SC Pathologists Question Legality of TC/PC in State

South Carolina Society of Pathologists asks for review of the legality and ethics of TC/PC

CEO SUMMARY: Recently the South Carolina Society of Pathologists (SCSP) requested that the state’s Board of Medical Examiners review the legality, under state law, of certain technical component/professional component (TC/PC) arrangements between referring physicians and pathologists. SCSP asked that the Board assess how TC/PC arrangements might violate state law, constitute illegal fee splitting, compromise patient care, and be unethical. State law in South Carolina has specific language that applies to some forms of TC/PC.

IN SOUTH CAROLINA, anatomic pathology TC/PC business arrangements were recently the subject of a review by the state’s Board of Medical Examiners. The information provided to the board offers a look at the different ways that some TC/PC arrangements might run afoul of legal and ethical requirements.

The review had been requested by the South Carolina Society of Pathologists (SCSP). In a letter it submitted to the Board of Medical Examiners, attorneys Jane Pine Wood and Steven M. Harris of the law firm McDonald Hopkins described one type of TC/PC business arrangement often used by pathology companies.

Questions About TC/PC

In the letter, the board was asked to assess how TC/PC business arrangement involving pathology services might be problematic in four areas: 1) does it violate South Carolina law; 2) does it constitute fee-splitting under applicable rules and regulations; 3) does it present a substantial risk to patient safety; and, 4) does it violate ethical practices?

The letter from Wood and Harris explains in detail that the intent of current federal and state laws is for Medicare and other payers to reimburse pathologists and laboratories for the technical and professional components of services involved in reviewing human tissue samples. “Unfortunately, a loophole in the federal Stark regulation (which the Office of Inspector General and the Centers for Medicare & Medicaid Services are working to limit) allows other medical specialists who generate the referrals for these pathology services to collect large portions of the pathologists’ fees for professional services which are not rendered by these other medical specialists,” wrote Wood and Harris.

“The South Carolina Society of Pathologists is aware of several arrangements, commonly referred to as ‘TC/PC’ arrangements, whereby referring physicians practices (both urology and gastroenterology practices) contract with a pathologist on a part-time basis for the provision of the professional pathology interpretation services,” the letter said. The lawyers were uncertain about whether the pathologists in these arrangements were employees or independent contractors, a factor that is important to the patient care issues raised later in the letter to the South Carolina Board of Medical Examiners.

Marking Up Path Services

“In this arrangement, the professional pathology interpretations are billed by the referring physician practice, which in turn pays the pathologist a markedly reduced fee for his or her professional services,” the letter said, adding that “…The pathologist’s laboratory either bills patients/payers directly for the technical component services or sells the technical component services to the referring physician practices which re-bill the purchased services to patients/payers with a mark-up in price.”

Inappropriate utilization was a concern. Wood and Harris pointed out that “…The SCSP has information indicating that the pathologist provides a [financial] pro forma to the referring practice which includes an excessive number of special stains, even on normal tissue, which would generate significant additional charges to the patient for both the technical and professional components of the special stains, and would substantially increase the profits realized by the referring practice from the fee splitting arrangement for these excessive services.

Training in Pathology

“It is important to distinguish the TC/PC arrangement from a legitimate multi-specialty practice in which pathologists and other medical specialties jointly provide services in a single, integrated medical practice,” the letter continued. “Such legitimate multi-specialty practices are not uncommon among pathologists and dermatologists, for example, especially in light of the dermatopathology training received by most dermatologists. The TC/PC arrangement at issue involves primarily urology and gastroenterology practices, whose physicians have no training in pathology, and who view the [TC/PC] arrangement solely, if not primarily, as a lucrative source of additional revenue.

“In these arrangements, the contracted pathologist may not have the same level of experience, skills, training, and expertise as a pathologist based in a hospital or in an independent lab, and may not hold medical staff privileges at a hospital,” explained Wood and Harris. “If not, the pathologist would avoid the stringent credentialing processes of hospital medical staffs, as well as those third party payers who rely upon medical staff credentialing of pathologists.”

AMA Stance on Fee Splitting

The potential for TC/PC arrangements to violate ethics was discussed. “The American Medical Association (AMA) has clearly stated that fee splitting as described in the letter is prohibited,” noted the two attorneys. “AMA Ethical Opinion 6.02 states unequivocally that ‘Payment by or to a physician solely for the referral of a patient is fee splitting and is unethical.” In addition, AMA Ethical Opinion 6.10 provides that: “‘No physician should bill or be paid for a service that is not performed; mere referral does not constitute a professional service for which a professional charge should be made or for which a fee may be ethically paid or received.’”

The letter also said “Similarly AMA Ethical Opinion 6.03 explains that: “Clinics, laboratories, hospitals, or other health care facilities that compensate physicians for referral of patients are engaged in fee splitting, which is unethical.”

These statements from the May 13 letter submitted by the South Carolina Society of Pathologists (SCSP) to the state Board of Medical Examiners provide insight as to how SCSP views the legal and ethical issues that may be relevant when evaluating TC/PC business arrangements between pathology laboratories and referring physicians, including specialist physicians such as urologists and gastroenterologists.


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