On March 2, 2013, the Board of Directors of the American Academy of Dermatology (AAD) approved a position statement on billing for pathology services that takes a pretty strong stand against markups and client billing. I had heard this change was forthcoming, but was not sure when. Many thanks to Dr. Julie Barber for alerting me to this development.
In its position statement, the AAD makes clear physicians should be able to bill for their own work. This includes dermatologists who buy the TC from an outside lab and read their own slides (the dermatologist should be able to bill for the PC) as well as dermatologists with their own in-office labs who read their own slides (the dermatologist should be able to bill global).
The AAD also strongly supports allowing a dermatologist to utilize the dermatopathologist of their choosing, even if that dermatopathologist works in the same group.
There are several things one could discuss in the position statement but I want to focus purely on the AAD’s stance on markups and client billing for pathology services.
Here is the pertinent section from the AAD’s position statement:
The Academy is concerned about the ethical and legal propriety of the following practices:
- Technical component (TC)/professional component (PC) arrangements that involve splitting the services between a dermatology practice performing the TC and/or the outside reference pathology lab performing the PC, or any combination or permutation thereof should not be designed for the financial gain of the dermatology practice. This may endanger patient safety, undermine quality of care, raise medico-legal risks/compliance red flags, and invite ethical concerns.
- Purchased service arrangements for ancillary dermatopathology lab tests provided by an outside pathology lab to a dermatology practice that then inappropriately marks up the cost and bills for work not performed by the billing dermatology practice. This arrangement results in a lowering of the level of resources available for providing pathology services to patients, invites scrutiny from state regulators, and is clearly unethical.
- Dermatology practices purchasing the TC and/or PC of dermatopathology services from an outside lab have been notified by the Academy that, where permitted by law, client billing is appropriate ONLY when necessary to ensure access to high-quality dermatopathology services. Any mark-up can only cover the administrative cost incurred by the dermatology practice. Marking up purchased services solely for profit is unethical and is considered egregious and unacceptable by the Academy.
Let’s take these one at a time.
The AAD is basically warning its members to only perform biopsies for legitimate medical reasons and to not take financial considerations into account when setting up a business arrangement with a laboratory. No argument from me on that one.
The AAD is telling its members they should not mark up and profit from ancillary tests (presumably immunofluorescence, immunohistochemistry, etc) performed by an unaffiliated laboratory. It even goes so far as to say doing so is “clearly unethical”. Again, no argument from me there.
What I found refreshing in this section is the AAD says marking up, billing and profiting from pathology services one does not provide (which of course requires the service to be sold to the dermatologist at a discounted rate) “results in a lowering of the level of resources available for providing pathology services…”
This is the first time I have seen this point raised by a clinical organization, and it is an extremely important one.
Pathology laboratories can be very expensive propositions. A large reference laboratory that has the capability of performing immunohistochemistry and immunofluorescence can have hundreds of thousands, if not millions, of dollars invested in real estate, equipment, employee overhead, etc.
When unethical clinicians desiring pure, unadulterated profit from work they do not do give laboratories an ultimatum—either sell them a service at a steeply discounted rate, thereby ensuring a razor-thin profit margin for the lab, or lose an entire book of business—there is little ability for the laboratory to upgrade equipment or bring in new tests and products.
This then serves only to force smaller independent labs to redirect more and more work to mega-reference labs and will eventually lead to a degradation in patient care at the local level.
I am very pleased with the AAD for recognizing this problem.
Markups can only cover administrative costs
While I understand where the AAD is coming from with this statement, it provides an unfortunate loophole that an ethically-challenged dermatologist can still use to his/her benefit. A dermatologist who wishes to profit from a markup arrangement could simply say, “Yeah, my administrative costs are $80 per 88305.” And without subpoena power, no one from the AAD or anywhere else would be able to prove the dermatologist’s admin costs are actually nowhere near $80 per 88305.
What the AAD does not address (but is perhaps understood nonetheless) is there are basically no administrative costs for the referring clinician who sends work to an unaffiliated lab. This is because every lab provides its clients with formalin containers and a FedEx number; the clinician does not have to pay for any of that.
Even if a clinician does have to pay for shipping and handling of specimens (which they don’t), the AMA has said the 88305 CPT code is not the appropriate code to use. Instead, CPT 99000 (handling and/or conveyance of specimen for transfer from the physician’s office to a laboratory…) should be used.
Furthermore, the clinician already has a coding/billing staff somewhere that handles codes and bills for the clinical services the dermatologist provides. It takes almost no additional work for that coder to append “88305 times whatever” to a bill.
This is a step in the right direction
I would like to commend the AAD for taking this step towards protecting patients from unethical profiteering; its position has not always been so clear on this issue. It says a lot that the AAD took this step, seeing as dermatology has historically been one of the worst transgressors in this area. Perhaps that is why the AAD has taken the position it has.
That being said, while position statements from professional organizations are nice, there is no enforcement mechanism in a position statement to actually prevent physicians from unethically marking up. Until markups for pathology services are legislatively outlawed in all fifty states, there will still be unscrupulous physicians who exploit patients simply to enrich themselves.