Consideration of the Underlying Forces that Promote Pathology Insourcing

I have been trying to understand the points made by Joe Plandowski in his guest blog of yesterday about pathology specimen insourcing (see: Continuing Discussion: Insourcing of Pathology Specimens by Specialty Groups). Joe is a veteran lab professional who is currently a consultant and assists GI/GU groups in the build-out of their in-office labs. This should have been apparent to all readers from his comments but I want to state it for the record. After thinking about his ideas, I have come to the conclusion that major drivers are operating to accelerate the trend toward specimen insourcing. Here is summary of four forces that are affecting the pathology practice model:

• Diminishing importance of hospitals. GU/GI specialists are opening ambulatory surgery and endoscopy centers and their private practices are consolidating into mega-groups. Removed from the gravitational pull of hospitals and their embedded pathology services, these groups are now free to seek these services in the marketplace. Specialized surgical pathology reference labs are often favored in such an environment because of economies of scale, their access to capital, and the greater productivity often required from their pathologists. These firms may also be more responsive to the service needs of the specialty practices than hospital-based pathologists.
• Complacency and culture of hospital-based pathologists. Many hospital-based pathologists are now salaried and may have lost, or never acquired, entrepreneurial instincts. Although some hospitals have launched successful lab outreach programs, the C-suite hospital executives often spin-off these ventures as soon as they become profitable and a willing commercial lab bidder shows interest. These same hospital executives often have little enthusiasm or understanding for outpatient or ambulatory care and view the labs as both a reliable "utility" and a source of profits, requiring relatively little capital investment.
• Insourcing as a source of new positions for "local" pathologists. I had never thought of this before Joe raised the point, but insourced jobs are now opening up for "local" pathologists in the GU/GI specialty practices. This provides an acceptable alternative to the niche commercial surgical pathology reference labs, some of whom he identifies in the blog note. He may be correct that this new "local" employment opportunity for pathologists is suppressing criticism of the trend by our national pathology societies. It would be helpful to know exactly how many pathologists are employed by these specialty practices in order to better understand the political power than they wield.
• Changes in academic training programs. Most, if not all, academic pathology training programs now segregate specimens by organ type: GI, GU, skin, pulmonary, etc. Pathology residents rotate through the various specialty reading rooms, working beside faculty pathologists. These same residents then often sign-up for one or more fellowships in specialty areas. We are training a crop of super-specialists, many of whom only feel comfortable in a specialized academic setting, a niche surgical pathology reference lab, or working for an insourced GU/GI group. I hasten to emphasize that similar trends may also be occurring in other medical specialties. As Joe emphasizes, many such young pathologists would covet a five-year contract, enabling them to diagnose mainly prostate biopsies all day. However, what happens at the end of this five year period if a newly-minted pathologist vies for the same job and has a better understanding of current science and technology?

Comments

[Jack Shaw]

This trend has a direct spill-over efect on hospital lab programs, especially ones that have an outreach business component. The hospital is losing an important source of revenue from the facility component of the in-sourced work. This creates another negative market dynamic in an already highly competitive market.

Managed care plans are increasingly more aligned with physicians than with hospitals and will generally contract with the specialty group for such testing even over a par hospital's objection.