SINCE THE END OF WORLD WAR II, the dominant practice model for the pathology profession has been the private group practice. Outside of academia and a few other settings, the vast majority of pathologists practiced laboratory medicine as physician-partners in a medical group.
During this same period, the pathology profession’s major defender was the College of American Pathologists (CAP). As the specialty association representing pathologists, CAP has been the first line of defense against threats to the scope of practice, professional compensation, and onerous regulation of laboratory medicine. For many decades, the pathology profession has generally prospered under this arrangement. But today, we may be seeing a power shift within the pathology services marketplace.
Consider this: Quest Diagnostics Incorporated has more than 500 pathologist-employees. Laboratory Corporation of America and AmeriPath Inc. each have more than 400 pathologist-employees. Now that Quest is about to acquire AmeriPath, the pathology profession may be reaching a tipping point. Just two companies will employ 10% of the 13,000 members of CAP.
Over the years, national labs have invested in sales and marketing to capture additional specimens from office-based physicians at the expense of private pathology groups. National labs also invest in information systems required to manage the managed care contracting data needed to expand in a changing market. In other words, these large companies are investing in three specific areas: sales, information systems, and managed care contracting expertise.
In contrast, private pathology groups typically defer or fail to invest in these three areas. By failing to invest in the future of their own businesses, many private pathology groups have seen continual erosion of market share in their communities. All the while, national labs invest to support growth in their specimen volume and revenue.
Now here’s the irony. Employee pathologists at national labs are often paid a salary and a production incentive. National labs take the difference between professional fees collected and pathologist compensation paid and invest it back in building their businesses. Private practice pathologists, if they were similarly willing to take reasonable compensation and invest the group’s additional earnings back into their businesses, might well have growing practice revenues that generate larger partner incomes in the coming years.