Battles Continue Over Doctor Mark Up of Lab Tests

FROM THE SHADOWS OF A PARKING GARAGE, Deep Throat suggests to reporter Bob Woodward, “Follow the money.” In this scene from the movie, All the President’s Men, Woodward gets the right advice he needs from an unnamed source to pursue the Watergate case, a huge political scandal of the 1970s.

“Follow the money” is also good advice for lab managers and pathologists tracking the battles over physician mark-ups of clinical laboratory testing and anatomic pathology (AP) services. Efforts of the federal Centers for Medicaid & Medicare Services (CMS) to implement proposed rules preventing physicians from marking up certain laboratory, pathology, and radiology services have been widely publicized. Now legislators in Missouri are considering changing state law to prohibit physicians from marking up fees for pathology services. “In some medical practices across Missouri, doctors are turning a profit from lab work done by other doctors. And most patients and their insurance companies don’t know about it,” says an article in the Springfield News Leader in Missouri on April 30. “It’s called ‘indirect billing’ or ‘pass-through arrangements,’ and a bill in the Missouri legislature would outlaw the practice.”

The sponsor of Senate Bill 817 is Missouri state Senator Jack Goodman (R- Mount Vernon). He believes it’s unethical for physicians to mark up fees for work performed by other physicians. A similar measure, House bill 1990, is expected to be assigned to a committee. Two earlier efforts to pass such bills failed. Missouri physicians have testified in favor of retaining the ability to mark up test fees, saying it allows them to negotiate discounts with labs and guarantees their patients a set package price for in-office tests and lab work. They claim this can allow them to pass on discounts to low-income and insured patients. But no one has stepped forward with evidence documenting that physicians do, in fact, pass these discounts along to self-paying patients.

I suspect federal officials will prevail in their efforts to prohibit physicians from marking up laboratory tests, anatomic pathology services, and radiology procedures not performed in their offices by board-certified physicians who are partners/employees of the medical group. As that happens, private payers will fall into line with similar anti-markup requirements. After all, if you follow the money, Medicare, Medicaid, and private health insurers have much more to lose than office-based physicians have to gain from banning mark-up arrangements.


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