News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel

News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
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How Close Is the End of Private Practice Pathology as We’ve Known It?

Payers are cutting reimbursements for anatomic pathology services, making it essential for every pathology group to understand its financial present and future

Certain pathology business leaders are warning their colleagues that the era of private pathology group practice domination of the anatomic pathology marketplace is about to end. The only question is how rapidly the clinical and financial foundations of smaller pathology group practices erodes to the point where these groups are unable to generate adequate reimbursement to sustain the practice and the incomes of the individual pathologists.

However, along with this bad news comes a note of optimism. There is a once-in-a-lifetime opportunity for the anatomic pathology profession to take ownership of genetic testing and precision medicine—the most important diagnostic technologies to emerge in the past 100 years. The danger for anatomic pathologists is how to successfully transition from the private group practice model to the new clinical practice models that deliver genetic testing and precision medicine services.

Why Pathologists Are Making Less Money Today

The economic plight of private practice pathology is familiar to all pathologists. During the past decade, reimbursement for technical component (TC) and professional component (PC) services was regularly beat down by payers. For example, pathologists lost the TC grandfather clause in 2012, which immediately caused many histology labs to go from profit to loss. (See Dark Daily, “In Fixing Physician Medicare Pay, Congress Enacts Yet Another Cut in Clinical Laboratory Test Fee Schedule,” February 12, 2012.)

Similarly, over the past 10 years, each time private health insurers negotiated the renewal of a managed care contract with a pathology group practice, they aggressively cut the prices they paid for anatomic pathology services. And the corresponding explosive growth of narrow provider networks exacerbated the financial erosion from lower prices. Many smaller pathology groups found themselves excluded from these networks, causing them to lose access to the large numbers of private-pay patients served by these networks.

“It is important for every surgical pathologist and every pathology practice administrator to recognize that they have the ability to negotiate much more favorable terms and increased network access with health insurers, but only if they come to the negotiating table with the right information and techniques,” observed Robert L. Michel, Editor-in-Chief of Dark Daily and The Dark Report. “Pathology groups showing strong financial performance today know these techniques and strategies. When negotiating managed care contracts, they achieve higher reimbursements, more favorable terms, and in-network status.”

Proven Ways to Help Pathology Groups Protect and Increase Revenue

Pathologists who would like to protect their groups’ revenue and bolster their partners’ income have the opportunity to learn and master the most effective managed care contracting techniques and strategies. Three nationally prominent experts in pathology business and operations are participating in a special webinar, titled “How Payers Are Repricing Anatomic Pathology: Your Financial Present and Your Pathology Group’s Future,” which takes place on Thursday, September 28, 2017 at 2:00 p.m. EDT.

Pictured above left to right are Mick Raich, President and CEO, Vachette Pathology; Jeffrey Pearson, MD, System Medical Director, Bronson Hospital Laboratories; and, Christopher Jahnle, co-founder and Managing Director, Haverford Healthcare Advisors. The three distinguished speakers will share expertise and experiences you can use to protect your pathology group’s revenue while preserving partner income. (Photo copyright: Dark Daily.)

First to speak on this webinar is Mick Raich, founder and CEO of Vachette Pathology, of Blissfield, Mich. He will discuss how Medicare and private insurers are using new pathology and lab repricing models to slash reimbursement and control utilization of expense pathology testing services. Raich will explain why payers are engaging such third-party companies as AIM Specialty Health of Chicago, Avalon Healthcare Solutions of Tampa, Fla., BeaconLBS of Montvale, N.J., and InformedDNA of St. Petersburg, Fla., to develop coverage guidelines, issue preauthorization, and manage the network of labs and pathology groups allowed to provide services.

Raich will further explain what pathologists must know about the Medicare Access and CHIP Reauthorization Act (MACRA) physician payment program, with its MIPS—Merit-based Incentive Payment System—that is designed to pay bonuses or assess penalties each year, depending on how individual physicians perform against their own operational and clinical benchmarks.

Insidious Methods Payers Use to ‘Take Back’ by Underpaying Certain Pathology Claims

Another topic that Raich will address can mean significantly greater collected revenue for your pathology group. He will explain the new phenomenon of how private payers are auditing error rates on claims, then taking back those overpayments by underpaying the labs or pathology groups on claims for specific CPT codes (current procedural terminology codes). Raich will show how your billing/collection team can detect these claims and recover full payment from the payers.

How One Pathology Group Practice Doubled in Size

The second important financial topic of the webinar involves the merger, acquisition, and consolidation of private pathology group practices. You’ll learn why many group practices are losing their independence due to declining revenue or because their parent hospital was acquired by a health system. Pathologist Jeffrey Pearson, MD, is the System Medical Director at Bronson Hospital Laboratories in Kalamazoo, Mich. He is also a partner and President of Pathology Services of Kalamazoo, PC.

During his tenure at Bronson, Pearson helped facilitate the acquisition and assimilation of two hospital laboratories and one for-profit laboratory. His pathology practice has doubled in size and developed a high degree of subspecialization. Each time, the pathology group associated with the acquired entity had to be integrated with his health system’s existing pathology group practice. Experiences will be shared regarding:

·       How to assimilate acquired laboratories;

·       Practice utilization management; and

·       Leveraging success to grow the practice and obtain favorable part A contracts.

Understanding How to Increase the Value of Your Anatomic Pathology Group

To round out the financial techniques and strategies you and your pathology practice administrator can use to protect your group’s revenue and boost partner income, the webinar’s third expert will discuss the latest developments in pathology practice mergers, acquisitions, and consolidations.

Christopher Jahnle is co-founder and Managing Director of Haverford Healthcare Advisors in Paoli, Penn., a suburb of Philadelphia. Over the past decade, his firm has represented Aurora Diagnostics of Palm Beach Gardens, Fla., as a purchaser of private pathology group practices.

Jahnle will describe the specific characteristics of a private pathology practice that have the highest value to buyers in today’s marketplace. You’ll understand how your pathology group’s unique mix of managed care contracts, hospital/health system relationships, and sub-specialist expertise will be valued by a potential acquirer or merger partner.

Jahnle will share case study examples to help you identify useful things your pathology group can do to make it more profitable and increase its value. This is essential knowledge if your group’s pathologists are considering such strategies as:

·       “Should we merge with a bigger pathology group?”

·       “Should we sell our pathology group?” and

·       “Should we add subspecialists and pursue more hospital contracts?”

All three expert speakers have practical knowledge that you can use to protect your pathology group’s revenue while preserving partner income. It is why this webinar is timely and a “must attend” for you, your pathology practice administrator, and your pathology group’s legal and financial consultants.

Full details about this important webinar are at this link (or copy and paste this URL into your browser:

—Michael McBride, Managing Editor

Related Information:

How Payers Are Repricing Anatomic Pathology: Your Financial Present and Your Pathology Group’s Future

In Fixing Physician Medicare Pay, Congress Enacts Yet Another Cut in Clinical Laboratory Test Fee Schedule


Facing the Looming End of Fee-for-Service, Clinical Laboratories and Anatomic Pathology Groups Look for New Business Models

Failing finances at technical pathology laboratories may be the most immediate concern for many pathology group practices

Many clinical laboratories and anatomic pathology groups now recognize the new reality of the American healthcare system: less reimbursement for laboratory testing. On one hand, the fee-for-service prices for lab tests paid by government and private payers have been aggressively slashed.

On the other hand, all payers have become stubbornly resistant to issuing coverage guidelines and setting adequate prices for the flood of new molecular assays and gene tests coming to market.

These trends have already brought a handful of medical laboratories and pathology practices to the point of bankruptcy, sale, or closure. This is definitely true for the technical laboratories owned by many local pathology groups, which have become unprofitable due to fee cuts. (See below.) (more…)

New AP Company Buys Five Pathology Group Practices

It may be a good news/bad news development for the anatomic pathology profession. This week a new anatomic pathology company made itself official and announced that it had already signed letters of intent to purchase five pathology laboratories. Aurora Diagnostics, Inc. is the new firm. Based in Palm Beach, Gardens, Florida, it was launched by four lab industry veterans.

Aurora Diagnostics represents good news in anatomic pathology because it wants to buy anatomic pathology groups and laboratories that meet certain criteria. It has $300 million in funding to execute those acquisitions. For pathologists looking to realize cash from their practice, as well as tap a new source of growth capital and management resources, the newly-formed Aurora Diagnostics may be an interested acquirer.

Aurora Diagnostics represents bad news in anatomic pathology because it means a new competitor will soon be putting sales reps on the street to compete for referrals from office-based physicians. For pathologists already facing sustained competition from national AP companies in the market, Aurora Diagnostics may soon be a competitive threat in their market.

The executive line-up at Aurora Diagnostics is comprised of familiar names. Founders of Aurora Diagnostics are James New, Chairman and CEO; Martin Stefanelli, Chief Operating Officer; Chris Jahnle, Business Development; and Kirk Rebane, Business Development. Aurora launched operations in July 2006 and has lined up $300 million of funding from Summit Partners and GSO Capital Partners, LP.

All four individuals are well-known to the laboratory profession. New is the former Chairman and CEO of AmeriPath. In that role, he built the company into a $500 million enterprise before it was sold to Welsh Carson Anderson & Stowe in early 2003. Stefanelli was COO at AmeriPath. Jahnle and Rebane are principals with Haverford Healthcare Advisors in Paoli, Pennsylvania. For more than a decade, Haverford has done business valuations and helped laboratories and pathology group practices in merger and acquisition negotiations.

There are several intriguing aspects to the business plan of Aurora Diagnostics. Expect a more detailed assessment on this nascent company in upcoming issues of The Dark Report. Should you have information or questions about Aurora Diagnostics, e-mail Robert at