Top 10 FAQs For Your In-Office Pathology Laboratory
1. With Medicare fee cuts, we hear this concept is dead?
These rumors are primarily spread by stakeholders with vested interests who are trying to prevent competition. Unless your practice is 100% Medicare, the IOP model of global billing is minimally affected by Medicare fee cuts. For example, if your practice is 30% Medicare, the recent fee cuts for tissue biopsy (33%) yield a net effect of 9.9% reduction. Our labs are designed to be highly efficient so they enjoy a much greater-than-average profit margin with virtually no overhead, unlike commercial labs. This is still a great investment with a six-month return on your money. Not to mention, with an IOP-installed lab, you have a valuable asset if you ever need to merge or sell your practice in the future.
2. We are contemplating a TCPC scheme with our current reference lab (local pathologist/national reference lab). Why consider an IOP-installed lab when TCPC is so much cheaper to set up?
TCPC is a reference lab dream come true. They get to keep the TC work while you split the PC fees with your pathologist (usually a 50-50 split, which is non-compliant). More than likely, they will also keep all the special stain and IHC stain revenues. It is the typical “lower risk, lower reward” business model. Not to mention, there are billing issues with many insurance companies regarding TC/PC split billings. An IOP-installed lab lets you bill the full global fees for tissue biopsy, special stains, and IHC stains. In addition, you pay your pathologist on a contracted basis. You bill globally (TC and PC) and get paid without any issues from split billings.
The biggest benefit to installing an IOP lab is that you are building a valuable asset for your practice. If in the future you decide to merge with another practice, or sell your practice to the hospital, you have an asset worth several hundred thousand dollars, which must be considered in the selling/merging process. TCPC, on the other hand, does NOT accumulate any assets.
3. We like our local pathologist(s). Can we continue to work with them in the IOP-installed laboratory?
Yes. We will negotiate a written, CMS-compliant agreement with the individual, or group, enabling you to maintain relationships with your preferred pathology group while we negotiate pathology services.
Note: IOP does not set pathologist compensation or encourage its clients to set pathologist compensation at a particular level. The amounts paid to pathologists are the result of negotiations between each individual IOP client and the pathologists with whom they work. As a result, compensation amounts vary, contingent on market conditions and other variables.
4. What does it cost to build and equip an in-office pathology laboratory?
There are costs to enter this new business, however, time is money. The longer it takes to install the lab the more your practice misses in new revenues. Our projects take 90 working days to complete. You start billing on the 91st working day. If a competitor is less expensive but takes 12 months to launch the lab, how much have you really saved? You have actually lost thousands of dollars in new revenues due to that nine-month delay. We are cost competitive with anyone. An IOP lab can be set up with our financing options and no money down, around $3,500/month.
5. Will our managed care plans recognize an in-office pathology laboratory?
Your CLIA-registered laboratory will provide pathology laboratory services for your patients just as your in-office chemistry laboratory. Every plan has different reimbursement criteria. To insure lab-compliant billing, we utilize the oldest independent pathology credentialing, coding, and billing company. Pathology billing is complex and national contracts abound. You may be good at billing for your clinical services, which have no national agreements. Pathology, however, is a difficult specialty to get reimbursed, with Quest and LabCorp holding numerous national and regional contracts with managed care plans. We also recently added a nationally-known expert consultant in contracting and credentialing to assist our clients in getting paid from the most stingy insurance plans.
6. Can we diagnose cases for other practices with our in-office laboratory?
Yes and no. To avoid issues with regulations governing self-referral, you may only diagnose and test your practice’s patients. This restriction includes ASC partnerships with multiple federal tax ID numbers. However, if the practice hires a pathologist as an employee, or makes the pathologist a partner in the group, then the pathologist can read cases from outside the group. If the physician is a dermatologist/dermatopathologist combination, that physician can also read cases from outside their practice but under a separate NPI number.
Current regulations, however, permit practices in the same postal address to legally share pathology lab start up costs, labor, and operating expenses. It can also be a mix of specialties (urology, gastroenterology, GYN and dermatology). There are additional requirements from a regulatory standpoint but IOP has experience in this area as we have done such arrangements very successfully for the past three years.
7. There isn’t a lot of space in our office. How much space do we need?
The ideal minimum is 300 square feet. This does NOT include space for the pathologist. However, we have installed both GI, dermatology and urology pathology laboratories in smaller spaces. CMS regulations allow pathology labs to be housed in the same building where you see patients. Beware of anyone claiming they can install a fully-functional anatomic pathology lab in 80-100 square feet. The only way this can be accomplished is by using manual staining methods (poor quality, very slow) and a non-self-contained pathology workstation for ventilation. More than likely it also means using a microwave tissue processor, which adds to construction expense (~$35,000) as they need external venting. On top of these issues, most histotechs and pathologists strongly dislike using them and claim the diagnostic readings are impaired. Installing pathology labs in what is essentially a small closet is not our idea of quality, state of the art, efficient, and productive laboratories.
8. How much return can each partner earn on this arrangement per year?
IOP provides an economic analysis per individual practice, as each group is unique. Contact us for a qualification evaluation at no charge. This analysis contains revenues, operating expenses and net profits. Our competition provides just costs.
9. What about buying used or “re-conditioned” laboratory equipment?
There are several consultants who install used equipment. They purchase it from a used equipment wholesaler at 30 cents on the dollar and then mark it up to the list price for new equipment. They pocket the difference ($200,000 - $300,000) to offset their low consulting fees (~$40,000). We consider this “ethically challenged” at best. After factoring in the equipment markup, these low-ball competitors end up charging more than IOP. Think of it this way: Would you buy an ‘84 Camry with 300,000 miles for your spouse or children to drive knowing it will break down every month? Your patients cannot afford that kind of downtime and service interruption. We use only brand-new equipment from the top manufacturer in the world.
10. Why do we need IOP when we can do this ourselves, or we can use a cheaper consultant?
You are entering the new business of pathology. We are the experts in the fields of regulatory, reimbursement, operations, legal, and management of in-office pathology laboratories. Without expert advice in these areas you will not maximize the benefits to your practice. It takes more than 1,000 hours (six months) to successfully complete one of our installations. Who in your practice can devote that many hours to such an undertaking? We do this project in 90 working days with a team of professionals. We know numerous groups that went at this alone and spent 2-3 times as much money, and took 2- 3 times as long. The lost revenues are often in the hundreds of thousands per month. With that billing time lost, a practice could pay the entire fee for a three-year IOP agreement and still make a handsome profit.
As for our competition with lower pricing, ask yourselves (and especially them) these critical questions:
1- Are you getting a true “apples to apples” comparison? Are you getting a proforma indicating all revenues, costs, and profits, or just costs?
2- Are they using used or “re-conditioned/re-manufactured” equipment? (See # 9)
3- Do they install a robust, proven lab computer system? Or do they just give you a list of commercial systems to evaluate and chose on your own? Our system can function in a 55 person GI group, which processes more than 120,000 cpt codes/year, as well practices as small as three GIs, and every size in between.
4- Do they take up to one year or more to complete what would be a 90-day project by IOP? Just calculate the amount of lost revenues due to the time wasted by consultants without any infrastructure like IOP. We have a project manager, a lab designer, local histotechnologists, and professional architects, not to mention experts in coding, credentialing, collection, and contracting. Plus we have more than 60 years combined pathology lab business experience (ten years with in-office pathology labs in particular).
5- Do they have billing, credentialing, coding, and collection experts to insure compliance and maximum reimbursements?
You may save a few thousand dollars doing it yourself, or going the low-priced consulting route, but you will lose hundreds of thousands of dollars in revenues every month you delay your laboratory launch. We know the time value of money better than anyone else in this business.
1340 Lakewood Drive
Lake Forest IL, 60045
(p) 800. 280.3785