Could This Be the End of Insourced Pathology Billing?

February 21, 2013

The cost for billing your anatomic pathology work just went up; as payments for services decrease, the cost for billing has to decrease equally.  If billing costs do not decrease at a rate even to the decrease in payments, then in fact your billing costs went up.  Look at the facts:

88305GB paid from 2012 CMS $105.86 Billing cost: $5.30 $5.30/ $105.86 =     Billing cost of 5%
88305GB paid from 2013 CMS   $70.46 Billing cost: $5.30 $5.30/ $70.46  =     Billing cost of 7.52%

If your billing cost is 5% on an 88305GB that paid $105.86 then it cost you $5.30 to get this claim paid.

FY 2013 Medicare Physician Fee Schedule (MPFS) Final Rule, released Nov. 1, 2012, CMS announced a 33% reduction to the global payment of an 88305.  Now the same 88305GB pays at $70.46 in 2013, but still costs you $5.30 to bill.  This is now 7.52% of the total payment.   This means you are paying an extra 2.52% for billing.  This may not seem like much but on a practice that collects $10M a year this costs about $252,000 per year.  Here are some examples of the changes by CPT code.


How are you going to handle this increased cost?  Many independent labs are saying that they are not changing billing and that they are going to see how it plays out.  These labs have a strong local presence in their communities and have a given missions statement to support their local economy.  This is very admirable.  Some labs will choose to out-source billing and use the savings to increase efficiencies in the lab, increase marketing presence, or drive managed care contracting.

My opinion is that no matter what your business is, you must choose the path of least resistance to stay competitive. Failure to do this leads to issues that defeat the business.  The key in any business is creating a profit margin. Those companies that can do this survive and those that don’t fail.  Some labs will fail as this recent change in payments has erased any margin in their current business model.

I can see the writing on the wall for self- billing.  The 2013 MPFS Final Rule cut the clinical lab fee schedule 4.5% and slashed the global charge 33% on 88305. These cuts are significant obstacles to overcome.

If you consider the current out-sourced billing world, you will see that these services are offering quality outcomes at very reasonable prices.  These billers have huge economies of scale.  They all have large proprietary billing platforms built specifically for pathology and lab billing, plus they can take advantage of the cost savings that comes from off shoring the manual part of billing, data entry for example. These variables allow them to bill more efficiently and at a lower price than most in-sourced services.

As an expert who has reviewed and audited pathology and laboratory billing processes and results for the last ten years, I can comment that there are some very effective in-sourced billing sites. But, if you consider the future of further cuts from Medicare and managed care plans, the proposed increase in the minimum wage and the burdens that come with the billing process changes, i.e. the point of service changes, self-billing is going to become more arduous in the future.
Mick Raich is a revenue cycle consultant who owns Vachette Pathology. He can be reached at or at 866-407-0763.

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