Urology & GI Physicians Bring Pathology In-House

Erodes long-standing business relationships between local path groups and specialist docs

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CEO SUMMARY: Increasing numbers of urology and gastroenterology specialist groups are deciding to bring anatomic pathology services in-house. This phenomenon has gathered speed during the past year and is becoming a threat to the long-term financial and clinical stability of the anatomic pathology profession in the United States. Every pathology group needs a strategy to cope with this trend.

IN TODAY’S HEALTHCARE MARKETPLACE, growing numbers of specialist physicians are taking active steps to capture pathology revenues by bringing anatomic pathology (AP) services into their group practices.

Leading this charge are urologists, with gastroenterologists and dermatologists not far behind. It is a recent trend. Until one year ago, there were relatively few examples where a specialist group had successfully brought anatomic pathology into its group practice.

In-House Anatomic Path

That is no longer the case. During the past 18 months, THE DARK REPORT estimates that as many as 100 specialist physician groups nationwide have successfully internalized all or part of the anatomic pathology cases generated by their patient populations. A current assessment of this phenomenon leads THE DARK REPORT to predict it will accelerate during the next 24 months—assuming no swift actions to quash this trend are taken by federal healthcare regulators or private payers.

The threat to the profession of anatomic pathology is both real and immediate. Moreover, the long-term negative consequences of this trend on anatomic pathology will directly reduce the availability and quality of pathology services to patients, physicians who use pathology services, and the nation’s health insurers—both government and private.

For these reasons, it is important for anatomic pathologists and pathology practice administrators to understand the forces driving this trend and develop effective business and relationship strategies to counter it.

This issue of THE DARK REPORT is devoted exclusively to the subject of specialist practices bringing anatomic pathology services in-house. You will read intelligence, information, and analysis exclusive to THE DARK REPORT and presented in advance of other sources available to you. It’s required us to expand and add pages.

We analyze this trend to answer several questions. It will take two special issues of THE DARK REPORT. In this issue, we tackle four questions. First, how do you recognize the movement by specialist physicians to bring anatomic pathology services in-house? Second, what makes pathology condominium laboratory complexes a new business model?

Third, what different business concerns are raised when a specialist group owns an on-site versus off-site anatomic pathology laboratory? Fourth, why have recent market forces motivated specialist physicians to look at anatomic pathology services as an ancillary revenue source for their group practice?

Who’s Behind “Condo Labs”

In the August 9 issue of THE DARK REPORT, these questions will be answered. One, who are the major organizers of these new and disruptive business models? Two, what type of financial analysis is convincing specialist physicians to make investments in their own pathology lab operations? Three, how does this business model raise concerns about overutilization and possible declines in clinical quality and AP services? Four, which legal and compliance issues make these pathology condo labs a high-risk proposition to their specialist group owners? Five, are there efforts inside Congress, Medicare, and the OIG to address the expected problems from pathology condo labs?

The issue of pathology condominium laboratory complexes requires immediate attention. In both Florida and Texas, the number of pathology condominium complexes is mushrooming. This reflects the speedy response of urology and gastroenterology groups to the financial opportunities of such investments, notwithstanding the considerable compliance and regulatory concerns triggered by such schemes.

I believe that, at this point in time, THE DARK REPORT probably knows more about the national scope of this serious issue than any single individual or entity. One reason this is true is that the executives and physicians organizing many of these pathology laboratory condominium complexes are going to extraordinary lengths to hide their business from the general public. In some cases, their corporate offices and pathology condo lab complexes have unlisted telephone numbers.

I recommend that pathologists and their practice administrators pay close attention to this fact. Why would developers of a new business, particularly one which is attracting the investment dollars of so many prominent urology and gastroenterology groups in multiple states, want to be invisible to the public, the press, and the healthcare profession?

One reasonable conclusion is that they understand their business arrangement skirts extremely close to the bounds of Medicare compliance, physician self-referral, and other serious legal issues. The organizers understand this is a high-risk strategy, one that can quickly trigger the wrath of Medicare/Medicaid investigators, not to mention private payers.

Something To Hide?

The murky, “below-the-radar” aspect of this trend should trouble the pathology profession. Further, it is obvious that the greatest direct legal exposure is to the urologists, gastroenterologists, and dermatologists who participate in a pathology condominium lab scheme. It is these specialist physicians who will pay the biggest price whenever Medicare and Medicaid investigators come calling and decide to declare that pathology condominium laboratories might meet the form of the law, but they fail to meet the full intent of the law.

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