You can profit from pathology services when the lab charges you one rate for its services, then you bill a patient's insurer a higher reimbursement rate. Here's an example: You send a patient sample to an outside lab for testing. The lab charges you a discounted price - say, $50 to examine a biopsy. The patient's insurer then reimburses you for a much higher amount, say $100. The difference, $50, is pure profit. Be aware, however, that authorities and insurers are scrutinizing such arrangements, which were investigated in a front-page story in the Sept. 30 Wall Street Journal.

"I don't believe docs should contract with path labs and raise the prices. The path labs should deal directly with the patient or their insurance," says Robert Fusco, MD, medical director of the Three Rivers Endoscopy Center in Moon Township, Pa. "We have been approached by several and refused involvement."

While so-called referral deals aren't new, people in the industry say they've grown rapidly in recent years as doctors seek new sources of income and demand grows for expensive lab work to detect diseases such as prostate cancer (see "How to Bill for Pathology Services," September, page 28). It's just one of many factors to consider when picking a pathology service for your facility.

Hospitals and lab companies
One of the earliest choices you'll face is whether to employ your local hospital's laboratory or a local or regional pathology services company to examine your samples. The decision may revolve around personal or political motivations: Perhaps a majority of your surgeons formerly worked out of one particular hospital, or perhaps the medical director has a personal feeling toward one option or the other.

There are advantages to both options. Larger, academic-based hospitals may have an experiential edge in that they tend to have a broader spectrum of pathologist specialties on staff and they use more confirmatory tests and intradepartmental consultation to find a definitive diagnosis. This pool of knowledge at their disposal gives them the ability to handle larger, more complex cases.

Outside labs, on the other hand, are more service-oriented, owing to the fact that they're for-profit businesses. This is, it must be mentioned, an aspect that hospitals are warming up to in this time of fierce healthcare competition. Additionally, lab companies may offer the advantage of matching your specialty. A GI specialty lab or an oncology specialty lab, for instance, may provide a level of detail that a hospital's lab department might not.

A pathology service's specialization is an important factor to consider when deciding who's going to be reading your biopsies. It's a niche market, and if your caseload includes a high volume of dermatology or thyroid cases, for example, seek out a service that matches that specialty.

"It is important to ensure the pathologists performing the work are well-trained, with extensive experience in the GI specialty," says John Poisson, executive vice president of Physicians Endoscopy LLC, a Doylestown, Pa., practice management company. "We prefer to work with groups whose members are fellowship-trained GI pathologists."

If you drill down in your search to determine whose level of expertise in a certain area you're confident with, you'll gain better results and avoid ending up with inconclusive ones.

Quality controls
There are a number of ways to ascertain the quality of your candidates. Board certification by the American Board of Anatomic Pathology is a good indicator of their professional standing. Affiliations with regional academic institutions may prove beneficial in assisting them to examine cases of higher complexity. Whether, where and in what fields the lab company's principals attended fellowships is another source of information, as is their degree of involvement with professional organizations.

While there is more than one industry association that inspects and accredits labs, the College of American Pathologists (www.cap.org) is considered the gold standard. Its peer-based process, run by pathologists for pathologists, inspects labs every two years on such grounds as organization, adequate staffing and space, procedure manuals and internal quality assurance reports.

The latter are especially important, given their bearing upon the results you'll receive from them. Says Mr. Poisson: "The accuracy of the reports (to their clients) is critical, not only from a clinical perspective but also from an administrative point of view. Errors within patient names, dates of birth and other demographics must be minimal."

Seeking out personal references is as always a valuable tool when buying or hiring. Collecting input from colleagues about their experiences with lab services or gauging physicians' levels of satisfaction with companies offers a ground-level view of the customer service a pathology lab provides.

Returns and results
Besides the accuracy of its results, a pathology lab's turnaround time is often the most urgent feature to the facilities that hire it. You'll want to check the track record of the services you're considering. They're required by law to maintain internal quality assurance and performance improvement documents. A prospective client can ask for a copy of such reports. So, for instance, you could review their average turnaround time for skin biopsies over the last 12 months. If a lab pleads ignorance of such documents, that would be a definite red flag.

You'll also want to look into how they present the results of their examinations to you. Some major reference labs have invested a good bit of money into slick presentation. Says Mr. Poisson, "Gone are the days of simple black-and-white text. Most of our vendors now provide full-color reports with embedded photomicrographs of the specimen samples."

While that's an attractive presentation, keep in mind that what's reported in the text is much more important. In fact, I'd venture to say that immediate access is more important than presentation. You may prefer not to be at the mercy of waiting for a hard copy at all, and some labs do offer electronic availability. Then your lab results are accessible through a secure server at any time - whether your surgeons are at the facility, their practices or their homes - or delivered directly into your medical records system, with no filing, faxes or other paperwork involved. This option is extremely valuable if the results are needed in the event of an after-hours emergency, when you don't want to reach the lab's operator.

Telepathology may also be a growing trend. At present, it's primarily used for education and consultation with researchers at academic medical institutions, but it could also provide new capabilities, so that pathologists can review slides prepared in a lab from a specimen and share their findings with the submitting physician via the Internet.

"Nearly all of our selected vendors have constructed Internet portals to examine results online during a teleconference session," says Mr. Poisson. "This is state of the art."

Price points
As with any purchase, you cannot be insensitive to how much pathology services will cost your facility, especially in light of the budget-conscious and managed-care-driven atmosphere of the healthcare industry. You don't want to be losing money on your volume of biopsies or services that patients' insurers don't recognize.

Pathology services is a competitive market, and one major selling point for national laboratories is their ease of use through direct billing. Provide us with the patient's insurance information and the sample, they say, and we'll get the examination and payer or patient billing jobs done. For small- to mid-sized facilities and practices, that takes a lot of work off your hands and can boost your efficiency.

As we outlined at the outset, another selling point is potential profits through client billing. Federal laws prohibit medical referrals for financial interest, and the American Medical Association warns against profiting from another's services. The users of client billing arrangements explain that they don't have a stake in the pathology service, and the insurers' reimbursements defray the costs of sample preparation, delivery and billing. Healthcare industry observers note, however, that the process raises ethical questions involving suspicions of kickback and inducement, overuse of testing and prizing discounted rather than quality pathology.

At present, Medicare and the states of California, Iowa, Louisiana, Montana, Nevada, New York, Rhode Island and South Carolina require direct billing for pathology services, unless the physician or facility was directly involved in the services. In Florida, Michigan and Oregon, facilities can bill, but with no price markup. Facilities in Arizona, Connecticut, Delaware, Maine, Maryland, New Jersey, Pennsylvania, Tennessee, Texas and Vermont may bill, but must disclose the arrangement to the patient.

In the final analysis, the price of pathology services is important to your bottom line, but not at the expense of quality results. "The medical perspective is, ?Am I getting quality service?' The administrative perspective is, ?Is this cost effective?'" says John Gleason, administrator of the Berks Center for Digestive Health in Wyomissing, Pa. "You want to find something that meets both of their needs."

Keep in mind, however, that if the surgeon is not happy with a pathology services' results, it defeats the whole purpose of carefully choosing a lab to provide these most critical of answers.

The right lab partner
In recent years, the field of anatomic pathology has developed rapidly in terms of what it can offer the medical community and its patients. While once the goal of sending tissue samples to a lab for analysis was to diagnose a potential cancer, pathology labs can now determine the stage and progress of a malignancy and, through examination of immunohistochemistry and flow cytometry markers, assess the ability of available therapies to treat it.

Given this potential for high-accuracy patient care, if you're looking to hire a pathology service you'll want to shop carefully to find the one that will best serve your surgeons, patients and facility.