Changing Economics Motivate Urologists & GIs

Specialist docs turn to anatomic pathology to offset income losses from other sources

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CEO SUMMARY: Over the past 18 months, more specialist groups have created their own anatomic pathology laboratories than were created in the past five years. It’s a gold rush to tap and capture profits generated by the anatomic pathology services provided to their patient populations. This heightened interest in operating in-house anatomic pathology laboratories is directly linked to income cutbacks.

THERE IS A SINGLE, UNIFYING REASON why urologists and gastroenterologists (GIs) recently gained a heightened interest in bringing anatomic pathology services into their group practices. It is profit!

“Both gastroenterology and urology suffered significant cutbacks in major areas of reimbursement during the past two years,” stated Bernie Ness, President of B.J. Ness & Associates of Toledo, Ohio. “This loss of revenue and income motivated these physicians to develop other sources of income, including ancillary services like anatomic pathology.”

Asking For Proposals

“With 20 sales reps throughout the country visiting physicians’ offices every day, we have a good feel for trends in the marketplace,” said Ness. “With growing frequency, urologists and GIs are asking our sales reps to offer them discounted fees, develop joint ventures, or help them start their own anatomic pathology laboratory. We have a front-row seat to watch this trend unfold. It’s also helped us understand why specialist physicians suddenly got extremely interested in how to capture anatomic pathology revenues within their practice.

“In gastroenterology, Medicare reimbursement cutbacks in key CPT codes happened about two years ago,” he explained. “The first response of GI specialty groups was to look for ways to replace the revenue by providing the technical component for their clinical services. This fueled the shift from using hospital facilities to ambulatory surgery centers and in-office endoscopy centers.

“Once gastroenterologists saw how much reimbursement hospitals were earning for use of the surgery suites, it reinforced their interest in building up their own ancillary service capabilities,” added Ness. “You could say that, once GIs broke ties with hospitals, the gloves were off in their willingness to capture ancillary service revenues.

“It didn’t take long before gastroenterologists began evaluating anatomic pathology services,” he continued. “It started in some of the largest GI groups, because they had enough specimen volume to support the histology laboratory and a full-time pathologist. Once they had a full year of operating experience, they began telling their peers about the money they were making with their pathology laboratory. That got other GI groups interested.”

Ness says the heightened interest by urologists and GIs in capturing anatomic revenues is easily visible to his pathology sales reps.

Ness says it is a different story in urology. It started several years ago and is tied to an important change in Medicare policy. “The gold mine for urologists was Lupron® . Patients got one shot per month. The urologist could make $100 over the cost of the drug when it was a Medicare patient,” recalled Ness. “In some instances, the drug manufacturer gave free Lupron samples to the physician. After administering the free sample to a patient, the urologists could bill Medicare for up to $550.

Urologists Lost Income

“Medicare responded to this situation with stiff reimbursement requirements. Combined with reimbursement cutbacks in other urology CPT codes, it gave urologists a motive to look for ways to replace this lost income. They are looking at all ancillary services, including anatomic pathology (AP),” he observed.

“Remember the intense battles fought by UroCor and DIANON for urology biopsies throughout the 1990s?” asked Ness. “This did not go unnoticed by some urologists. They surmised that AP could be profitable. They built their own anatomic pathology laboratories. Once they understood the finances, the news spread quickly among the urology profession.”

Ness says the heightened interest by urologists and GIs in capturing anatomic revenues is easily visible to his pathology sales reps. “Here’s a good example. In Ohio, the Medicare rate for a primary biopsy is about $90. The private payer rate can be up to $150,” he noted. “Two or three years ago, if we approached a urology clinic and offered to bill them at the Medicare rate, so they could then bill at the private rate, there was little interest. That’s no longer the case. Today many more urology practices are interested in exploring the details of a discounted pricing arrangement for AP services.”

In-House AP Trend

Ness believes his sales reps are seeing a new trend which is establishing deep roots, particularly within urology. “Economics drives this sudden interest in AP. Once a urology or GI group believes that anatomic pathology can be a profit center, it begins taking decisive steps to develop a way to capture those revenues,” said Ness.

“I’ve seen lots of things in the 25 years that I have sold esoteric tests and AP services. In my opinion, this trend is a significant threat to any local pathology group or national anatomic pathology company,” he continued. “It is changing the fundamental relationship that anatomic pathologists have as a consultant to the referring physician.

“That is not a positive development,” added Ness. “It financially weakens the primary pathology resource in a community, which is the hospital-based pathology group. There is also the potential for specialist physicians to over-utilize AP services when treating their patients. Any response by Medicare to control that problem may prove destructive to the entire pathology profession.”

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