Anthem’s Cuts in AP Fees Could Put Patients at Risk

Insurer’s low payments might disrupt long-standing relationships between pathologists and physicians

CEO SUMMARY: Consultants who work with anatomic pathologists have several theories about why Anthem is enacting deep cuts of 50% to 70% for the professional component of many anatomic pathology services. While they have different ideas about what motivates the nation’s second largest health insurer, they agree that such reductions in payments will have a harmful effect on patients and on the relationships referring physicians have with the anatomic pathologists in their communities.

WHAT HAPPENS AFTER A MAJOR INSURER SLASHES what it pays to physicians by 50% to 70%? Might patient referral relationships among physicians change for the worse? Would patients suffer as a consequence of their health insurer paying physicians just 30% of what they were paid in recent years?

Anthem, Inc., is about to learn the answers to those questions. Since late last year, the nation’s second largest health insurer has cut what it pays for most anatomic pathology CPT codes by 50% to 70%. Given that Anthem serves 40-million members, such low reimbursement rates could cripple many anatomic pathology practices. (See “Dermatologists Say Anthem Cuts Affect Patient Care,” TDR, Aug. 12, and “Anthem Rolling Out New Pathology CPT Code Cuts,” TDR, July 1.)

In addition to forcing pathology groups to cut back on staff or go out of business, such low rates also could harm patients, according to physicians and consultants who advise anatomic pathology practices.

For example, one consultant who works with anatomic pathologists fears the deep cuts Anthem has made in certain AP codes will harm patients. Such harm will result from the disruption in the relationships that anatomic pathologists have with referring physicians, said the consultant, who asked not to be named.

Definitive Diagnosis

“The cuts in reimbursement may lead good local pathology groups to abandon their practices, thus leaving large labs as the only options for patient care,” the consultant said. “The inherent difference between a large lab and a local, specialized lab is the definitive diagnosis you get from specialized labs. Some pathologists at large labs may take a wait-and-see approach to a potential case of cancer, which could compromise patients’ long-term health.”

In an e-mail to THE DARK REPORT, Anthem said it will not comment because its fee schedule is proprietary and confidential. Also, Anthem added that it follows the notice provisions defined in its provider agreements when it makes changes to the fee schedule.

Pathology consultants have different theories about why Anthem wants to make such deep cuts in payments, but they agreed that these reductions will harm patients and pathologists’ relationships with physicians.

Such harm may be particularly acute in the relationships that dermatologists have with referring physicians because disrupting these relationships harms patient care, the consultants said.

For example, dermatologists are concerned that Anthem’s new payment rates for the professional component of AP services disrupt their ability to work with dermatopathologists. These professionals developed strong relationships over many years, they said.

Late last year, Anthem informed pathology groups in some states that it would cut what it pays for certain CPT codes in the 80000 series by 50% to 70%. These rates are much lower than what it had been paying. “I have heard from a number of pathologists who are distraught over the cuts that Anthem is imposing,” said one consultant who has more than 30 years of experience working with pathologists. The consultant asked not to be named.

Loyal to Local Pathologists?

Asked why Anthem is slashing payments now, this consultant said large laboratories in Anthem’s network may have complained to Anthem about how smaller and regional AP groups were retaining their referring physicians. Such loyalty to local pathology groups makes it difficult for the large labs to acquire the specimen volume from Anthem’s patients because those patients’ physicians prefer to send to the AP groups they have worked with for many years.

“When national labs struggle to win business away from local and regional pathologists, they will often pressure a health insurer to take steps to help them capture more physician referrals,” he said. “After all, the national labs often discount their prices to as low as 30% of Medicare to win these managed care contracts. Now they need more case volume to keep their costs at break-even or better. That’s why, for example, national labs would lobby Anthem to pressure its network physicians to steer that pathology work their way.

Going After Market Share

“In anatomic pathology, it’s a fact of life that national labs will struggle to gain any business when trying to acquire new market in any city or large metropolitan area,” he commented. “Local pathologists have a strong hold on their client physicians because they have worked closely with those physicians for many years. In addition, those referring physicians want to retain the long-standing relationships they have with local anatomic pathologists.

“After working with one pathology group over many years, a referring physician doesn’t want to start over with anatomic pathologists they don’t know,” he explained. “Referring physicians—especially dermatologists but also gastroenterologists, genitourinary specialists, and others—rely on the familiarity they have with their pathologists. Also, they trust the accuracy they get from local pathology groups.

“Facing pressure from the large labs, Anthem’s choices are limited,” he added. “It could cut pathologists from its network, but it also could let its network pathologists self-select.

“Essentially, that’s what’s happening now. Anthem is telling pathologists, ‘Here are your new contract rates. You can either take them or leave them,’” explained the consultant. “Anthem knows many in-network pathologists will drop out rather than accept such low reimbursement.

“In some cases, a pathology group may choose to go out of network,” he said. “Or, if the pathologists are older and approaching retirement age, they’ll simply sell to another group or close up shop.

“These developments are one way Anthem can make the large lab companies happy,” he noted. “At the same time, Anthem benefits because it can now pay the low prices it wants to pay all across the country.”

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