6th Annual Business of Pathology Review

The year 2011 has been an interesting year for healthcare and for physicians in general. It marked the beginning of the national healthcare plan and all the good, bad, and indifferent things that come with this change. The changes to pathology payments were affected also.

There are three main issues that are directly affecting pathologists’ incomes. They are increasing self-pay billing, managed care denial tactics, and poor billing practices.

The billing world is only now feeling the effects of the unemployment market. The COBRA 1 coverage offered by large employers covers 18 months of healthcare. Only now are we seeing these patients in the system as true self-pay. In some cases, hospitals and health systems, and even labs, are paying a patient’s extended CORBA 1 coverage as this allows them to bill the patient’s insurance company versus billing the patient directly. Another important factor in play here is the ever-increasing personal deductible. Just five years ago many employees had a $500.00 deductible; now more and more employees have a $5,000.00 deductible. Since the patient is directly responsible for more health care dollars, the account becomes much harder to collect and more likely to move to the collection bucket in the end.

It is more important now more than ever to have a clean self-pay demographic file, and an efficient self-pay billing process. This should include credit card payments and a strong collection process. The bottom line is that in many areas of the country the self-pay collection rates have dropped from 11%-8% to around 5%. 

The managed care billing world has become more complex as the industry matured. There are numerous tactics that these plans use to force the work to their “approved” labs and to keep payments in check.

Several national payers have made it very clear that they want all work that is leaving the network to be pre-approved; without pre-approval these claims are automatically denied. Some payers now require a group to bill under two separate tax identification numbers if they are billing from two sites or types of service and one of them is non-participating.

Another favorite tactic is to deny or reduce payment to the referring physician if they send work outside the network. Another trick is for the managed care plan to black-ball a provider if they leave their provider network. Some have taken to sending letters out to all the employers in the area telling them that a provider is no longer participating and telling their enrollees to use a different hospital or provider.

There is also an increasing trend for insurance plans to deny claims. Many national plans deny over 15% of all the claims that are billed. This means billers have to work harder to appeal these cases and gather payment. The payment rates now offered by managed care plans are reaching new lows. Several plans have offered their clinical lab fee schedule to hospital pathologists and independent labs. Also, many offer these rates directly through the group’s PHO or MSO and never tell them this is their competitive national fee schedule at about one-third of the CMS physician fee schedule. This is equal to getting paid $18.00 for an 88305-26.

More and more of these managed care insurance plans are now routinely denying any clinical charges including the CMS approved clinical charges. Many practices have negotiated carve-outs for clinical pathology or improved anatomic pathology rates to compensate for this loss. 

Finally, 2011 seems to be the year for many catastrophic billing failures. In review of over 70 pathology practices, laboratories, and hospitals, it seems we have found a new genesis of billing errors. As billing becomes more complex, the failures only compound the lost revenue.

For hospital-based groups we see numerous billing errors made on the payment side as the billing entities struggle to keep up with network and affiliate arrangements. Often groups think they are getting paid one rate only to find that they are getting paid a much lower rate through a silent PPO or network arrangement.

Many hospital based groups own a small private independent lab. In some cases these groups bill both professionally and globally under the same tax identification number. It is inevitable that in this arrangement the payers choose the lowest rate. It is quite common to see global bills paid at a professional rate.

For independent labs the main struggle is to build and maintain a strong list of managed care plans.  Sometimes this means lowering their expected payment rate to gain a managed care contract.

Some hospitals are now bringing their pathology groups in-house and putting them on salary. In this case we see the hospitals paying a fixed salary to the pathologists but not truly understanding how much revenue they are bring in to cover these costs. We are working with more and more hospitals nationally to help them bill and collect for these services correctly. 

The year 2011 has been an interesting year for pathologists’ payment arrangements. The year 2012 will see an even bigger change as we expect to see ACO’s take bigger stage and fully expect to see more bundling of services by both CMS and the commercial payers.  Stay tuned…