A pathology lab model can add to your income

Jul 01, 2006

Many urologists are in the process of trying to transition their practices from the hospital to the office, and are looking for opportunities for ancillary income. A number of ancillary services are being explored.

One option developed by urologists and other specialists is an off-site pathology lab, in which the practice sends specimens to a pathologist who is employed by the practice on a part-time basis. The site typically serves as the lab for multiple practices. The pathologist reads the practice's slides and submits a report to the urologist. The practice then bills the patient's insurance company for the pathologist's reading but pays the pathologist a much lower fee, resulting in the practice making ancillary income on the difference between the fee charged/collected and the fee paid to the pathologist.

Although this "pod lab" or "condo lab" model may appear attractive from a purely monetary point of view, the advantages are outweighed by very serious legal risks. A common form of the condo lab approach has been reviewed by the Office of Inspector General, which concluded that the arrangement could violate the federal anti-kickback statute and could therefore result in the imposition of monetary fines and penalties. Experienced health law attorneys indicate that, at this point, the condo lab model is viewed with deep skepticism by legal counsel and federal regulators alike.

This is referred to as a purchased service model (PSM) and only applies to patients covered by non-governmental insurances. The PSM operates as follows:

Instead of allowing the pathology lab to bill the insurance for its service, the urologist instructs the pathology lab to bill their office for the service at a negotiated rate. Subsequently, the urologist bills for the pathology service to the insurance company and receives reimbursement at the prevailing fee schedule.

Pathology labs participating in a PSM provide a succinct diagnosis reporting format, consistent turnaround time, and user-friendly supplies to collect, store, and transport biopsy specimens. They lead the way in exploring mutually beneficial business relationships that can provide clinicians an opportunity to profit from pathology services within federal and state guidelines.

Indeterminate readings of pathology specimens are a given, but a good lab will have a guideline in place to deal with them. Such a lab involved in PSM will trigger another reading when a specimen is not definitively benign or malignant. This reading is usually made by a nationally recognized uro-pathologist.

The PSM specimens covered by non-governmental insurances typically result in each urologist recognizing $30,000 to $35,000 per year in additional revenue.

On average, a urologist performs 10 to 12 prostate biopsies each month. At least 30% to 50% of these biopsies are covered by non-governmental insurances. A pros-tate biopsy case is reimbursed $1,200 to $1,500 by these insurances to a urologist within 4 to 6 weeks of submission.