"PART ONE OF A TWO-PART SERIES"

Market Demand for Pathologists Shifts Toward Specialization

INSIGHTS FOR LABS LOOKING TO ADD PATHOLOGISTS

CEO SUMMARY: Unlike the slack employment market for pathologists seen during the 1990s, there is strong demand for pathologists in this decade. Private pathology group practices now face competition for the best pathology talent. That’s because public lab companies are regularly in the marketplace looking to hire pathologists with the right subspecialty skills and expertise. THE DARK REPORT offers this exclusive look at the employment situation for the pathology profession.

EDITOR’S NOTE: This is the first of a two-part assessment of supply and demand for pathologists. Part One looks at the shift in hiring practices for pathology positions in the United States. Part Two will address efforts to define and measure the productivity of individual pathologists.

Part One of Two Parts

DURING THE 1990S, MANAGED CARE and closed-panel, gatekeeper- model HMOs directly caused a decline in demand for pathologists. That pattern has been reversed in the early years of this decade.

Pathologists are the heart and soul of every laboratory. That is why shifts in the demand for pathologists, as well as changes in high-demand clinical skills, affect the strategic planning for both clinical labs and anatomic pathology groups.

To help clinical laboratory directors, pathologist leaders, and group practice administrators gain an accurate understanding of the supply/demand dynamics for pathologists, THE DARK REPORT is providing this exclusive two-part intelligence briefing. Subjects to be covered are: 1) how and why demand for pathologists is stronger in this decade than the last decade; 2) changes to the candidate pool of pathologists, particularly those individuals who recently finished their formal medical training; 3) pathology sub-specialties emerging as the “hot” clinical areas—with salaries to match; 4) what types of laboratories are hiring; 5) typical compensation terms offered to employee-pathologists; and, 6) productivity expectations for employee pathologists.

“What people consider to be the popular wisdom about the professional opportunities for pathologists lags behind the reality of today’s healthcare marketplace,” stated Rich Cornell, Principal at Integro Medical, LLC, a physician recruiting firm based in St. Louis, Missouri. “For pathologists with the right skills and experience, today’s professional environment is probably the best I’ve seen during the 15 years that I’ve worked to recruit and hire pathologists.”

Cornell speaks with unique authority on this topic. He has recruited and placed pathologists in a variety of laboratory environments. One high profile client was DIANON Systems, Inc., which for a period of more than ten years used Cornell’s services exclusively to recruit and hire pathologists. Cornell’s active client list includes pathology settings that range from public lab companies to academia and private group practices.

“Let me explain the differences between the last decade and this one,” declared Cornell. “In the 1990s, the emphasis of managed care was to make primary care physicians the central decision-maker in the healthcare system. Reimbursement declined steadily throughout the decade. Capitation and utilization risk made providers, including pathology groups, hesitant to bring additional physicians into their practice.

Obvious Consequences

“The consequences were obvious. Within the pathology profession, there were too many pathologists being trained,” continued Cornell. “It was tough for pathologists to find jobs. A larger number of pathologists deferred plans to retire. Pathology groups became gun-shy about bringing new pathologists into the group.

“One obvious reaction to this situation was seen in the academic sector,” added Cornell. “During the 1990s, the number of residency slots in pathology declined. Some medical schools and community-based programs closed down their pathology residency programs. Also, a five-year requirement was put into effect for board certification. By the end of the decade, the cumulative effect of these actions had shrunk the number of new pathologists entering the marketplace each year.

“The overall situation in healthcare changed during the past couple of years,” observed Cornell. “Primary care physicians no longer drive the healthcare marketplace. Some experts believe we now have too many primary care physicians. At the same time, specialists are back in demand. In fact, demand is particularly strong for subspecialists.”

As evidence of this change, Cornell points out that residency programs for hospital-based physicians are again full. “Soboyna & Weinstein published an article in the July 2001 issue of Human Pathology. They noted that 2001 was a turnaround year, because “pathology filled 82% of its matched slots, whereas anesthesiology filled 89% and the present commodity among residencies, radiology, filled 100%.’ These numbers were sustained in 2002,” said Cornell.

Supply of New Pathologists

“For 2001, 552 residents or fellows completed training in clinical pathology (CP) or anatomic pathology (AP),” he continued. “On average, each candidate received 1.9 job offers. About 19% of these physicians entered practice, while 19% opted for academics and 58% decided to pursue additional training in specialized fellowships.”

This was good news for new pathologists. But on the demand side, there have been noticeable shifts. “Demand for specialized pathology skills is rapidly increasing,” observed Cornell. This year Richard Horowitz, M.D., a pathologist affiliated with the USC and UCLA Medical Schools, conducted a study of new pathologists hired by 481 groups during the years 2000-2002. The results were fascinating. Only 38% of hiring groups were willing to take on a generalist-pathologist! Almost two-thirds, 62%, of hiring pathology groups wanted a new pathologist with sub-specialty training. The top three sub-specialties desired were: cytopathology, dermatopathology, and hematopathology.”

Movement Among Groups

The number of pathologists moving annually between practices is significant. Data from the American Board of Medical Specialties (ABMS) indicates that there are 21,510 board-certified pathologists in the United States today. Of this total, 13,730 are boarded in both AP and CP, with 5,545 boarded only in AP and 2,235 boarded only in CP. “The Medical Group Management Association (MGMA) estimates that at least 8% of the nation’s physicians move annually. That means as many as 1,700 practicing pathologists are changing positions each year,” noted Cornell.

“About two-thirds of all pathologists work in private practices,” continued Cornell. “Ten per cent work in university medical schools or hospitals and an almost equal number, 9%, work in independent laboratories. The balance work in multi-specialty groups or as coroners and medical examiners.”

Cornell can identify five significant subspecialties that are currently in demand within the pathology profession. They are dermatopathology, (about 45 fellows per year), gastrointestinal/hepatic pathology (about 51 surgical path fellowships), genitourinary pathology (about ten “true” fellowship programs), hematopathology (about 57 fellows), and cytopathology (about 88 fellows). These numbers are representative and taken from the Directory of Pathology Training Programs in the U.S and Canada, 2004-2005.

Public Lab Demand

“Probably the most visible shift in pathologist work environments during recent years has occurred within the public laboratory companies,” observed Cornell. “These companies are pushing to expand their revenues from anatomic pathology services. As case volume increases, they need to hire additional pathologists to handle the work. This was certainly true of DIANON Systems during the 1990s. By the end of 2002, they had approximately 40 employee pathologists working on staff.

“Another example is AmeriPath, which employs about 450 pathologists, of which 60 are dermatopathologists,” added Cornell. “ Both Laboratory Corporation of America and Quest Diagnostics Incorporated are regularly looking to hire additional pathologists.

“Public laboratory companies are constantly in the marketplace to recruit and hire pathologists. As a result, the financial compensation, benefits, and working environment they offer is already establishing a different type of baseline that private pathology groups must understand and meet if private groups are to successfully recruit top pathology talent,” he commented.

Compensation & Benefits

“Public laboratory companies know they must offer an attractive package to attract pathologists,” noted Cornell. “In terms of working environment, there are probably two significant features a public lab company offers. First is ‘quality of life.’ Pathologists working for these companies usually have a standard work week that runs Monday through Friday from 8 a.m. to 5 p.m., with no weekends required. They are neither required to be on call nor to perform autopsies.

“Second is case mix. Public lab companies have substantial specimen volume and can allow the pathology subspecialist to look at cases specific to their field of interest,” noted Cornell. “This is exactly what today’s subspecialists want. They want to concentrate on cases for which they have trained.

Competitive Salaries

“Of course, the compensation packages are competitive,” he continued. “Included are stock plans, incentive pay, corporate benefits, and the opportunity to work in a prime location. The public lab companies’ regional facilities are typically located in larger metropolitan areas around the country. This is attractive to pathologists seeking to work in different regions who want to be in or near a major city.”

Salaries paid to pathologists by public lab companies are based upon experience, certification, and training. The range is from $190,000 to $300,000 per year. “In today’s market, I would expect to see a board-certified dermatopathologist with three years of experience be offered a salary base of around $250,000 per year,” stated Cornell. “Annual salary increases average between 2% and 10% per year, depending on individual company policy, employee performance, and several other factors.

Incentive Pay Included

“Incentive pay is part of the overall compensation package,” he continued. “Each company requires pathologists to sign out a minimum daily volume. There is a ‘per case’ incentive of some type for any work signed out that exceeds the daily minimum.” (Editor’s note—Specifics of pathologist productivity will be covered in Part Two of this series.)

“These compensation packages also take into consideration other company objectives,” added Cornell. “There can be an annual bonus of between 1% and 20% of base salary. This bonus can be linked to a number of factors, including employee performance, quality assurance/quality control, sign-out volume, the company’s financial performance against targets, the regional laboratory’s performance in achieving corporate budget targets, and customer satisfaction, to name a few.”

Advice For Path Groups

“Any pathology group looking to recruit top subspecialty talent should understand the basic types of employment, compensation, and benefit pack- ages found at public laboratory companies,” Cornell stated. “Private group practice settings offer many professional challenges and opportunities that are not commonly found within most public laboratory companies.

“For example, pathologists working in hospital-based pathology groups have a different interaction with referring clinicians and the surrounding medical campus than a pathologist working with a public lab company’s regional facility. In hospital-based practice settings, there is the opportunity to be involved in clinical laboratory operations as well as anatomic pathology. The hospitals’ patient mix affects the types of cases seen daily by the group. Many pathologists like this type of varied practice setting,” said Cornell.

“Demand for pathology subspecialty skills is high in today’s healthcare marketplace,” noted Cornell. “I see it every day in the recruitment market. There is ample evidence that the demand for pathologist subspecialists will continue to grow.”

Standardized Lab Data

THE DARK REPORT notes that Cornell’s conclusions about the growing primacy of subspecialty pathology mirrors similar trends which have been regularly reported on these pages. The pathology profession is undergoing a steady evolution in parallel with the healthcare system that it serves.

The key themes in this trend are consolidation of small provider units into strong regional practices, more types of clinical applications that involve molecular pathology, and increased interest by both clinicians and patients to have “disease state experts” as consultants in the case.

This latter point is not only a response to consumer activism, but is influenced by subtle shifts in medical malpractice claims. During THE DARK REPORT’S Pathologist Income Symposium in Atlanta on October 23-24, both Cornell and faculty attorneys noted that malpractice trends involving different areas of pathology services are filing claims that may shift the standard of care, at least as it applies to certain pathology subspecialities. This may be another force that helps shift the profession’s emphasis away from generalist skills toward subspecialty expertise.

One key insight to be gleaned from Cornell’s experience is that the recruiting environment for pathologists is now significantly influenced by public laboratory companies. The break-neck growth of Ameripath, IMPATH, and DIANON Systems during the period 1995-2002 placed a significant number of pathologists into employment settings. Add to this the growing numbers of employee- pathologists at LabCorp and Quest Diagnostics. Collectively, these entities may employ as many as 10% of all the pathologists currently in full-time practice in the United States. One result of this shift in pathologist employment is that private group practices now have greater competition when recruiting top
pathology talent.

Typical Pathologist Pay & Benefits

Listed below are some common benefits and compensation levels from both single specialty groups (SSG) and commercial laboratory companies. These were provided by Rich Cornell, an experienced physician recruiter and Principal at Integro Medical, LLC of St. Louis, Missouri.

SINGLE SPECIALTY GROUPS

Standard Benefits*

•98% Relocation (avg: ~$9,000)
•94% Malpractice
•93% Health Insurance
•92% CME (avg: ~$3,000)
•74% Retirement
•75% Disability
•35% Signing Bonus (avg: ~$14,000)

SSG Physician Income Averages**

•All physicians: $123,483
•Starting: $190,347
•Eastern: $395,150
•Western: $413,379
•Southern: $511,177
•Midwestern: $472,000

*MHA 2002 Review of Physician Recruitment Incentives.
**MGMA Physician Compensation and Production Survey, 2003. Figures reflect total compensation, including all benefits.

COMMERCIAL LABORATORIES

Typical Benefits

•4-6 weeks vacation or paid-time-off
•1 week CME, $3-5K CME allowance
•Health & dental insurance for employee. Employee-paid family coverage
•Medical malpractice insurance
•Scheduled holidays off
•Short-term & long-term disability
•Pre-tax savings plan (401K), with some company dollar-for-dollar match.
•Life insurance, typically a factor
of 3x the base salary
•Employee assistance program (EAP)
•Moving allowance, $10,000-$20,000

Typical Salary Package

•Salary range of $190K-$300K, based on experience, certification
•Performance incentive, based
on 70-100 cases signed out daily, up to $220,000

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