Loop­hole has driven “pod” labs into physi­cian of­fices

CMS must stop ex­plo­sion of physi­cian of­fice pathol­ogy labs

Modern Healthcare - - News - Mark Stoler


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.

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