Lab Soft News: Continuing Discussion: Insourcing of Pathology Specimens by Specialty Groups

I recently posted a note announcing a webinar on the insourcing of pathology specimens (see: Webinar on the "Insourcing" of Pathology Specimens by Clinical Practice Groups). The title of the presentation indicates the need to "fight back" against the practice. Graham Grieve submitted the following comment: Why is [specimen insourcing] a threat to the specialty of pathology? Shortly afterward, Joe Plandowski sent the following note to me that I now offer to readers as a guest blog.

What is wrong with "in-sourcing" of specimens by specialty groups? Consider these points:

Many large, and not so large, GI and Uro specialists have moved out of the hospital into their own facilities for patient procedures (e.g., ASCs [ambulatory surgery centers] and Endoscopy Centers).
Large specialty groups (GIs and Uros) have lots of specimens and their work usually goes to the niche players that specialize in GI or Uro specimens. These include Caris, Bostwick, Oppenheimer, GI Pathology, Plus Diagnostics, and CBLPath, just to name a few. Some of these companies offer $35 or lower global 88305 fees for non-Medicare work [as well as] color reporting, rapid turnaround time, pathologists with specialized GI and Uro training, and computer-to-computer data entry/reporting.
For the most part, local pathologists, especially those that are hospital-based, cannot compete in this environment. To do so means they need [to provide] competitive services such as color reporting, couriers, pathologists with specialized training, and computerized links with the client. Anyone who understands hospitals knows that is not about to happen on the hospital lab side.
When a GI or Uro group decides to in-source specimens, a dramatic shift occurs. Now the local pathologist is in control again because the niche players can't compete by placing a pathologist in that in-sourced laboratory. The niche players have all their pathologists in pens back at the "mother-ship" [and] not roaming across the landscape.

Why no hue and cry from organized pathology? Consider these points:

The official statement is they don't like in-sourcing and are fighting it.
In my opinion the membership, if not the leadership, [of pathology societies] is beginning to recognize the realities of the market. By taking ...a position anti in-sourcing, organized pathology [would be] decimating the local pathologist's ability to compete and crimping his/her compensation....[W]ithout local in-sourced labs, the work will move out-of-town to one of the niche players.
Specimens [will] continue [to move] outside the hospital as specialists find ways to improve their incomes. When that happens, the hospital-based pathologist takes another financial hit. One way to minimize the hit is to [enable pathologists to] follow the specimens into an in-sourced lab.

Other thoughts:

In the considerable number of in-sourced labs in which I have been involved (except one where the client overruled our strong recommendation), local pathologists have been awarded five-year agreements to provide medical directorship and professional pathology services [to the specialty group].
All in-sourced labs, except one where the client overruled our strong recommendation, have been accredited by COLA. These are high quality labs that today contain [sophisticated digital pathology] equipment.
Whenever an in-sourced lab is being built, [local] pathologists [clamor] for an opportunity to get the contract. We have never had a problem obtaining competent local pathology services for in-sourced labs.

I find it interesting to watch this situation unfold. On the one hand,...the typical [local] pathologist's emotional reaction [is] "that's our work --- why are they profiting from it." My reaction is they are profiting from it because pathologists have not recognized the realities of the market. Had they done so, pathologists [could] have been building labs for these specialized groups and securing long-term professional services contracts at those labs. On the other hand, [it is possible for the] local pathologists [to negotiate for] the professional pathology work they are seeking [from] these in-sourced labs under relatively favorable terms.

I have spent a lifetime in this industry and have watched it evolve over the years. [Pathology insourcing] is just another of the many twists and turns of change that have occurred. Technology and sound financial decisions drive the market. Technology makes it easier to move a single type of routine tissue preparation (e.g., prostate) downstream into an in-sourced lab. Financial decisions get made by specialized groups that see an opportunity to move [their practice out] of the hospital and bulk-up [their] ancillary [diagnostic] services. This should not [come as a] surprise except...to the pathology community.

Joe Plandowski
847-840-3077