Pathology group practices across the country have yet to solve a major problem: in private practice settings, what is the right mix of compensation and equity for individual pathologists?

The question strikes to the nub of retirement expectations. During their professional careers, can pathologists build the value of their group practice so that, at retirement time, shareholder-pathologists have an equity share substantial enough to provide a comfortable retirement? To accomplish this, the business structure of the group practice must be managed so that it has value as an established business—value that potential buyers recognize and for which they will pay.

The lack of effective strategic business planning on this point was made painfully clear during the past five or six years. As the handful of pioneering pathology physician practice management companies (PPM) criss-crossed the country offering to buy pathology group practices, a rancorous debate emerged. In groups with both younger pathologists and pathologists nearing retirement, the older group was motivated to accept a rich offer from a PPM, bank the sales proceeds, then work the few years remaining before retirement. At the same time, younger pathologists, with many career years remaining, felt sold down the river if they were outvoted by the near-retirement set.

In my opinion, pathologists have done themselves a disservice by failing to spend more time on two strategic issues. First, gaining agreement among partners as to whether the pathology group practice exists either: 1) to provide a vehicle to earn income; or 2) as a business which, even as it pays income to its pathologists, is building value as a business—value which a buyer will recognize by paying a fair price if the practice were to be sold. Second, once the first strategic decision is made, the second issue is how to recognize the contributions of shareholder-pathologists. How do new shareholders buy in? How does the group practice provide a mechanism for departing shareholders to cash out?

To help pathologists and their group practice administrators better understand these questions and their solutions, The Dark Report, in conjunction with Haverford Health Advisors, is scheduling a two-day program on pathology transition topics. It will be held October 24-25, 2003 at the Hyatt Regency Hotel in Atlanta, Georgia. We'd welcome your suggestions, in advance, for topics that would interest you.

Med Tech Training Via Long-Distance Programs

More lab managers consider distance training to be one viable response to the MT shortage

CEO SUMMARY: Students from as far away as Oregon and Hawaii are using the online distance training program at the Medical College of Georgia, located in Augusta, to get their Bachelor of Science degree and medical technologist certification. Because many regions do not have a local MT training program, labs are demonstrating growing interest and support for online long distance learning.

Doc"Bill-Back" Policy Rewritten at LabCorp

Implementation of revised policy is noticed by laboratory competitors

CEO SUMMARY: Laboratory compliance continues to evolve. In response to changes it sees in the lab marketplace, Laboratory Corporation of America instituted a fundamental change in its policy toward billing back physicians who fail to provide documentation necessary for the lab to successfully bill Medicare. It no longer"bill-backs" client-physicians for"unbillable" tests.

"Pay for Performance" Starts For Calif. Docs

Initiative links substantial incentives to clinical outcomes and other elements

CEO SUMMARY: California is a bellwether state for healthcare innovations. Six of its largest payers are collaborating on"Pay For Performance," a program which pays financial incentives to physician group practices which achieve measurable outcomes in clinical care, patient satisfaction, and implementation of information technology. It's expected to be a model for similar initiatives in other states.

Public Laboratory Rankings: Lab Acquisitions in 2002 Changed National Market

Four national competitors absorbed by Quest and LabCorp in their efforts to sustain growth

"Companion Diagnostics" Enter Lab Marketplace

Expected to be good for diagnostic vendors, but mixed benefits for clin labs and drug firms

CEO SUMMARY: Although the field of pharmacogenomics is still in its infancy, it has begun to develop sub-specialty areas."Companion diagnostics" describes the marriage of a therapeutic drug with a specific diagnostic assay which can identify which patients will benefit from a prescription and which will not."Companion diagnostics" will generally have reasonable reimbursement for labs because of their high clinical utility.

Lab Industry Briefs

Genetic Analysis From Tissue Blocks Unveiled in Chicago

Dianon Sales Stars Leave LabCorp Amidst Rumors of a Start-up

INTELLIGENCE:

MORE ON: 20% Copay Lobbying

MICROSOFT HELPS PACLAB DEVELOP WEB-REPORTING

CYTYC'S PAP IMAGER GETS FDA APPROVAL