Loophole has driven “pod” labs into physician offices
CMS must stop explosion of physician office pathology labs
In 2004, alarmed by the potential for abusive billing practices and threats to patient safety, the American Society for Clinical Pathology launched its highly successful Stop Pod Labs Now campaign, to raise awareness of the problems these ventures pose to patient care and pathology quality.
We urged the CMS to do something about these small, strip mall laboratories set up and owned by doctors’ offices and often staffed by part-time pathologists, for the purposes of capturing the reimbursement intended for the performance of the anatomical pathology services they order.
The CMS heard us and revised its anti-markup rules, ultimately forcing the closure of scores of pod labs that were used by clinicians to mark up the cost of pathology services and pass the cost along to Medicare. But pod labs are not going quietly.
A loophole in the final rule has driven pod labs out of the shopping mall and into the physician’s office, where the same potential for harm exists. Unfortunately, we did not stop pod labs after all; they took on another life, in another form.
The loophole, an exception in the anti-markup rule, was intended to allow for blood tests, X-rays and other simple tests to be performed in the physician’s office. This exception was meant as a convenience for patients who otherwise would have to travel to another destination for the test, or to have the test in the doctor’s office, but then wait for the sample to be sent out to a laboratory and returned days later for a result that could otherwise take only a few minutes.
But many doctors—most commonly gastroenterologists and urologists—are setting up anatomical pathology labs in their offices to perform complex tissue biopsies for conditions such as prostate, colon and other cancers. Performing this type of test in the office in no way creates a convenience for the patient. It clearly does generate income for the doctor, however.
It also potentially drives up costs to Medicare and creates the real possibility that laboratory services will be of substandard quality. These biopsies are procedures that require that tissue specimens be processed by teams of highly trained professionals under the medical direction of a pathologist and analyzed by pathologists expert in the specific type of test being per-
A loophole has driven pod labs out of malls and into physician offices.
formed—in an accredited laboratory.
The nation is experiencing a surge in the number of physician group practices establishing in-office pathology labs for the express purpose of capturing the reimbursement for the pathology service. Laboratory Economics reported in November 2009 that the number of gastroenterology in-office histology laboratories more than tripled between 2005 and 2009, while urology in-office histology laboratories more than doubled during this time.
There has also been a corresponding increase in the utilization of pathology services, both in terms of the number of biopsies being performed per patient and the number of patients undergoing a biopsy, with essentially no evidence that these increases improve process accuracy or quality of outcome.
Usually these arrangements are structured to capture the technical component of reimbursement for the pathology service, although sometimes the professional component is also involved. The danger with these arrangements is that there is no legal requirement for the technical component—the highly complex process of preparing the tissue specimen—to be supervised by a pathologist. Instead, the anti-markup rule requires only that the supervision be provided by a physician, any physician, who is part of the billing practice.
Indeed, such potentially abusive billing practices, such as markups, fee splitting and kickbacks, can distort rational medical decisions, lead to the overutilization of healthcare services and higher medical costs for patients and third-party payers, and cause unfair competition by freezing out competitors unwilling to engage in such practices, as both the federal government and private researchers have noted.
These arrangements can also adversely affect quality of care by encouraging physicians to order services or recommend supplies based on profit rather than the patients’ best medical interests.
Patients most likely to be affected by selfreferral arrangements are often uninsured and those covered by private payers that have not adopted safeguards similar to those designed to protect the Medicare program from abusive billing practices. These arrangements hit hardest those patients least able to afford it.
In conjunction with national and state pathology organizations, the ASCP has helped organize a coalition to urge congressional leaders and the CMS to address this issue as soon as possible. Despite numerous meetings and a letter-writing campaign that has delivered more than 2,000 letters to the CMS and members of Congress, the CMS has made no commitment to close these detrimental loopholes in its 2011 Medicare physician-fee schedule.
The ASCP and coalition partners will continue to make their case to stop pod labs in whatever form they take so that we can prevent abusive billing practices and protect the pathology profession and the clinicians and patients we service. <<
Mark Stoler, a
physician, is president of the American Society for Clinical Pathology.