Pathology Lab For the Gastroenterologist

Pathology Lab Disclosure:
For the Gastroenterologist
• Currently contract Pathologist Services
Harry Sarles Jr. MD FACG with Quest Inc.

• Currently own shares in ASC’S through
ownership in Digestive Health
Management

• Currently own and operate a path lab,
infusion centers and an anesthesia
company.

PRE TEST Methylene blue stain/stomach

• Identify the following images

Small Bowel NL/ABNL Small bowel

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Esophagus Colon Polyp

Pre-Test Why a pathology lab?

• A Pathology Lab can be an ancillary service in • If you own an ASC you must develop a
your ASC that brings added revenue. pathology management plan.

• Xylene is carcinogenic but is needed for • Can represent a significant revenue
processing tissue even with a microwave stream to the practice depending on the
processor business plan.

• HVAC installation for your lab will be your least • Can be helpful in contract negotiations
costly budget item. with insurance companies as part of the
menu of services provided.
• A pathologist always does the specimen
grossing.

CPT CODES Reimbursement Dallas 2005

• 88305 level IV surgical pathology, gross • 88305- $108.47
and microscopic examination • 88312- $83.11
• 88313- $60.35
• 88312 special stains for microorganisms • 88342- $93.36
• 88313 special stains (other) iron etc. • These codes are not bundled and are
• 88342 immunohistochemistry (each
reimbursed 100% even with multiple
antibody) codes on the same specimen (same day)

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Reimbursement Dallas 2010 What is at stake? (pathology
revenues) demonstration only
CPT GLOBAL TC PROF-26
• San Antonio Endoscopy Center (SAEC)
88305 $102.16 $65.06 $37.10 • Last month did 694 cases (220 EGD’S 474

88312 $98.48 $72.28 $26.20 Colonoscopies)
• 87 CMS patients, 607 insurance or private
88313 $72.03 $60.36 $11.67
pay
88342 $98.61 $57.11 $41.50 • 134 specimens (bottles) / 100 CMS

patients
• 93 specimens (bottles) / 100 contract

patients

SAEC model continued SAEC model continued

• $68.92 (TC) x 117 med. pts. = $8,063.64 • $78,136 / month gross cash flow
• $90.00 x 567 contract pts. = $51,030.00 • $937,632 / year gross cash flow
• 100% of EGD specimens got special • This model is based on actual volumes in

stains and 10% of colon specimens got a real EASC, published CMS
special stains. reimbursements and hypothetical contract
• 39% of bottles get additional codes rates.
($68.08 CMS, $72.00 non-CMS) • All estimates are on the conservative side.
• $68.08 x 46 CMS specimens = $3,131
• $72.00 x 221 non-CMS = 15,912.00

Zig Ziglar Pathology Options for the ASC

• If people like you they’ll listen to you, but if • Outsource all of your pathology specimens
they trust you they’ll do business with you. to a pathology company, hospital, etc.

• Build your own pathology lab as an
extension of your practice (office) not an
ASC extension per federal guidelines.

• Hire or contract pathologist services.

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Pathology Options State Regulations

• Federal laws (Stark regulations, New anti- • Some states have anti-markup regulations
markup legislation as of 2009 final rule) as well.

• State laws (anti-markup and disclosure • Many states also have disclosure
regulations) requirements.

• Ethical considerations • Advisable to understand what your state
• Contracting ability with insurance requires and to stay informed of new
health care legislation that could inhibit
companies and pathology companies. your labs ability to exist.

CMS anti-markup provision Anti-markup (2009)

• Part of anatomic pathology diagnostic • The anti-markup provisions will not apply to the
testing services. TC if the TC is supervised by a physician who
performs at least 75% of his or her professional
• Final rule 2009 services for the billing physician.
• Requires lab to be an extension of your
• The provisions will not apply if the TC is
practice where space and employees are conducted is conducted in the same building as
yours. the office of the ordering physician.
• Net effect dissuades part time lab
arrangements (pod/condo) that are shared • With respect to the PC the pathologist must do
among several practices. 75%of his or her services for the billing MD or
perform the services in the same building as the
billing MD.

Zig Ziglar Ethical guidelines

• The only way to coast is downhill. • AMA ethical guidelines policy 8.09
addresses all laboratory services.

• www.ama.assn.org
• Summary…A physician should not charge

an excessive mark-up above the amount
for the service provided and accounted for
by the laboratory.

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Ins Company contracts What actually happens in a
pathology lab (key steps)
• E&M codes
• Procedure codes • Fixation
• EASC codes • Accessioning
• Carve-outs (pathology, pharmacy, imaging • Grossing
• Processing
etc) • Embedding
• Plans are interested in quality, access, • Microtomy
• Staining
and above all else COST!

Fixation Accessioning

• Specimen placed into formalin vial • Lab aid will assign unique ID number
• Vial labeled, transported in biohazard bag • Large volume lab should be computerized
• Specimen should not remain in formalin
to print accession number, patient name,
for more than a few hours to avoid brittle stain, company name, and biopsy site on
biopsies the slide and cassette using a diamond
stylus. (cost $28,000-$100,000)

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Grossing

• Slides are set aside
• Specimens are removed from the

formaldehyde and placed into a microflow
cassette for submersion into reagent
alcohol.
• The initial part of the path report is
generated using dictation (usually by the
technician)

Processing

• Removal of water from tissue and penetrating it
with paraffin.

• Removed with graduating concentrations of
alcohol.

• Xylene is introduced to remove dehydrants from
tissue.

• Xylene is misable with paraffin that penetrates
the tissue

• Paraffin has similar density to tissue to ensure
smooth cuts when embedded on a cassette
block

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Processing Cont.

• Xylene is a known carcinogen and
requires professional disposal.

• Microwave processors are new technology
using fewer reagents, minimizing xylene
usage and can cut processing time from 8
hours to 45 minutes. (cost $25,000 each)

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Embedding

• The specimen is placed on or into a block
of paraffin.

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Microtomy

• Blocks are cut into 4 micron slices and
placed on a water bath at 42-45 degrees.

• Slices are placed on the pre-prepared
slide and heated to 60 degrees for 15
minutes to melt the slice onto the slide.

Staining

• Usually automated (cost $10,000)
• Special stains can be automated at great

expense or manual by a specially trained
technician at reduced cost.
• Slides are read, dictated, report generated
and returned to the operator.

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Your Cost Personnel

• Space and personnel will be determined • Staffing accounts for 50-70% of the labs
by your volume. direct cost.

• HVAC (heating, ventilation, and air • Salaries vary widely. A recent survey
conditioning) an unexpected high showed $12-$23/hr on a national basis
expense.
• R. J. Buesa Salaries in Histology Annals of
• Joint venture or go it alone. Diagnostic Pathology 12 (2008) 122-127
• Consultant / architect (ASC contacts are
• A good tech can do 800-1000 specimens
not the right way to go). (estimated cost a month.
$35,000- $400,000)

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Staffing levels Staffing levels

• For every 3 pathologists there are usually 4 • Additional needs are transcriptionists,
histotechs secretaries, histology aids, and potential
ASC site personnel.
• Histotechs typically can process 8,600-13,800
blocks per year depending on lab set up and job • Courier service
descriptions. Those doing mainly embedding • Lab director
and sectioning can handle the higher volumes.

• R. J. Buesa Histology staffing levels still a work
in progress Advance for Medical Laboratory
Professionals I Sept. 25, 2006 22-24

Mock Budget Harry Do’s

Consultant / architect $50,000-$400,000 • Seek legal counsel but do not invite them
to a doctor meeting
Build out (HVAC) $100,000-$500,000
• Avoid ASC consultants and architects for
Lab equipment $100,000-$200,000 Path Lab needs

Fixtures $30,000-$40,000 • Use Path Lab consultants but be aware of
their costs and ongoing contractual
Computer hardware and $20,000-$40,000 arrangements
software
• Use high quality path lab equipment (you
Phone system and $15,000-$20,000 can’t afford to go down!)
wiring

Personnel 1 tech / 10,000 blocks/yr

Summary #315,000-$1,200,000

Harry Do’s Harry Do’s

• Get Insurance contracts in order before • Stay in a growth mode in your practice
opening your lab. • Focus on Quality in our increasingly

• Use microwave processing if possible to competitive marketplace
minimize xylene usage and improve • Add Legislative and regulatory spending to
efficiency
your annual budget/business plan
• Identify and hire a histotechnologist • Spend $1,000-$5,000 annually to help
champion to lead you through the process
and direct your lab reverse our GI misfortunes with CMS and
congress.

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My contact info Consultant

• Harry Sarles Jr. MD FACG • Randy F. Wills MBA, President of Wills
• 214-274-5464 cell Associates Inc.
• 972-771-2222 office
• [email protected] • 561-659-4541 office
• 561-758-3932 cell
Post Test • 561-671-7513 fax
• [email protected]

Methylene blue stain/Stomach

Small Bowel NL/ABNL Colon Polyp

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Esophagus Small bowel

Post -Test Zig Ziglar

• A Pathology Lab can be an ancillary service in • Obstacles are the things we see when we
your ASC that brings revenue. (F) take our eyes off our goals.

• Xylene is carcinogenic but is needed for tissue
processing even with microwave processing (T)

• HVAC installation for your lab will be your least
costly budget item (F)

• A pathologist always does the specimen
grossing (F)

Zig Ziglar

• If standard of living is your major objective,
quality of life almost never improves, but if
quality of life is your number one objective,
your standard of living almost always
improves.

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