Pathology Groups Respond to Eroding Finances

THESE ARE NOT THE BEST OF TIMES FOR ANATOMIC PATHOLOGY GROUPS. The various Medicare fee cuts enacted in the past couple of years have eroded the financial stability of a substantial number of the nation’s 3,300 independent pathology practices and laboratories.

The consequences of eroding finances will become more obvious with each passing month of 2014. That’s because the latest round of Medicare fee changes took effect on January 1 and, as the claims from that date forward are settled, pathology labs will be able to calculate the specific revenue decline their group is experiencing as a result of the new Medicare rules, given their test volume and test mix.

What I wanted to call your attention to is the fact that the anatomic pathology profession is now entering the first phase of a major cycle of transformation. The financially-weakest pathology groups will be first to fall. Most often, these will be pathology groups with five or fewer physicians, particularly those associated with a community hospital that is struggling with its own financial problems.

The early news about this cycle of transformation is not positive. Sources from coast to coast are telling THE DARK REPORT how certain pathology groups in their communities are restructuring their businesses. These developments are discussed in more detail in our intelligence briefing here.

However, not all the news is glum. Some pathology groups are actively refocusing their clinical services and business structures to meet the changing needs of hospitals, office-based physicians and payers. For example, I was fascinated to learn about Spectrum Medical Group, of Portland, Maine.

This group has 180 physicians and 22 of them are pathologists. Spectrum is a unique business model because it represents other medical specialties, including anesthesiologists and radiologists. This allows it to negotiate a single contract to provide nearly all hospital-based physician services to health systems, hospitals, and other providers in its service region.

The jury is still out as to whether Spectrum’s business model will find success in the coming era of integrated clinical care organizations. But Spectrum’s existence demonstrates to pathologists everywhere that different business models for anatomic pathology are taking root.


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