In response to a recent note (see: "Laws" Governing Future Employment; Relevance for Surgical Pathology), Barry Portugal, a well-known consultant in pathology and lab medicine, posted the following comment:
I agree that laws 1 and 2 probably won't have a major impact on pathology, but I have a different perspective about law 3. While there may be some referrals from small pathology groups to pathology groups with greater sub-specialization, I believe another market dynamic will be more prevalent. I believe that there will be a significant number of pathology group mergers over the next few years.
According to industry information, the majority of pathologists working in hospitals practice in groups of five or less. Smaller pathology groups are unable to negotiate effectively with managed care plans, and are often excluded from performing outreach work from plans offered by large insurance companies. Larger pathology groups with substantive sub-specialization and with more geographical diversity will be able to leverage multiple hospital contracts to be included in those networks and compete with national reference laboratories. Additionally, larger pathology groups can compete more strategically relative to the outsourcing of outpatient histology and pathology services to office-based practices.
I certainly respect Barry's opinion and expertise in the field. I further agree that larger pathology groups hold a distinct advantage over the smaller ones and that there may be mergers and movement toward larger pathology groups in the future. However, I think that there are also forces at work that run counter to such trends. In short, health systems hold many of the cards and the vast majority of pathologists may end up as hospital employees rather than in pathology groups. Here are my reasons for this prediction:
- Most of the momentum now is toward the emergence of rapidly growing health systems. In a previous post, I discussed how may physicians are moving out of private practice and into health systems (see: Physician Private Practice Declines; the Last Barrier to Emergence of "Big Medicine"). Health systems are consolidating to gain more negotiating power with insurance companies (see: Health Systems Use Their Regional Dominance to Muscle Insurance Companies). The federal government, through Medicare, is reducing reimbursement, particularly for private groups, with radiology as an important example (see: Radiologists Unite to Fight Sagging Reimbursements). If clinicians are increasingly moving their groups back to the welcoming arms of hospitals, why would pathology groups not pursue a similar strategy?
- Many surgical pathologists are seeking employment in GI/GU groups as contractors to these groups' in-office labs (see: The Importance of Integration of Insourced Pathology Services; Webinar on the "Insourcing" of Pathology Specimens by Clinical Practice Groups; Many Big Urology Practices Now Utilize an In-Office Histology Lab and Their Own Pathologist). I am not sure if this trend will persist, particularly if some of these GI/GU groups head back to hospitals.
- I believe that many smaller hospitals want to preserve their independence from neighboring large health systems. For them, contracting surgical pathology services to a "freelance" surgical pathologist may be a more desirable option than entering into a relationship with a neighboring large, hospital-based, multi-specialty pathology group.
Having said all of this, I agree with Barry that the "market dynamic" will prevail in the end. Right now and with all of the upheaval in healthcare, it's not entirely clear which of these forces will prevail. One thing that I am sure of: bottom line issues will carry the day with quality issues in second place.