For pathologists, 8% aggregate hike in Medicare pay

“That eight and nine percent increase is aggregate payment. Most people don’t have the exact case mix of the typical laboratory,” Dr. Myles said. “So, if you do a lot of flow cytometry for 2016, your effect is not going to be the same as a laboratory doing a lot of immunohistochemistry. That’s why we, as pathologists, need to know what types of codes are being billed in our laboratories so that when we see these changes we are able to calculate what the impact will be on our individual laboratory. As a laboratory director, you’re going to need to know that to plan your budget for next year.”

The critical importance of under-standing, demonstrating, and arguing for the true value of pathology and laboratory services was a constant refrain during The Dark Report webinar, “Boosting Your Pathology Lab’s Revenue in 2016.”

Vachette Pathology’s Raich delivered a sobering bottom line.

“You have to be a good businessman,” he said. “We’ve been in a time where it was very lucrative to be in a medical practice. I think the changes taking place now are a little bit different than what we’ve seen over the last 10 years. There’s a concept you need to have of margin, and how much you can make per CPT code, and per episode of care.”

Raich says the big-picture trend at Medicare, and consequently among private payers, is a greater move toward bundling payments for care, including laboratory medicine.

“The CMS has said it wants to package a lot of services and it mentions pathology services,” he said. “We can’t put our heads in the sand on this. We can’t say it’s not going to happen. I’ve had people say to me that it’s going to be predominantly fee-for-service for the next 25 years. I would like that, but I believe we’re out of money. And whenever you’re out of money, you have to cut your budget, and that budget’s going to come out of the physician side.”

Anticipating the trend, more hospitals are asking pathologists to join ACOs or come in-house as salaried groups, Raich said. When that is the offer on the table, it is essential for pathologists to put forward data that accurately reflect the revenue they bring in.

“One thing we know is that the health systems struggle from the revenue side on data. They can tell you their gross charge, they can even tell you their budget, but they have trouble telling you their revenue,” he said. “You need not only utilization numbers on your volume, but the numbers on your margins. You need to know, if your pathology group does a breast case, how much money you make on that case. Not collections, not charges, but collections versus revenues to show your margin.”

Tessier, of HBP Services, cited data from the MGMA showing that hospital-paid pathologists earn 80 percent of what their counterparts in private practice do while they are 22 percent less productive by workload units. He said pathologists on salary at hospitals should include incentives as part of their group agreements.

“As part of the value-based world, you have to demonstrate your value by engaging effectively with patients and ACOs,” Tessier said. “The first step in that process is by demonstrating engagement with the hospital administration’s concept of entrepreneurial spirit.… You need to be going into contract talks with goals and objectives and accomplishments.”

Examples of contract incentives that HBP clients have secured include a 25 percent share in savings from reducing send-out costs, 10 percent of the savings from slashing blood-acquisition costs, and a $10,000 bonus for achieving a 20-minute turnaround time on 90 percent of frozen sections.

“It’s extremely important to get away from flat-fee Part A arrangements, and to get into incentivized arrangements,” Tessier said during The Dark Report webinar, available for purchase at http://j.mp/dark_pathologyrevenue.

The difficult work that many pathologists and laboratories are doing to lead the way in reducing improper test utilization should not be rewarded with merely a pat on the back, Tessier added.

“I do feel strongly that if pathology groups can get to lower test utilization and controlling unnecessary send-out tests, we should anticipate a shared-savings incentive paid by the hospital,” he said.

In negotiating with private payers, Tessier advises clients to “go long” and seek four- or five-year contracts by giving up a bit on cost-of-living adjustments, reducing the increase to as little as one percent or even less in the fourth and fifth years of a deal. This can provide a corpus of stability in the payer mix during this period of payment pangs.

“This can still be a great move to make because payers love to get a deal,” Tessier said. “The more you go long, the more you hold on to the base of what the current reimbursements are.”

Kevin B. O’Reilly is CAP TODAY senior editor.