Physician Practice Acquisition - Where is Pathology?

[Zarniwoop]

With the rush of hospital systems to buy up physician practices, pathology appears to be left out.
I am aware of a couple of hospitals that have "outsourced" pathology in the last few years while at the same time employing more and more docs in patient care fields.

Why is pathology (and radiology) an undesirable commodity for many hospital systems?
Don't these fields make money?

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[coroner]

The laboratory has always been on the fringe of medicine and is one of the more inscrutable concepts of health care that number crunchers and administrators never quite get a firm grasp of. This goes with the more understandable concept of scrutinizing clinicians who generate revenue based on patient visits or procedure/operations which lead to more analysis by those HR/financial people when reviewing hospital economics. Don't get me wrong, they know there's gold in 'dem hills, but almost all labs in the U.S. are profitable and a lion's share of this comes from the CP side. For a hospital-based laboratory lab to not generate a net positive cash flow, it would take epic amounts of incompetence on the level of Chewy from 'The Goonies' at the helm.

I'm willing to bet most administrators have no clue what the average pathology group is billing. Even if they did have an idea, because of the reasons listed above, that is usually enough to keep them happy and/or to have no interest in looking at our RVU's. Things are changing though and this model is vanishing as the trend of outsourcing/centralizing pathology as well as more hospital-employed physicians is growing.

Being left out in this case is a good thing. The last thing I'd want if for the CFO to have a meeting with me and my partners and say "Well, the hospital is looking at new ways to increase revenue so we decided to take over the billing for your group!". Translation, you'll go from making bank to a pay cut and to go with it you'll have a nice tall glass of stfu, plus with the bonus of being a hospital employee, you'll have to pee in cup for random drug screens.

 

[Euchromatin]

Chewy from 'The Goonies'

Who is "Chewy?" Do you mean Chunk? Mouth? Mikey? (I just watched the Goonies the other day!) Unless Han and his Wookie associate accidentally did a slingshot around the sun while doing the Kessel run or something...?

 

[Torsed]

Quest is quietly taking over many of the hospital labs in recent times.

 

[coroner]

Who is "Chewy?" Do you mean Chunk? Mouth? Mikey? (I just watched the Goonies the other day!) Unless Han and his Wookie associate accidentally did a slingshot around the sun while doing the Kessel run or something...?

Yeah, I meant Sloth (physically deformed and mentally handicapped guy wearing the Superman t-shirts). For some reason I always thought of him as Chewy because he kept munching on Baby Ruth's throughout the whole movie..."Baby Ru!"

 

[path24]

Hospitals don't realize how easy it is to take a pathologist's pc yet. Give it time. The uros, gis...etc have already figured it out.

 

[Doormat]

The laboratory has always been on the fringe of medicine and is one of the more inscrutable concepts of health care that number crunchers and administrators never quite get a firm grasp of. This goes with the more understandable concept of scrutinizing clinicians who generate revenue based on patient visits or procedure/operations which lead to more analysis by those HR/financial people when reviewing hospital economics. Don't get me wrong, they know there's gold in 'dem hills, but almost all labs in the U.S. are profitable and a lion's share of this comes from the CP side. For a hospital-based laboratory lab to not generate a net positive cash flow, it would take epic amounts of incompetence on the level of Chewy from 'The Goonies' at the helm.

I'm willing to bet most administrators have no clue what the average pathology group is billing. Even if they did have an idea, because of the reasons listed above, that is usually enough to keep them happy and/or to have no interest in looking at our RVU's. Things are changing though and this model is vanishing as the trend of outsourcing/centralizing pathology as well as more hospital-employed physicians is growing.

Being left out in this case is a good thing. The last thing I'd want if for the CFO to have a meeting with me and my partners and say "Well, the hospital is looking at new ways to increase revenue so we decided to take over the billing for your group!". Translation, you'll go from making bank to a pay cut and to go with it you'll have a nice tall glass of stfu, plus with the bonus of being a hospital employee, you'll have to pee in cup for random drug screens.

I wouldn't say that CP labs are going to be profitable in the future. Smaller CP labs are going to shut down or consolidate. Why? Check out the CLFS pricing changes coming down the pipe as a result of PAMA legistlation. I know of at least 2 smaller multispecialty physician group labs that have shut down or going to shutter their in-office CP labs becuase of this. Interestingly, an in-office CP lab (running CBCs and CMETs that are resulted during the patient visit) actually adds convinience for doctors and patients as intended under the IOAS exemption to the stalk law. Of course, in-office AP services provided under the IOAS loophole do not add convience for the patient during their office visit or even the same day. It's is just pure self-referral income. For any physicians who client bill their CP -- they are going to see their kickback income decrease substantially.


This section of PAMA constrains Medicare officials from dropping the price for
any single clinical laboratory test by more than these amounts for each year:
10% in 2017
10% in 2018
10% in 2019
15% in 2020
15% in 2021
15% in 2022
Were CMS to implement price reductions of this amount on a single test in each
of the six years, it would cut the price of a lab test by 75%, compared to the base
year. It is known that CMS wants to reset prices for the 20 highest-volume tests
that represent more than half of what is spent annually on Medicare Part B
Clinical Laboratory Test Fees (CLFS).

 

[WEBB PINKERTON]

Talk to the pathologists who hospitals have been taken over by "for profit" companies in recent years. Florida looks like ground zero for this. Ask them what has happened to their PC. There are many who know how easy it is to take the pathologist's PC.

 

[coroner]

I wouldn't say that CP labs are going to be profitable in the future.

Yes, but this should not come as anything surprising. Laboratories have been getting cut for the past 10-15 years. Although the proposed schedule is up to 75% over the six year period, it may not reach that, but you can bet your bottom dollar it will get slashed either way. That being said, the passage of H.R. 4302 will radically affect how Medicare officials will determine the prices to be paid for clinical laboratory tests. This will cut $2.4 billion from Medicare Part B reimbursement for clinic laboratory tests as enacted by Congress. Thus, as CMS implements the provisions of this law, all laboratories filing Part B lab test claims will see less revenue for the same volume of claims, beginning in 2017.

This is "indirectly" bad news for some of us who are hospital-based pathologists i.e. those who aren't shareholders of corporate mega-labs. Even though we don't collect on part B, the after effects of decreased revenue will likely lead to further consolidation. What gets me is that for hospital-based labs, the national average of Medicare billing is roughly 7%. How about going after some of the other big dogs (pharma industry) instead of our ever-shrinking sliver of pie??? The lab along with radiology and PT/OT are the most consistently profitable entities within a hospital. The more our bottom-line is affected, the more it's going to lead to layoffs, departmental closures that are operating at a loss e.g. maternity at many smaller hospitals, and outsourcing/consolidation. The ironic thing is bubba gubbermint wants to do this to curtail overprofiteering by labs. But ultimately, this hurts the smaller community-based hospitals which will force outsourcing and feed the corporate mega-labs making them fatter in profits. I doubt there's anything CAP can salvage at this pont. It may be a lost cause...

Talk to the pathologists who hospitals have been taken over by "for profit" companies in recent years. Florida looks like ground zero for this. Ask them what has happened to their PC. There are many who know how easy it is to take the pathologist's PC.

Are you referring to organizations like Palmetto, and other such unsavory types? In order to retain their market in Florida, I've heard that they've made such proposals as trying convince insurance companies to only reimburse on skin specimens if they've only been read by dermpath while in the meantime they try to corner that market. Of course this is adamantly opposed by the Florida Association of Pathologists and CAP. I directly asked the CAP president if he thinks this is a small spark that will be put out or if it will catch fire and spread to other states (as if we didn't need another blow to our profession). According to him, Florida and places like New York and California are "bellweather" states and they are optimistic this will be stamped out before any types of mandates are set in place. We shall see...

 

[WEBB PINKERTON]

No. I'm talking about the for profit companies that have bought up many of the hospitals down there. Good luck keeping your PC if you work in Florida.

 

[coroner]

Hmmm...No wonder there's so many job advertisements located in Florida (like HCA)

 

[yaah]

The increasing trend is for payments for (particularly inpatient care) to be treated as "bundled" payments. Thus, someone admitted for heart failure provides the hospital with a certain reimbursement level, regardless of how long they stay, how many tests are performed, how many consults there are, etc.

Yes, many hospitals have sold their lab business to private labs like quest. Quest will tell them they can run the lab for such and such $, and it may sound like a good deal. I tend to wonder how often their management actually achieves the financial gains they say, particularly because they are probably basing their projections on previous reimbursement levels and practice patterns, which are continuously changing for the worse.

Take these two trends together, I suspect #2 will have a hard time competing with #1, because how will the lab get paid if they are not directly controlled by the hospital?