Dollars and Sense Add Up for PSA Cooperative
Feature Article
CAP Today, March 2005
As it approaches its 10th anniversary in May, Pathology Service Associates, LLC, continues to broaden its base of back-office services and membership among small to mid-size pathology practices, enabling them to keep thriving in a competitive health care marketplace, say PSA leaders and members.
Adhering to the philosophy that physicians and hospitals benefit from independent, locally practiced pathology, the Florence, SC-based network has grown to more than 70 practices, consisting of one to 20 pathologists, across 21 states and the U.S. Virgin Islands, says founder Louis D. Wright Jr., MD. PSA's core benefit to its affiliated practices is handling all their billing and collection, he says, but out of that springs an ever-widening menu of services ranging from compliance advice to marketing training.
Recent additions to PSA's portfolio include its certification as a grantor of CME credits, an expanding array of benchmarking services as its client database grows, and the survey and communication device TellPSA, an online survey bulletin board. PSA also recently produced a corporate video about its services hosted by former Olympic figure skater Peggy Fleming.
"As we've grown over 10 years, we've identified more and more needs, and that's resulted in developing more and more business tools that we provide for our practices," Dr. Wright says. "That continues to be our mode of operating. Most often we discover that a need in one place is a need in another place. So we build a business solution."
Since joining PSA's network in November 2002, Utah Pathology Services Inc., a 17-pathologist group based at three hospitals owned by Intermountain Healthcare, has benefited greatly, says Terry Rich, MD, a board member and former president of the group. I'm not sure where we'd be" without PSA's help, Dr. Rich says. "They have helped us to remain financially viable."
He adds that PSA takes a proactive approach. "When they notice something is happening, they call us," he says. "They say, 'Have you checked on this?' I almost feel like they're fighting to get the money in for us." On a personal level, he adds, "They're very happy, pleasant people to work with. It's almost been a family relationship."
That bond traces to PSA's founding as a five-practice cooperative in South Carolina a decade ago. Dr. Wright says the group united over shared woes in developing adequate business-support tools for their practices.
"It became the consensus view that, rather than each of us invent that back office, we needed to be more efficient and competitive," leading to the co-op concept, he says. "We talked to our friends and neighbors around the country. That created a more diverse interest in what we were growing. We began to grow by word of mouth in one geographic area after another." Advertising and occasional recruiting also have helped boost membership to where it is today, he adds.
Those who join the cooperative receive a package of services, Dr. Wright says. "We of course provide all the billing and collection," he says. "We have marketing programs and train marketers. We have a compliance program to keep our practices all operating carefully within the legal context for laboratories. We're regularly doing surveys to find things that our practices think are important."
PSA does one-shot consulting services for unaffiliated practices, typically a market assessment, Dr. Wright says. That involves "going out in your marketplace, seeing who has the business, who your competitors are. It becomes sort of like a big Andersen Consulting" contract, he adds. But PSA limits that sort of arrangement: "If they want a bunch of things, they need to be on board for the whole array."
Dr. Wright says PSA's services have become more valuable for smaller practices as larger commercial labs have grown and payments for services have declined. "People are having to do more to make the same revenue stream they had a year ago," he says. "That means they might have to tippy-toe into someone else's traditional service area to keep their economics afloat. That's not unique to pathology."
The upshot of that? Dr. Wright gives what he readily admits is a biased answer: "It means the little guys need help. The little guys have the ability to sustain their practices if they'll aggregate into big co-ops. Essentially, that's what PSA is: small operations in communities coming together, for many reasons, to become more competitive with people who are intruding in their realm every day."
CEO Al Sirmon says that's the key: "That small, four-man practice, on their own, couldn't afford to go out and purchase a sophisticated billing system like we have. The only option is to outsource.... That's why the co-op works very well for these practices. It allows them to have access to high-end management, financial management, or marketing management, without having to bring that in-house. Quite honestly, a 10-man group probably can't afford that."
Edward W. Catalano, MD, PSA's board chairman, explains the philosophical underpinnings. "Our ultimate goal is the preservation of the private practice of pathology. Anything we can do to promote the specialty and ensure its viability gives great satisfaction," says Dr. Catalano, director of Columbia, SC-based Professional Pathology Services, PC, a 15-pathologist group that covers several hospitals and that belongs to PSA.
"PSA has helped impress upon us the importance of infrastructure in practice viability," he adds. "To be competitive with the commercial labs, we need to not only have an excellent professional product, we also need to follow best business practices and be compliant in coding and all the compliance issues. We also have to have a very high-level marketing support team."
Affiliated practices of PSA's cooperative always have seen billing and collection as the core benefit, and that hasn't changed, Dr. Wright says. "We get involved, we apply patient insurance information, we file the claim with the insurance, we collect the money," he says. "That's the main purpose: We file those charges and collect the money."
Sirmon says that's simpler said than done and, in fact, grows more complex all the time. The typical array of payers to a given practice might be as many as 200, he says, including several different products within such larger accounts as Aetna or Cigna, and new technology is generating new coding all the time.
"It's critical nowadays that we monitor the payers and make sure they're paying according to their contract," Sirmon says. "We also need to make sure affiliated practices are getting paid for the new [codes], and we generally have to educate insurance companies about them." Adds Dr. Wright, "All the payers want to turn and run from these [newer] services. It's a constant challenge to get them to understand that these services have value and, if applied the right way, might even create a cost savings."
Dr. Rich in Utah says billing had become too complex for the "very small" in-house group that had been doing it for Utah Pathology Services. "Before joining with PSA, our outpatients would receive two bills, one from the hospital for technical charges and one from the pathologists for professional charges," he says. PSA worked with the hospital to set up a global bill so the patient would receive only one.
Fred Worsham, MD, chief medical officer of Charleston (SC) Pathology, PA, says patients have enjoyed greater clarity in billing through the use of PSA's services. "Patients don't understand what a pathology bill might be about. We wanted a service that showed exactly what we did," he says. When they still don't understand, Dr. Worsham explains, PSA provides phone consultations. "There is somebody on the end of the line who can say, 'You had a tissue removed, a pathologist examined it under a microscope, this is standard procedure.'"
Rex Pathology Associates, a six-pathologist practice in Raleigh, NC, has been using PSA for eight years since switching from a more generic billing service, says Stephen Chiavetta, MD, president of Rex, which works almost exclusively for Rex Hospital in Raleigh. The prior billing service provided quarterly reports but not much else, says Dr. Chiavetta, who adds that Rex's collection rates now exceed 95 percent.
While such bottom-line results might be the affiliated practices' top concern, Dr. Wright says the data collected and reports generated lead to questions, which often lead to discussions about other services the affiliated practices might need. "The more they study their billing reports, the more interest they develop in these ancillary services," he says, adding that PSA has the most accessible and one of the largest pathology-specific databases in the country. With a database of this magnitude, Dr. Wright adds, "PSA can provide statistically significant information on the economics of pathology."
For example, with marketing, "Dr. Jones used to send tests; now he doesn't. Why not? You realize you need someone on the street," Dr. Wright says. PSA can broaden that picture with its market assessment program, MAP, which analyzes the distribution of pathology services in a given ZIP code. "That's led to our practices recognizing they need somebody to help them market in their area. Well, we have a training program," he says. "The more they use the full basket of business utilities we provide with billing, the more successful they are as economic enterprises."
Dr. Rich says Utah Pathology Services used the market assessment program to determine it had about 35 percent of its market, and to figure out who sent tests and who didn't, and what they liked and didn't like about the group's services. "That MAP was very instrumental in being able to set up a plan," he says, adding that the group hired a hematopathologist and two dermatopathologists after seeing the results.
PSA also screened more than 150 applicants for the newly created position of practice manager at Utah Pathology Services and helped the group interview the four finalists for the position. "They had the expertise on what to look for in a salesman," Dr. Rich says. "We were naïve." And PSA continues to help track revenue month to month, he adds. "We know when the revenue from a practice is going down," he says. "We send someone over to find out what's going on—are they on vacation for two weeks, or did they start sending to someone else, and why?"
Finally, PSA provides the group credibility in working with the hospital administration and finance department. "They can talk financial jargon with the financial people at the hospital and back it up with credible financial data," Dr. Rich says.
Instead of hiring its own marketing person, Charleston Pathology has used PSA's client service representative program to advocate its services to physicians' offices and make sure it stays in-network for given insurance plans when larger commercial labs try to keep it out, Dr. Worsham says. "There are an awful lot of things that can muddy the picture for a physician who wants to send cases to you," he says.
On the compliance side, PSA provides training for marketers and managers to stay current as government regulations continue to evolve, Dr. Wright says. "In the last couple years, we've had all the confidentiality and security issues to deal with, and we have compliance programs where we assist our practices in making them be sure they are compliant with all the HIPAA and confidentiality laws that are out there," he says.
"We're a certified grantor of CME credit, so we have programs regularly for our pathologists for coding and compliance, so the pathologists themselves understand the proper way to code their work and therefore stay within the law," Dr. Wright adds. PSA looks at that issue upfront: "When we are negotiating with a practice to become involved to provide business services, we do what we call a functional audit of the practice to be sure they meet our ethical standards."
Dr. Rich praises PSA's tenacity in doing such audits. "That's one thing I have been extremely impressed with," he says. "We're a group that wants to err on the side of charity over greed and trying to make sure our coding and compliance are right in line. We don't want to be out there in the gray zone."
Rex Pathology Associates, which receives sample cases to code once per quarter, has found the continuing education to be valuable, Dr. Chiavetta says. "You send in your results, and they send back to you their results and their comments." He adds that lawyers retained by PSA hold teleconferences on various compliance-related issues.
The PSA network helps facilitate the affiliated practices' joint involvement in legislative and regulatory affairs. Dr. Catalano cites recently passed direct-billing legislation in South Carolina, which became law over the governor's veto and requires that pathologists directly bill patients for their work.
"It was primarily PSA-related practices that took the lead in that initiative," he says. "The commercial labs would use client billing as a sort of loss-leader to get the clinician to send all the lab work to them.... The direct billing law is a mechanism to try to put us on a level playing field with these commercial laboratories."
Dr. Chiavetta says the network helped organize a class-action arbitration against United Health Care for payment of clinical laboratory services. "Otherwise, we wouldn't have done it, or would have done it on our own," he says. "PSA was very helpful in providing information. They kept copies of the EOBs to give us, and we had good information about what United Health Care was saying."
PSA's services also help its practices take a broader view, providing benchmarking against a practice's own past results or against the results of similar practices, to help members keep score and know when they're gaining—or lagging—within the marketplace.
"Our approach to understanding the outcome of billing and collections is very detailed, it's very practice-specific, and it has 100 different elements to it," Dr. Wright says. "All of those elements are aggregative and comparable. We can not only do internal benchmarks, we can also compare them to their peer group—all the other practices with four pathologists, for example."
Sirmon says practices draw from PSA's monthly reports to make comparisons—and he draws upon an analogy to explain the value of this process. "In order for you to make a diagnosis, you've got to have a well-prepared slide to put on the microscope," he says. With summary reports that break down by payer, location, or other factors a practice wants to examine, "you can pretty much answer any question about your practice from the financial side."
PSA regularly calculates certain metrics, such as net collection percentage, which tells a practice how much it collected compared with the amount it was allowed to collect—gross charges minus contract adjustments, with 90 percent a "good goal" for most practices, Sirmon says. "We noticed that those net collection percentages do vary from practice to practice," he adds. "Many times, it's the economics of the region."
Breaking that down can help "address a strategy of how you bill in that [economically disadvantaged] area," he adds. "Is it a problem of certain payers? Is it a problem of a certain hospital they cover, maybe in a poor area? You want to drill down and find out what the reason is. Then you start getting together a plan to take action to improve it. The main thing about it is, it's an ongoing process."
In addition to net collection ratio, practices generally want to know their bad debt ratio, days in accounts receivable, and net charge to gross charge percentage, Sirmon says. Of increasing importance is the rollover percentage, how much each payer is rolling over to patient responsibility—a slice that's increasing. "We do see employers having to make that decision, to offset that premium increase," he says. "It makes it harder to collect."
Dr. Chiavetta says the monthly reports have provided invaluable information for Rex Pathology Associates. "These are very helpful in identifying which practices are doing well for us and where our referrals are coming from, as well as what reimbursement we are receiving," he says. "They do have very good software, and a conscientious group of employees that do this job with the idea that they're working for you."
PSA will be better able to make comparisons among its affiliated practices and the industry as a whole through the use of its newly launched online service, TellPSA (www.TellPSAPath.com), where it will post short surveys on topics of common interest. "They [TellPSA users] can immediately see the response of everyone else who has taken the survey," Dr. Wright says. "They can get an instant fix on where their colleagues are."
Most topics originate with PSA's staff who return from visits to practices around the country, but a soon-to-be posted survey on the subject of what program directors tell young pathologists about business issues is a "product of and sponsored by" the Association of Pathology Chairmen.
"They're beginning to recognize that pathologists need to be not only highly trained scientists, but they need to have some business skills," Dr. Wright says.
Ed Finkel is a writer in Evanston, Ill.