The St. Louis Post-Dispatch, a very large Missouri newspaper, recently published an excellent article on markups and client billing for pathology services. Among other things, the article quotes Dr. Art Caplan, chair of the Division of Medical Ethics at New York University’s Langone Medical Center, as saying biopsy markups are due in part to “greed” on the part of referring physicians.
The article, which was published on the front page of the Sunday, May 4 edition, jumps around a little bit, but overall does a very good job of presenting the issue of markups and client billing to its audience.
Markups due to “greed”
The article explains how physicians may pay a laboratory only $40 to process and diagnose a biopsy and then mark up and charge the patient up to four times what they paid the lab. Although not mentioned in the article, they achieve this by billing the patient or the patient’s insurance using anatomic pathology codes (88305 most often).
The article tells why physicians mark up pathology services:
Referring physicians, who have absorbed cuts in reimbursements from Medicare in recent years, rely on markups on lab services to help fuel their practices. They usually don’t have equity in these external labs, but still profit from the pathologist’s work.
Immediately after that, Dr. Caplan is quoted as saying markups are “purely a combination of ‘my time’ and greed.”
He goes on to say physicians who mark up claim the markups are justified because of “the time they expend to process a biopsy: sample it, box it, store it, send it, receive it, bill for it.”
Justification for markups falls flat
Unfortunately for these docs, the American Medical Association (AMA) disagrees with their reasons.
Marie Mindeman, Director of CPT Editorial Research and Development for the AMA, stated in a July 2005 letter that anatomic pathology codes are not appropriately reported for report communication regarding the relevance of a tissue diagnosis with the patient, office record-keeping, overhead or specimen handling costs.
Furthermore, Dr. Tracy Gordy, former chair of the CPT editorial panel for the AMA, stated in a July 2007 letter that anatomic pathology codes are “intended to be reported by the person who is responsible for the examination of the tissue(s) that were submitted for individual examination and pathologic diagnosis.”
Dr. Gordy also went on to say, “it is not appropriate for the treating physician to report CPT codes 88302-88309 as part of an office or other outpatient visit, hospital inpatient service or consultation.”
So these docs can try and justify it all they want, but the fact is they are using anatomic pathology codes for reasons that clearly contradict how the AMA says they should be used, and are doing it solely for profit.
Financial interest in pathology referrals leads to overutilization
The article briefly touches on a very important part of this issue I wish had been explained more:
But today, pathology services are often controlled by a referring physician who orders the biopsy, ships a specimen to an external lab, marks up the lab costs, and sends a final bill to the consumer and/or insurer for both the doctor’s visit and lab services.
I would have preferred the author to have gone into more detail about how pathologists and laboratories are never the ones who actually order a biopsy to be examined; that is purely under the control of the referring physician.
And since pathology charges increase with the number of specimens submitted, referring physicians who mark up and client bill for pathology services have an incentive to submit more specimens, because they will make more money if they do.
And we all know this is not simply theoretical. Every study which has looked at biopsy utilization has seen a marked increase as soon as referring physicians take a financial interest in their pathology referrals.
Knowing these details would most likely have made it much easier for people to see why markups and client billing for pathology services is such a bad idea for individual patients and the health care system in general.
Markups are clearly unethical according to the AMA
As we have discussed before, the AMA clearly states markups for pathology services are unethical, and the article discusses this briefly.
It cites the AMA Code of Ethics Opinion 6.10, which says, “A physician should not charge a markup, commission, or profit on the services rendered by others.”
It also highlights a 2001 opinion from the AMA Council on Ethical and Judicial Affairs that says markups for anatomic pathology services “exploit patients” and are contrary to the AMA Code of Ethics.
Missouri physician groups not impressed
Despite the fact the AMA says markups for pathology services are clearly unethical, Mr. Tom Holloway, executive vice president of the Missouri State Medical Association (MSMA), which maintains a “neutral” stance on this issue, was quoted as saying the issue of markups is not “sexy enough”.
Hmm. What a pity a professional organization of physicians does not consider unethical billing practices by its physicians to be “sexy enough” to do something about.
Even more troubling is the fact Chapter XIV, Section 1 of the MSMA bylaws states, “The ethical principle governing the members of the American Medical Association shall govern members of this Association.”
Maybe the MSMA should consider changing its bylaws.
But unfortunately, the MSMA is not alone. The article also noted Dr. Kate Lichtenburg, former president of the Missouri Academy of Family Physicians (MAFP), and Dr. Todd Shaffer, former board chair of the MAFP, told the Missouri medical board in 2013 that markups are “clearly not an ethical issue”.
Hopefully something will come of this article
I am hopeful Missouri pathologists, who have made several attempts with both legislative and regulatory authorities in the past, will be able to use this article as a springboard to getting client billing outlawed in Missouri.
The only people who benefit from client billing and markups are the referring physicians, and the practice simply needs to end in all states.