No Slice of the Pie for Pathology and Laboratory

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Managed care appears to be ready to minimize pathology in the same fashion as it minimized the clinical laboratory. Within the laboratory industry, it is widely recognized that most managed care plans reimburse laboratory services at levels which are inadequate to cover the full cost of testing.

Now it may be pathology’s turn. In the market evolution of healthcare, Medicare HMOs may be the next major trend to reprice and restructure a considerable segment of the healthcare marketplace. In just four years, from 1993 to 1997, Medicare HMOs have increased their share of the Medicare market from 5% to 10%. With 40 million seniors enrolled in Medicare, and 80,000 per month switching into Medicare HMOs, I predict that the Medicare market segment will undergo profound changes during the next two or three years.

This does not bode well for either clinical laboratories or pathologists. Medicare business comprises a large portion of the specimens for both laboratories and pathologists. In a Medicare managed care format, this business will be drastically repriced…downward!

Pathologists, in particular, should be concerned about this potential series of events. A careful reading of our presentation on Medicare HMOs in this issue will demonstrate why an increasing amount of pathology work will originate outside the hospital. Because most pathologists are hospital-based, this is a trend which will displace traditional hospital-based pathology groups and favor those pathology groups which serve both hospitals and physician offices.

Further, clinical laboratories and pathologists should realize how these Medicare HMOs reward hospitals and contracted physicians at the back-end, through risk-sharing arrangements. These two classes of providers thus have access to extra dollars above the prospective monthly reimbursement. Ancillary providers, including laboratories, pathologists, radiologists, etc., are generally denied participation in the risk-sharing pool. But these are dollars which “sweeten the capitation pot” for hospitals and the contracted physicians. In the true sense, it creates an unequal economic environment.

Since there is no slice of the risk-sharing pie for laboratories and pathologists, is there any way to change this situation? I believe the answer is yes. I believe the answer lies in a combination of increased participation at the contract negotiating table, offering clinical services which are recognized as essential and “value-added,” and creating regional provider organizations which carry negotiating clout because of their size and reach. For pathologists currently entrenched within a hospital, this kind of collaboration represents a huge paradigm shift.


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