How Local Path Groups Can Keep Patient Access

Efforts to restrict non-contract lab providers are increasing in Northeastern states

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CEO SUMMARY: For pathology groups operating their own histology and cytology labs, a growing problem is access to patients covered by exclusive managed care contracts. In the Northeast, several persistent pathology group practices are using some effective business strategies to fight this trend. Not every strategy works every time, but there are enough victories to make the effort worthwhile.

Editor’s Note: Albert L. Giles is President of Anodyne Green, a pathology consultant and group administrator based in Vorhees, New Jersey. For three decades, Giles has provided business and operational support for pathology group practices primarily in the states of New Jersey, New York, Pennsylvania, Delaware, Florida and California.

PATHOLOGY GROUP PRACTICES which operate their own histology and cytology laboratories are faced with a growing problem: maintaining their access to specimens in situations where they do not hold managed care contracts.

There is a breakdown in the familiar business arrangement between these local pathology group practices and the commercial laboratories that hold managed care contracts. For almost two decades, it was common for commercial lab companies to negotiate “all-in-one” contracts with managed care plans, keep the clinical lab testing for themselves, and subcontract the anatomic pathology (AP) and cytology specimens to local pathology groups.

These subcontracting arrangements are now a dying breed. In recent years, commercial laboratories have taken aggressive steps to disrupt longstanding subcontracting relationships and capture the AP and cytology specimens for themselves.

Capturing AP Specimens

As the national and regional labs which hold these contracts hire their own pathologists and create the capacity to do the work, they take two steps in the marketplace. First, they terminate their subcontracting relationship with local pathologists and direct those specimens to their own labs and pathologists.

Second, in cases where local pathologists maintain business relationships with physicians in the area, national and regional laboratories collaborate with the managed care companies to enforce the exclusivity clause of their “all-in-one” lab testing contract. Physicians come under direct pressure to stop referring specimens to the local pathology group.

To counter this trend and preserve access to specimens, my more progressive pathology group clients developed several strategies. None are effective all the time. But each has a time and a place when it can make the difference and preserve access to the AP and cytology specimens needed to sustain local histology and cytology laboratories.

1. Strategy One: LOOK TO YOUR PPO

If local pathologists participated in the formation of a Physician Preferred Organization (PPO), whether it be hospital-based, multi-specialty, or single specialty, we believe this is the first opportunity to re-visit.

If the PPO protected your pathology group, negotiated for you, and got you fees only for inpatient work, they did not fulfill their responsibility to you. If a pathology group owns a separate lab, or if it is paying technical component to its hospital(s) and marketing outside the hospital, the pathology group has a right to provide services to the PPO’s beneficiaries.

In many instances, the pathology group has the right to approach the PPO and reopen the entire issue. It can force the PPO to renegotiate contracts with the “universal” laboratory provider so that lab company only gets the clinical laboratory testing services. In pursuing this strategy, political considerations may prevent the pathologists from prevailing, but even in this instance, a direct written appeal to the Board of Directors may initiate the desired action by the PPO.

2. Strategy Two: ARE YOU SURE?

Too often I find local pathologists make a wrong assumption when a competing lab or a payer pressures local physicians to refer specimens to the contracted lab provider. Because these pathologists are aware that one or more labs hold a contract, they make an assumption that the contract specifically excludes non-contract laboratory providers.

I often find the opposite to be the case. But don’t expect your competitors—or the insurer—to readily admit this fact. There are many instances where non-contract pathologists can bill outpatient anatomic and cytology services to managed care companies.

Whether a lab services contract is held by one of the two major commercial labs, a regional lab, or even another pathologist-owned lab, it does not automatically exclude non-contracted pathology groups from having the right to bill for services. It is important to persistently query each managed care company to learn the specific facts about that lab services contract. In particular, determine if cytology and anatomic pathology services can be provided by a non-contract laboratory or pathology group.

Good News/Bad News

The outcome of this investigation may produce a good news/bad news situation. If pathology and cytology are included in the contract, pathologists may find that they can get recognized, but reimbursement will probably be at the level of what is paid to the commercial laboratory (very low), and may result in a marginal loss. At a minimum, this investigation into the contract’s structure and terms permits you to identify the specific testing services your group wants to provide.

If cytology and anatomic pathology are not part of the contract, I recommend that you immediately approach that managed care company. Open negotiations to gain recognition as an anatomic and cytology service provider and to negotiate a reasonable fee schedule.

Even if the contract restricts all lab testing services only to the contracted lab(s), you still have viable options and should not give up. It is time to make your case that the contract should be opened to include your pathology group as a provider.

Begin with the provider relations department. If that department indicates your pathology group cannot be paid for this work, move directly to the Medical Director of the organization.

Even if the contract restricts all lab testing services only to the contracted lab(s), you still have viable options and should not give up.

Keep in mind that your goal is to educate the right decision maker. For example, if a Medical Director practiced pediatrics for several years before accepting the position of Medical Director, it is unlikely that he/she fully appreciates the professional interdependence between the surgeon and the pathologist.

If the Medical Director says no, we have been successful in immediately filing an appeal to the governing board of the managed care organization. A word of advice—don’t get involved with the marketing people. They will only give you reasons why they like the single contract. We also find vice presidents and presidents to be a waste of time. They seldom provide any assistance.

Preparing To Negotiate

Before approaching a health insurer, it is crucial that you prepare a precise list of the procedure codes for which your pathology group wants the right to bill. If your group performs these procedures, interpretation of immunohistochemistry, fine needle aspiration, and flow cytometry must be included on this list.

In many cases, the insurer may indicate it does not have those testing services in their fee schedule. This provides another wedge for the pathology group. It can provide this unique service and it can educate the insurer about the level of fees needed to properly reimburse for these services.

There are other issues which can cause payers to make an affirmative decision. First, it is important that your legal counsel review state laws. That’s because some states passed a managed care enabling act which requires physician access to multiple laboratories.

In most states, there is a legal requirement that the contract bidding process be open to qualified providers. If it turns out that the managed care contracting entity requested a bid for only for a universal lab testing con- tract, that may be justification to file an administrative appeal to the Insurance Commissioner or another regulatory body.

3. Strategy Three: DOCTORS WANT US

There is a third strategy that can be powerful in certain circumstances. Have physicians send letters to the managed care provider requesting that your pathology group be added to the provider panel.

This requires a some work on the part of the pathologists. Surgeons and other physicians need to be personally asked to write a letter to the managed care entity. We make a point to provide several types of sample letters, in outline form! They can flesh it out on their letterhead, sign it and send it along. The letters should note the benefits which result from using a local pathology group as a provider. (See sidebar below.)

Have physicians address all their petition letters to one place at the managed care entity—the Medical Director. He is charged with maintaining clinical quality and keeping the panel of physicians happy. Remember that it is important for these endorsement letters to be unique, even as they request the same pathology group be added as a contract provider. When Medical Directors see a barrage of nearly-identical letters, they know who initiated the letter-writing campaign.

After these letters are sent (and a check is made to insure this happened), a representative of the group should follow up with the Medical Director. Most are open to scheduling this meeting. For pathology groups that either operate their own labs or operate under a “technical component purchase agreement,” diligent execution of these three strategies will generally result in recognition by the payer. Of equal significance, most such pathology groups negotiate fee schedules that are better than those in place for the commercial laboratory provider(s).

Have No Misconceptions

Pathologists should have no misconceptions. Each one of these three strategies can prove to be slow and time-consuming—not to mention frustrating. However, to our knowledge, these are the only methodologies that offer a pathology group the reasonable probability of gaining recognition for these laboratory services. Also, our experience teaches that is it important to follow these strategies in the sequence listed here. This maximizes the chance for success.

Here’s another secret from our experience. Obviously, each managed care plan requires a separate negotiation cycle. That can appear daunting at the start. But we’ve learned that, each time our pathology group earned recognition with one managed care carrier, it was easier to negotiate recognition with the next carrier. The same holds true for negotiating reasonable reimbursement for each contract.

Specimens Going Elsewhere

There is a reality every pathology group practice must face. The proportion of patients seen in hospitals is shrinking compared to the growth in outpatient procedures. It means that pathologists must expend extra effort to retain their access to specimens originating in physicians’ offices, in ambulatory surgery centers, and specialty hospitals. The strategies described above can be invaluable in helping local pathology groups maintain their market share. They can also spell the difference between success and failure over the long term.

Pathologists Offer Benefits To Local Physicians

WHEN HAVING PHYSICIANS write a managed care plan asking to have the local pathology group added to the provider panel, there are several benefits which can be mentioned. They include:

  1. Getting all tests for inpatient, outpatient, and outreach procedures from the same lab.
  2. Speedier turnaround time for biopsies, since national labs typically take a week or longer to report results.
  3. Improved quality of care, particularly if a pathologist is frequently asked to do formal (or informal) second opinions. The referring physician should write the payer and state clearly that he/she prefers to use the local pathology group for the initial case work-up.
  4. Quality of reports on outpatient tests, particularly biopsies. We find it effective for a surgeon to compare a biopsy as reported by the pathology group in his hospital with the biopsy report he gets in his office from a commercial lab. Such a comparison can be stunning in favor of the local pathology group.


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