of the street first. Only then you can look into the eyes of the referring physician and dictate your terms.

I agree this a problem caused by the pathologists themselves. This why I think there is glut of pathologists more than anything else.
If the market was a even playing field the clinic would open a lab and only get the TC profit.
Pathologist would get a equitable portion of the PC. The clinic would be able take 50% or more of the PC.

This also works to any owner's advantage in private labs too, cheap slave labor.

 

[WEBB PINKERTON]

The in-office lab people are offering "time shares" for small practices to exploit us.

All for One

Thank the chronic pathologist oversupply problem for the mess we are dealing with.

Guess we have to hope all the practices are bought out by the hospital chains.

 

[SEpathguy]

I've heard about client billing but never really got it until reading through this thread. Thanks for educating (and depressing) me. Seems like radiology is completely exposed to having the same thing happen to them (other than the fact that they probably aren't oversupplied like we are). For that matter, what's to keep the family practice doctors who refer the patients to the GI docs from "client billing" for the endoscopy procedure? (other than that gastroenterologists are better business people than we are and not oversupplied). This is theft - plain and simple! Ugh!

 

[Pathbusiness]

Radiology does not need to invent billing schemes to raise the revenue because they are not over supplying the market with trainees.

 

[turtle1966]

***************************************************

.... One of the biggest wildcards is how many private insurances do not allow client billing, and as of right now, I don't know that answer. .....

I know of Blues, United Health Care, and certain HMOs not allowing client billing in certain states and in certain product lines.

Only the Majors will have an impact. Therefore, get the payers' mix and contact the top 4 payers, as a starter.

 

[gbwillner]

Any thoughts about client billing the other way, where you have a contract for professional services, but don't have all the technical capabilities (like molecular or some stains)? Can you bill Medicare for these services?

 

[turtle1966]

Any thoughts about client billing the other way, where you have a contract for professional services, but don't have all the technical capabilities (like molecular or some stains)? Can you bill Medicare for these services?

If you do the PC, you can bill Medicare for the PC only, and the Specialty Lab (performing the TC) will bill for the TC.

In my experience, the Specialty Labs (a) will client bill you, if you can bill, (b) otherwise, they will bill insurance companies directly themselves.

 

[Doormat]

I work in a small group in a rural setting with most of our specimens originating from hospital affiliated providers. We have been in talks with a GI group from a metropolitan area which has a client billing arrangement with a well-known laboratory. They spoke with us because they want to set up their own histology lab - they think they are leaving a bunch of cash on the table with their current deal with said lab. Their current deal was keeping 70-75% of the global bill for private insurers. The lab was getting only 25% for the entire TC/PC. Is this in line with what you all see out there? I was surprised.

Why are you in talks with the GI group? Their current arrangement, where a pathology lab offers something of value (client billing of AP private insurance patients) in exchange for medicare referrals already violates the existing medicare false claims act (FCA). The 2015 Strata Dx decision confirmed this. The Pathology Blawg author left us all with an important legal story that was the September 2015 Strata Dx client billing settlement. He left us all a gem before he had to shut down his blog. Simmer law group PLLC was the relator for the Strata Dx case.

My conversation with the money greedy GI group would go as follows:

Do you think this is a negotiation? You are in violation of the FCA with your current AP billing arrangement. I will report your arrangement to the OIG after contacting a DC law firm specializing in qui tam lawsuits (simmer law group). Do you have anything to say?

 

[Pathbusiness]

I wouldn't touch anything except a global billing contract without anything but good service and accurate diagnostics in return. Everything else is under the radar and will not survive without paying hefty fines. Too high a risk. There was a time to do these things.

 

[Path2009]

Why are you in talks with the GI group? Their current arrangement, where a pathology lab offers something of value (client billing of AP private insurance patients) in exchange for medicare referrals already violates the existing medicare false claims act (FCA). The 2015 Strata Dx decision confirmed this. The Pathology Blawg author left us all with an important legal story that was the September 2015 Strata Dx client billing settlement. He left us all a gem before he had to shut down his blog. Simmer law group PLLC was the relator for the Strata Dx case.

My conversation with the money greedy GI group would go as follows:

Do you think this is a negotiation? You are in violation of the FCA with your current AP billing arrangement. I will report your arrangement to the OIG after contacting a DC law firm specializing in qui tam lawsuits (simmer law group). Do you have anything to say?

We began our discussion to see if they would send us their volume. However, at this point I doubt our talks will come to anything. I was relating this because I was shocked at how much they were taking.

I remember that story from the Blawg. These arrangements are so commonplace. It would be difficult to prove that quid pro quo was actually occurring. If you want to have the above conversation, you don't have to look far to find someone to have it with. Maybe qui tam lawsuits involving pathology client billing arrangements are the hustle of the future.

 

[gbwillner]

If you do the PC, you can bill Medicare for the PC only, and the Specialty Lab (performing the TC) will bill for the TC.

In my experience, the Specialty Labs (a) will client bill you, if you can bill, (b) otherwise, they will bill insurance companies directly themselves.

What about molecular tests where there is no split?

 

[Pathbusiness]

Two areas where Qui Tams and huge settlements will happen in coming times.
(1) Client billing, TC/PC split in GI, GU, and Derm.
(2) Upfront staining in GI.
These two are causing tremendous wastage of tax payers money and resulting in millions of patients being labelled with wrong diagnoses and unnecessary followups.

 

[turtle1966]

What about molecular tests where there is no split?

If you are rendering no service, the Specialty Lab will have to bill Medicare for the service. Unless, for billing reasons, you want to pay the Specialty Lab, and then bill Medicare for the same amount.

 

[AZpath]

Unfortunately, I don't share some folks optimism that these IOP practices are going away soon.
Client billing might go away but not IOP.
Unfortunately, IOPs are legal and so TC -PC splits etc.

I don't see a change in law despite a lot of effort by CAP etc. There are too many other vested interests in other specialties and corporate labs currently.

One story:

Illinois made client billing illegal. A few pathologists that I know of had a lot of client billing at there lab in Illinois.
You would think they would benefit by picking up global referrals?

Nope.

The clinics in-sourced most of their business within weeks and they lost this business.

 

[AZpath]

Two areas where Qui Tams and huge settlements will happen in coming times.
(1) Client billing, TC/PC split in GI, GU, and Derm.
(2) Upfront staining in GI.
These two are causing tremendous wastage of tax payers money and resulting in millions of patients being labelled with wrong diagnoses and unnecessary followups.

From your lips to God's ears my friend.
#1 is mostly done legally so Qui Tams / whistle blower suits are unlikely IMO. I agree this should be illegal.

For the price of microscope and desk space, any lab can send out a clinic a so called independent contractor pathologist to split the PC.

The lab is happy to get the TC. Legal so far as I can tell. We would need a ruling against this by CMS etc.

These are turn key idea for clinicians. Who needs client billing when this is legal too.

There are other thing which are illegal or barely legal until OIG say no.

 

[Pathbusiness]

Once the corporations are put under a CIA post settlement and every activity is reported to CMS by the appointed compliance officer, these borderline issues gain attention. Most of the CMS rulings come this route.

 

[Doormat]

Unfortunately, I don't share some folks optimism that these IOP practices are going away soon.
Client billing might go away but not IOP.
Unfortunately, IOPs are legal and so TC -PC splits etc.

I don't see a change in law despite a lot of effort by CAP etc. There are too many other vested interests in other specialties and corporate labs currently.

One story:

Illinois made client billing illegal. A few pathologists that I know of had a lot of client billing at there lab in Illinois.
You would think they would benefit by picking up global referrals?

Nope.

The clinics in-sourced most of their business within weeks and they lost this business.

If you are a private practice pathologist and currently have business that is outpatient independent GI or GU you've already lost it. You just don't know it yet.

Agree that CAP has given up on this. Instead they are dithering around with AMA-approved LCD reform. My bet is that the payers get smart to these arrangements. The big insurers can make IOP out-of-network. I know of 2 health systems where any prof fees billed by a physician who is not a member of the health system medical group is out-of-network.

Plus, the CMO of my health system is going all in on value-based care. He says he's the guy at the world series of poker table who puts on his sunglasses, goes all in, and waits for the cards to fall. For 2019, I bet medicare comes up with a G-code bundle for the prostate cancer biopsy procedure that includes biopsy interpretation. Colon cancer screening with also have a bundled G-code that includes the actual procedure and all biopsies.

 

[AZpath]

G codes just hurt the good with the bad. They don't offer a value based option just cut fees.
I agree insurance companies can have a great impact. They will move faster if CMS changes the rules. If we are lucky OIG may rule on few of these step ups.
CAP does care but they tell us that the path is via congress. Good luck.

 

[AZpath]

Why are you in talks with the GI group? Their current arrangement, where a pathology lab offers something of value (client billing of AP private insurance patients) in exchange for medicare referrals already violates the existing medicare false claims act (FCA). The 2015 Strata Dx decision confirmed this. The Pathology Blawg author left us all with an important legal story that was the September 2015 Strata Dx client billing settlement. He left us all a gem before he had to shut down his blog. Simmer law group PLLC was the relator for the Strata Dx case.

Interesting case, however the GI group had no lab. This was client billing that CMS considered a kickback. Did the state have a law too?
If we see more of this it will end client billing.

 

[WEBB PINKERTON]

Almost all labs offer low client pricing for private insurance patients with the expectation that they will refer the Medicare patients as well. Is the office supposed to use a different lab for the medicare/Medicaid? Yea right.

 

[AZpath]

"Strata Dx decision"

That's the precedent set by this case. No client billing in exchange for their MC work.
Groups that do this need to look out. All it takes is one employee to rat you out as a Qui Tam.

This could be a ex-partner that quits. Larger labs could loose 5-10 million. The Qui Tam gets a nice cut.

 

[Pathbusiness]

"Strata Dx decision"

That's the precedent set by this case. No client billing in exchange for their MC work.
Groups that do this need to look out. All it takes is one employee to rat you out as a Qui Tam.

This could be a ex-partner that quits. Larger labs could loose 5-10 million. The Qui Tam gets a nice cut.

Azpath this settlement could lead to much bigger catches as almost every big private lab is doing it.
Hickory Pathology Lab Agrees To Pay The United States $601,000 To Settle False Claims Act Allegation

 

[WEBB PINKERTON]

Every lab engages in client billing with the goal of getting medicare. Like I said, why would the physician office want to mess with sending specimens to different labs? That has been the argument against BeaconLBS in Florida, that it would just lead to a Labcorp monopoly.

 

[AZpath]

Your talking about two separate issues. The Beacon program actually made a lot of extra work for clinics. They are forced to do this.
I agree LabCorp get a lot pull through a lot of CMS work by excluding other labs from the market. Nobody likes narrow networks like BeaconLBS. It just different situation that is negative to pathologists.

The client billing suit suggests the clinic gets a kick back for playing ball with lab on their CMS referral.

 

[LADoc00]

What idiot would take 25% of even the BEST payor mix to literally do all the work including managing a LIS, waste disposal, credentialing, licensing and basic overhead?

The reimbursement at 100% is bad enough. Unless you are talking some dingy basement dive lab with a old coot like 20 years past his prime pushing glass like an aged monkey all day that deal doesnt make any sense.

I hope people realize here there are deals so bad they actually cause you to LOSE money right?

 

[AZpath]

What idiot would take 25% of even the BEST payor mix to literally do all the work including managing a LIS, waste disposal, credentialing, licensing and basic overhead?

The reimbursement at 100% is bad enough. Unless you are talking some dingy basement dive lab with a old coot like 20 years past his prime pushing glass like an aged monkey all day that deal doesnt make any sense.

I hope people realize here there are deals so bad they actually cause you to LOSE money right?

I agree with you LA.

I suspect there is a high % of Medicare and Medicaid in the Mix. The commercial work is a give away in exchange.

Otherwise why would the GI group want to a better deal ?
75% of commercial sounds like a great deal for the clinic when they are doing nothing.

 

[Path2009]

What idiot would take 25% of even the BEST payor mix to literally do all the work including managing a LIS, waste disposal, credentialing, licensing and basic overhead?

The reimbursement at 100% is bad enough. Unless you are talking some dingy basement dive lab with a old coot like 20 years past his prime pushing glass like an aged monkey all day that deal doesnt make any sense.

I hope people realize here there are deals so bad they actually cause you to LOSE money right?

Are you saying this makes sense for old coots 20 years past their prime?

This lab is a major player in outpatient pathology who has been very aggressive gaining market share. The mix is half federal, half commercial. But not all commercial will do client billing. AZpath is right - they were basically giving away commercial for federal. So now the GI group thinks it can make money off of the commercial not participating in client billing and the federal. 75% of commercial wasn't enough.

I was hoping some folks would disclose what is standard in the client billing arrangements that they participate in. We don't currently participate in any. I guess there's too much shame.

 

[LADoc00]

Yah it make sense for the old coot because his other option is being the greeter at Walmart....

That deal is NOT the standard. At least not any deal I have ever made. I have made literally on the order of 3m just on my client billing side over 8 or so years. That was my take home. So Im 150% sure I know what Im talking about. Minimum is 50% or double the deal you have been offered. Minimum, minimum. Like I am starting negotiation at 80 me, 20 you. If you dont have enough leverage to get a good deal right now: either get more leverage or walk away.

All you do taking **** deals like that is make the rest of us have to negotiate harder the next time. 25%?! I would literally slap you if you here in my office right now. Slap your whole group.

 

[Pathbusiness]

From a billion dollars in investment, over $300 mil in annual revenue, Miraca became as 170 mil firesale casualty for a reason. Sales people brought deals like this from all over the country, and convinced the management that "it works in long run" once we get our foot in the door!!

 

[AZpath]

Miraca is a bunch of knuckleheads. They use every kick back in the book to gain business, yet they loose money.
What ever deal you make with any entity should be good for both parties. Otherwise, their pathology lab will be run poorly.
In know a lot of people are offered 50% of the PC at MC rates for GI. I would not take that little if they are doing the TC.

 

[LADoc00]

You can make a ton of $$ even at 50% PC if done right. Mainly due to the fact you have zero collection risk. Its a careful calculation but can be mathed out. 25% however is just insane.