For a growing number of urology practices, establishing in-office laboratories holds more appeal than sending the work outside. (This model is not cost-effective for nephrologists.) The popularity surge may be related to the crackdown on “pod” labs by the Centers for Medicare & Medicaid Services.
These facilities essentially served as physician office labs for various practices, but were located far from the practice itself—sometimes in a different state. Now, all physician office labs must operate in the same location in which the practice sees the bulk of its patients.
Having set up about two dozen in-office urology labs around the country—and counting—Bernie Ness, co-founder of the Chicago-based pathology consulting firm TWINCREST, has received a lot of positive feedback from his clients.
“The physicians have noticed an increase in the quality of the pathology readings, since the same pathologist does the reading day in and day out,” he says.
As a survivor of prostate cancer who remembers the frustration he felt when his specimens would be sent not to the best pathologists but simply to the labs dictated by his insurance coverage, Ness is particularly attuned to the improvements in patient care. “One physician told us that having the pathologist as part of the practice made a big difference, because when necessary he could just walk the patient down the hall and have the pathologist explain a complex finding.”
And administratively, of course, “it’s easier [for urologists] to mainly be dealing with their own lab rather than, say, four outside labs that they had been using.”
Once a practice does decide to move forward, Ness advises the group on matters ranging from the design and size of the lab, to the equipment and staff needed, to recruitment of and pay structures for lab staff. He also provides pathology reporting software and billing expertise.
Ness has found that the in-office laboratory option is not economically viable for urology practices referring fewer than 4,000 biopsy vials a year. Urologists who do choose to establish their own lab generally should plan on making an investment of about $150,000. And they can’t split the costs with other practices. “No lab-sharing is allowed; all practices using the lab must have the same federal I.D. number,” Ness cautions.
The client-bill model
As it happens, there is a legal but sometimes controversial middle ground between office labs
and outside labs for urologists: the client-bill, or purchase-service, model. A physician choosing this option bills the patient directly for lab services delivered by an outside vendor, and then the physician pays the lab a discounted fee for the lab work rendered.
Jeffrey Small, MD, is a strong proponent. “I’d heard about this and as a solo practitioner, I was intrigued,” recounts the Bridgeport, Conn. urologist. “It’s good for the patients and it’s a way to keep your head above water financially with reimbursements being cut in other areas.”
Although Medicare won’t pay physicians through the client-bill model, many other insurers will. Some practitioners worry about the conflicts of interest potentially spawned by this close relationship between physician and lab, but Dr. Small believes the strategy makes smart business sense for urologists, and he has been impressed by Lakewood Pathology Associates, his partner in this arrangement. “I have easy access to the pathologist, and because Lakewood is a smaller, growing lab, they go beyond the call of duty in customer service.”
Edwin Hendrick, the senior vice president of sales and marketing for Lakewood, is happy to hear that. “We think there’s now a market and a niche for a higher-service-oriented laboratory, and that has allowed us to take business away from some of the larger providers.”
Based in Lakewood, N.J., the lab’s new leadership team can be found on the West Coast, the target of their expansion plans. (Dr. Qureshi of QDx was a partner and medical director of the company prior to its being acquired by the current owner.)
Hendrick says his company sees urologists being forced to use larger labs because of insurance, accept longer turnaround times, and endure a lack of support on the pathology side. “The urologists want to trust the people they’re dealing with [in the laboratory] and know that those people will be there on a day-today basis.” But he believes that one of the greatest benefits a urologist can get from the lab is knowledge about the latest available tests.
“It’s hard for busy urologists to read up on all the new molecular and genetic markers that are out there,” explains Hendrick. “They’re going to have to rely on some of the vendors even more so now to show them what’s [available] in the marketplace that can help their practice.”